To prevent instances of money laundering and frauds, the Reserve Bank of India on Wednesday asked banks and all payment system operators to keep a trail of domestic fund transfers by customers.
The regulator has asked remitter banks to keep a record of name and address of beneficiaries of all cash pay-out services.
For cash pay-in services, remitting banks and business correspondents (BCs) will have to register the customer based on a verified cell phone number and a self-certified ‘Officially Valid Document (OVD)’ as set out in the Know Your Customer rules.
Every transaction by a remitter will have to be validated by an Additional Factor of Authentication (AFA).
“Remitting banks and their BCs shall conform to provisions of the Income Tax Act, 1961, pertaining to cash deposits,” the RBI said.
It also said that the remitter bank will need to include remitter details as part of the IMPS and NEFT transaction message. The transaction message will have to include an identifier to identify the fund transfer as a cash-based remittance.
The regulator said that the need to bring in these rules arose after the significant increase in the availability of banking outlets, developments in payment systems for funds transfers, and ease in fulfilling KYC requirements.
Reserve Bank of India governor Shaktikanta Das has urged banks to step up efforts against mule accounts and asked them to intensify efforts to curb digital frauds.
Das has also made reference to some banks having ‘lakhs’ of such accounts used for fraudulent transactions.
Last year, the RBI tightened the customer due diligence (CDD) norms by asking banks and regulated entities to adopt a risk-based approach for periodic updation of know-your-customer (KYC) data.
Mule accounts are bank accounts that serve as conduits in money-laundering process, receiving funds from illicit activities and then transferring them to other destinations.
