Banks and NBFCs should carry out Money Laundering Risk Assessment Periodically: RBI

Money Laundering Risk- NBFC -Taxscan

The Reserve Bank of India ( RBI ) said that, Banks and NBFCs should carry out Money Laundering Risk Assessment Periodically.

The RBI has amended the KYC master direction whereby it has been specified that the Banks and NBFCS shall carry out ML and TF risk assessment exercise periodically.

The Master Direction on KYC dated February 25, 2016, is hereby updated to reflect the following changes in line with Rule 9(13) of the PML Rules 2005:

A new section (5A) has been added to chapter II of the MD on KYC requiring REs to carry out ‘Money Laundering (ML) and Terrorist Financing (TF) Risk Assessment’ exercise periodically to identify, assess and take effective measures to mitigate its money laundering and terrorist financing risk for clients, countries or geographic areas, products, services, transactions or delivery channels, etc. While assessing the ML/TF risk, the REs are required to take cognizance of the overall sector-specific vulnerabilities, if any, that the regulator/supervisor may share with REs from time to time. Further, the internal risk assessment carried out by the RE should be commensurate to its size, geographical presence, complexity of activities/structure, etc. Also, the REs shall apply a Risk-Based Approach (RBA) for mitigation and management of the identified risk and should have Board approved policies, controls, and procedures in this regard.

The RBI also directed that the first such internal risk assessment by the REs should be completed by June 30, 2020, and thereafter reviewed periodically.

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