AML Measures as per IFSCA (AML, CFT, and KYC) Guidelines when CDD is incomplete

AML Measures as per IFSCA (AML, CFT, and KYC) Guidelines when CDD is incomplete

As per IFSCA (AML, CFT, and KYC) Guidelines, 2022, the regulated entities must satisfactorily apply adequate Customer Due Diligence measures before establishing a business relationship with the customer or executing the transaction. However, there may be situations when the customer or its beneficial owners cannot be identified, or their identities cannot be verified reliably and independently. This would obstruct the regulated entity’s efforts to conclude the CDD effectively.

Where CDD cannot be completed, the IFSCA Guidelines provide for adopting the following measures to manage the potential ML/FT risk that may arise from such customers:

  1. Rejecting the person or refraining from establishing the business relationship
  2. In the case of an existing customer, terminating the customer relation
  3. Prohibiting from providing any services or product or executing any transaction
  4. Returning the funds to the customer, if any received earlier
  5. Filing the Suspicious Transaction Report (STR) with the FIU-IND if the customer’s behaviour is suspected of being associated with ML/FT or the funds relate to proceeds of crime.

While undertaking any of the actions mentioned above, the regulated entity must stay cautious and ensure that such action does not “tip off” the customer.

The AML Program must define this very precisely as part of its Customer Acceptance and Exit Policy to safeguard the business against financial crime vulnerabilities and, at the same time, stay regulatory compliant.

Here is an infographic discussing the compliance actions a regulated entity must consider when CDD cannot be concluded effectively.

Let AML India guide you in developing and maintaining the AML Program, including the Customer Due Diligence process (circumstances, exceptions, restrictions, etc.). With well-defined AML policies and procedures, the identification and prevention of ML/FT attempts can be ensured.

We are committed to assisting proper enforcement of AML and CFT regulations to regulated entities in India by designing a personalised AML framework – policies, internal controls, and procedures – and ensuring effective implementation of the same.

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