AML Laws and Regulations for Multi-State Cooperative Societies in India

As a reporting entity, a multi-state cooperative society must do the following. This article keeps each at the level required by law; a compliance requirements guide explains how to do each. Correspondent banking and wire-transfer duties are not included here because they do not apply to a cooperative society designated as a DNFBP.

• Register with FIU-IND. Enrol with the Financial Intelligence Unit of India on the FINnet 2.0 / FINGate 2.0 portal, as directed by the Central Registrar’s circular, so the society can file its reports.
• Appoint officers. Appoint a Designated Director and a management-level Principal Officer under Rule 7 of the PMLR. The same person cannot hold both roles, and both are to be informed to FIU-IND.
• Conduct the internal risk assessment. Assess money laundering, terror financing and proliferation financing risk across members, products such as deposits and credit, delivery channels and geographies, and keep it current.
• Document AML policy, controls and procedures. Adopt a board-approved policy that turns the risk assessment into the society’s operating procedures, as required by the FIU-IND Guidelines.
• Member identification and CDD. Identify and verify every member and the beneficial owner (a controlling interest of more than 10 per cent for a company or partnership, and more than 15 per cent for an unincorporated association or body of individuals), with enhanced due diligence for politically exposed persons and high-risk members, under Section 11A of the PMLA, Rule 9 of the PMLR and the FIU-IND Guidelines.
• Ongoing monitoring and periodic update. Monitor member accounts and transactions on an ongoing basis, and refresh KYC at least once every 2, 8 and 10 years for high, medium and low-risk members respectively. Review each member’s risk categorisation at least once every six months and decide whether enhanced due diligence is required.
• Sanctions screening. Screen members and beneficial owners against the designated lists under Section 51A of the UAPA and Section 12A of the WMD Act and freeze and report any match. Verify the relevant UNSC and domestic designated lists daily. This duty applies to every society.
• Regulatory reporting. File cash transaction reports for cash of more than Rupees 10 lakh and for connected cash transactions crossing that figure in a month, reports on cash transactions involving counterfeit currency, forged valuable security or forged documents, and suspicious transaction reports of any value, including attempted transactions, under Rule 3 and Rule 8 of the PMLR. Cash and counterfeit reports are filed monthly, by the 15th day of the succeeding month; a suspicious transaction report is filed promptly once the Principal Officer is satisfied that the transaction is suspicious, through FINnet 2.0.
• Record management, CKYCR and FINnet 2.0. Keep transaction records for five years from the date of the transaction and keep identity records and business correspondence for five years after the membership ends, under Section 12 of the PMLA. Upload member KYC records to the Central KYC Records Registry under Rule 9A, and file all prescribed reports through FINnet 2.0.
• Training and awareness. Train the board, management and staff by role to apply the controls and recognise the red flags of laundering through deposit and credit accounts.
• Independent testing and audit. Test the programme through internal audit, compliance assurance or independent review, alongside the society’s statutory cooperative audit, and close every finding.