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TMI BlogMaster Circular on Money Transfer Service SchemeX X X X Extracts X X X X X X X X Extracts X X X X ..... tting(authorising) Indian Agents under Money Transfer Service Scheme (MTSS) SECTION II Guidelines for overseas principals SECTION III Guidelines for appointment of Sub-Agents by Indian Agents SECTION IV Guidelines for renewal of permission (authorization) of existing Indian Agents SECTION V Inspection of Indian Agents SECTION VI KYC / AML / CFT guidelines for Indian Agents SECTION VII General Instructions PART B Reports / Statements Annex I : KYC / AML / CFT guidelines for Indian Agents Annex II : Format for Sub-Agents of Indian Agents of MTSS Annex III : Statement showing details of quantum of remittances received through Money Transfer Scheme during the quarter ended Annex IV : Statement of collaterals kept by Indian Agents Appendix PART-A SECTION I Guidelines for permitting (authorising) Indian Agents under Money Transfer Service Scheme (MTSS): 1. Introduction 1.1 Money Transfer Service Scheme (MTSS) is a quick and easy way of transferring personal remittances from abroad to beneficiaries in India. Only inward personal remittances into India such as remittances towards family maintenance and remittances favouring foreign tourists visiting India are permis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the same group, all (other) non-banking financial companies as also the book value of debentures, bonds, outstanding loans and advances made to and deposits with its subsidiaries and companies in the same group in excess of 10 per cent of the Owned funds. 3. Procedure for making Applications to the Reserve Bank Application for necessary permission to act as an Indian Agent may be made to the Chief General Manager-in-Charge, Forex Markets Division, Foreign Exchange Department, Reserve Bank of India, Central Office, Amar Building, Fort, Mumbai-400 001 and should be accompanied by the documents pertaining to its proposed Overseas Principal, as detailed in Section II below and the following documents: a. A declaration to the effect that no proceedings have been initiated by / are pending with the Directorate of Enforcement (DoE) / Directorate of Revenue Intelligence (DRI) or any other law enforcing authorities, against the applicant or its directors and that no criminal cases are initiated / pending against the applicant or its directors. b. A declaration to the effect that proper policy framework on KYC / AML / CFT, in accordance with the guidelines issued vide A.P.(DIR Series) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh this arrangement. b. A cap of US $ 2500 has been placed on individual remittance under the scheme. Amounts up to Rs. 50,000/- may be paid in cash to a beneficiary in India. Any amount exceeding this limit shall be paid by means of account payee cheque/ demand draft/ payment order, etc., or credited directly to the beneficiary's bank account only. However, in exceptional circumstances, where the beneficiary is a foreign tourist, higher amounts may be disbursed in cash. Full details of such transactions should be kept on record for scrutiny by the auditors/ inspectors. c. Only 30 remittances can be received by a single individual beneficiary under the scheme during a calendar year. 6. Criteria for RBI decisions (i) The Indian Agents need to have strength and efficiency to function profitably in a highly competitive environment. As a number of Indian Agents are already functioning, permission (authorization) will be issued on a very selective basis to those who meet the above requirements, have necessary outreach and who are likely to conform to the best international and domestic standards of customer service and efficiency. (ii) The Indian Agent should commence its money tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Principal should be registered with the overseas trade / Industry bodies. g. The Overseas Principal should have a good rating from one of the international credit rating agencies. h. The Overseas Principal should submit confidential reports from at least two of its bankers. i. The Overseas Principal should submit a report certified by independent Chartered Accountants, regarding steps taken to comply with anti money laundering norms in the home/ host country. j. The Overseas Principals will be fully responsible for the activities of their Agents and Sub Agents in India. k. Proper records of remitters as also beneficiaries pertaining to all pay-outs in India are to be maintained by the Overseas Principals. All records must be made accessible on demand to the Reserve Bank or other agencies of the Government of India, viz., Ministry of Finance, Ministry of Home Affairs, FIU-IND, etc. Full details of the remitters and the beneficiaries should be provided by the Overseas Principals, if called for. SECTION III Guidelines for appointment of Sub Agents by Indian Agents: 1. The Scheme Under the Scheme, Indian Agents can enter into Sub Agency agreements with entities, fulfilling c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agent * verification of physical existence of location of the Sub Agent * conduct certificate of the Sub Agent from the local police authorities. (certified copy of Memorandum and Articles of Association and Certificate of Incorporation in respect of incorporated entities). Note: Although obtaining of conduct certificate of the Sub Agent from the local police authorities is non-mandatory for the Indian Agents, the Indian Agents must take due care to avoid appointing individuals/ entities as Sub Agents who have cases / proceedings initiated / pending against them by any law enforcing agencies. * declaration regarding past criminal cases, cases initiated/ pending against the Sub Agent and/or its directors/ partners by any law enforcing agency, if any * PAN Card of the Sub Agents and its directors/ partners * Photographs of the directors/ partners and the key persons of the Sub Agent The above checks should be done on a regular basis, at least once in a year. The Indian Agents should obtain from the Sub Agents proper documentary evidence confirming the location of the Sub Agents in addition to personal visits to the site. The Indian Agents should discontinue agreements wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Reserve Bank from time to time by Indian Agents. 2. The applicant should be an Authorised Dealer Category-I bank or an Authorised Dealer Category-II or a Full Fledged Money Changer (FFMC), as defined in the A.P. (DIR Series) Circular No. 25 [A.P. (FL Series) Circular No. 02] dated March 6, 2006, or a Scheduled Commercial Bank or the Department of Posts. 3. The Indian Agent should have minimum Net Owned Funds of Rs. 50 lakh. 4. Application for renewal of permission should be submitted to the Regional Office concerned of the Foreign Exchange Department of the Reserve Bank under whose jurisdiction the registered office of the Indian Agent falls along-with the documents pertaining to the Overseas Principal as detailed in Section II above and the following documents: a. A declaration to the effect that no proceedings have been initiated by / are pending with the Directorate of Enforcement (DoE) / Directorate of Revenue Intelligence (DRI) or any other law enforcing authorities, against the Indian Agent or its directors and that no criminal cases are initiated / pending against the Indian Agent or its directors. b. A write up on the KYC / AML / CFT, risk management and internal cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m Net Worth and Net Owned Funds respectively on an ongoing basis, they are required to bring it to the notice of the Reserve Bank immediately along with a detailed plan of restoring the Net Worth/ Net Owned Funds to the minimum required level, if there is any reduction in their Net Worth/ Net Owned Funds below the minimum level. PART-B Reports / Statements 1. A quarterly statement of the quantum of remittances received, as per the enclosed format (Annex-III) should be furnished by the Indian Agents to the Regional Offices (ROs) concerned of the Foreign Exchange Department (FED) of the Reserve Bank, under whose jurisdiction their registered offices fall and Foreign Exchange Department, Forex Markets Division, Central Office, Amar Building, Fort, Mumbai-400001 within 15 days from the close of the quarter to which it relates. 2. List of their additional locations should be furnished by the Indian Agents to the ROs concerned of the FED of the Reserve Bank, under whose jurisdiction their registered offices fall, on quarterly basis within 15 days from the close of the quarter to which it relates. 3. Indian Agents should forward the list of their Sub Agents, Overseas Principal-Indian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sfer into India from all over the world under the MTSS from being used, intentionally or unintentionally, by criminal elements for money laundering or terrorist financing activities. KYC procedures also enable Authorised Persons, who are Indian Agents under MTSS [referred as APs (Indian Agents) hereinafter] to know/understand their customers and their financial dealings better, which in turn help them manage their risks prudently. 3. Definition of Customer For the purpose of KYC policy, a 'Customer' is defined as : * a person who receives occasional/ regular cross border inward remittances under MTSS; * one on whose behalf a cross border inward remittance under MTSS is received (i.e., the beneficial owner) [In view of Government of India Notification dated February 12, 2010 - Rule 9, sub-rule (1A) of PML Rules - 'Beneficial Owner' means the natural person who ultimately owns or controls a client and or the person on whose behalf a transaction is being conducted, and includes a person who exercises ultimate effective control over a juridical person]. 4. Guidelines 4.1 General APs (Indian Agents) should keep in mind that the information collected from the customer while mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Verification and Maintenance of Records of the Identity of the Clients of the Banking Companies, Financial Institutions and Intermediaries) Rules, 2005, as amended from time to time, as well as instructions / guidelines issued by the Reserve Bank, from time to time. iv. Not to make payment of any remittance where the AP (Indian Agent) is unable to apply appropriate customer due diligence measures, i.e., AP (Indian Agent) is unable to verify the identity and /or obtain documents required as per the risk categorisation due to non-cooperation of the customer or non reliability of the data/information furnished to the AP (Indian Agent). It is, however, necessary to have suitable built in safeguards to avoid harassment of the customer. In the circumstances when an AP (Indian Agent) believes that it would no longer be satisfied that it knows the true identity of the customer, the AP (Indian Agent) should file an STR with FIU-IND. v. Circumstances, in which a customer is permitted to act on behalf of another person/entity, should be clearly spelt out, the beneficial owner should be identified and all reasonable steps should be taken to verify his identity. b) APs (Indian Agents) shoul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r does not, in fact, pose a low risk, APs (Indian Agents) should carry out full scale customer due diligence (CDD) before making payment of any remittance. 4.4 Customer Identification Procedure (CIP) a) The policy approved by the Board of APs (Indian Agents) should clearly spell out the Customer Identification Procedure while making payment to a beneficiary or when the AP has a doubt about the authenticity/veracity or the adequacy of the previously obtained customer identification data. Customer identification means identifying the customer and verifying his/her identity by using reliable, independent source documents, data or information. APs (Indian Agents) need to obtain sufficient information necessary to establish, to their satisfaction, the identity of each new customer, whether regular or occasional. Being satisfied means that the AP must be able to satisfy the competent authorities that due diligence was observed based on the risk profile of the customer in compliance with the extant guidelines in place. Such risk based approach is considered necessary to avoid disproportionate cost to APs (Indian Agents) and a burdensome regime for the customers. The APs (Indian Agents) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asures to verify the identity of such persons, through the following information: (i) The identity of the natural person, who, whether acting alone or together, or through one or more juridical person, exercises control through ownership or who ultimately has a controlling ownership interest. Explanation: Controlling ownership interest means ownership of/entitlement to more than 25 percent of shares or capital or profits of the juridical person, where the juridical person is a company; ownership of/entitlement to more than 15% of the capital or profits of the juridical person where the juridical person is a partnership; or, ownership of/entitlement to more than 15% of the property or capital or profits of the juridical person where the juridical person is an unincorporated association or body of individuals. (ii) In cases where there exists doubt under (i) as to whether the person with the controlling ownership interest is the beneficial owner or where no natural person exerts control through ownership interests, the identity of the natural person exercising control over the juridical person through other means. Explanation: Control through other means can be exercised through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioned in a utility bill or any other document accepted by the AP for verification of the address of the customer. When there are suspicions of money laundering or financing of the activities relating to terrorism or where there are doubts about the adequacy or veracity of previously obtained customer identification data, APs (Indian Agents) should review the due diligence measures including verifying again the identity of the client and obtaining information on the purpose and intended nature of the business relationship, as the case may be. [In view of Government of India Notification dated June 16, 2010- Rule 9 sub-rule (1D) of PML Rules]. e) Payment to Beneficiaries i) For payment to beneficiaries, the identification documents, as mentioned at SECTION-II, should be verified and a copy retained. The copy of identification documents obtained should contain current and legible photograph of beneficiaries. This shall continue for a period of next six months from March 12, 2013, subject to submission of a copy of the identifications documents during every payment. Further, in the event of a beneficiary being discovered to have received funds on the basis of a photo ID which did no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pplying enhanced CDD to PEPs, customers who are family members or close relatives of PEPs and transactions of which a PEP is the ultimate beneficial owner. 4.6 Monitoring of Transactions Ongoing monitoring is an essential element of effective KYC procedures. APs (Indian Agents) can effectively control and reduce their risk only if they have an understanding of the normal and reasonable receipt of remittances of the beneficiary so that they have the means of identifying receipts that fall outside the regular pattern of activity. However, the extent of monitoring will depend on the risk sensitivity of the remittance. APs (Indian Agents) should pay special attention to all complex, unusually large receipts and all unusual patterns which have no apparent economic or visible lawful purpose. APs (Indian Agents) may prescribe threshold limits for a particular category of receipts and pay particular attention to the receipts which exceed these limits. High-risk receipts have to be subjected to intense monitoring. Every AP (Indian Agent) should set key indicators for such receipts, taking note of the background of the customer, such as the country of origin, sources of funds, the type of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a transaction. b) APs' (Indian Agents) internal audit and compliance functions have an important role in evaluating and ensuring adherence to the KYC policies and procedures. As a general rule, the compliance function should provide an independent evaluation of the AP's (Indian Agent's) own policies and procedures, including legal and regulatory requirements. APs (Indian Agents) should ensure that their audit machinery is staffed adequately with individuals who are well-versed in such policies and procedures. The concurrent auditors should check all cross border inward remittance transactions under MTSS to verify that they have been undertaken in compliance with the anti-money laundering guidelines and have been reported whenever required to the concerned authorities. Compliance on the lapses, if any, recorded by the concurrent auditors should be put up to the Board. A certificate from the Statutory Auditors on the compliance with KYC / AML / CFT guidelines should be obtained at the time of preparation of the Annual Report and kept on record. 4.9 Introduction of New Technologies APs (Indian Agents) should pay special attention to any money laundering threats that may arise from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... suring overall compliance with regulatory guidelines on KYC/ AML/ CFT issued from time to time and obligations under the Prevention of Money Laundering Act, 2002, as amended by Prevention of Money Laundering (Amendment) Act, 2009, rules and regulations made there under, as amended from time to time.The Principal Officer should also be responsible for developing appropriate compliance management arrangements across the full range of AML/CFT areas (e.g. CDD, record keeping, etc.). He will maintain close liaison with enforcement agencies, APs (Indian Agents) and any other institution which are involved in the fight against money laundering and combating financing of terrorism. To enable the Principal Officer to discharge his responsibilities, it is advised that the Principal Officer and other appropriate staff should have timely access to customer identification data and other CDD information, transaction records and other relevant information. Further, APs (Indian Agents) should ensure that the Principal Officer is able to act independently and report directly to the senior management or to the Board of Directors. b) The Principal Officer will be responsible for timely submission of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d; and d. the parties to the transaction. (iii) Maintenance and Preservation of Records a) APs (Indian Agents) are required to maintain the records containing information of all transactions including the records of transactions detailed in Rule 3 above. APs (Indian Agents) should take appropriate steps to evolve a system for proper maintenance and preservation of transaction information in a manner that allows data to be retrieved easily and quickly whenever required or when requested by the competent authorities. Further, APs (Indian Agents) should maintain for at least ten years from the date of transaction between the AP and the client, all necessary records of transactions, both with residents and non-residents, which will permit reconstruction of individual transactions (including the amounts and types of currency involved, if any) so as to provide, if necessary, evidence for prosecution of persons involved in criminal activity. b) APs (Indian Agents) should ensure that records pertaining to the identification of the customer and his address (e.g. copies of documents like passport, driving license, PAN card, voter identity card issued by the Election Commission, utility ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lation and manner/procedure of submission of the reports to FIU-IND. It would be necessary for APs (Indian Agents) to initiate urgent steps to ensure electronic filing of all types of reports to FIU-IND. The related hardware and technical requirement for preparing reports in an electronic format, the related data files and data structures thereof are furnished in the instructions part of the formats concerned. c) In terms of instructions contained in paragraph 4.3(b) of this Circular, APs (Indian Agents) are required to prepare a profile for each customer based on risk categorisation. Further, vide paragraph 4.6, the need for periodical review of risk categorisation has been emphasized. It is, therefore, reiterated that APs (Indian Agents), as a part of transaction monitoring mechanism, are required to put in place an appropriate software application to throw alerts when the transactions are inconsistent with risk categorization and updated profile of customers. It is needless to add that a robust software throwing alerts is essential for effective identification and reporting of suspicious transactions. 4.13 Cash and Suspicious Transaction Reports A) Cash Transaction Report (CT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions are abandoned/ aborted by customers on being asked to give some details or to provide documents. It is clarified that APs (Indian Agents) should report all such attempted transactions in STRs, even if not completed by customers, irrespective of the amount of the transaction. iii) APs (Indian Agents) should make STRs if they have reasonable ground to believe that the transaction, including an attempted transaction, involves proceeds of crime generally irrespective of the amount of transaction and/or the threshold limit envisaged for predicate offences in part B of Schedule of Prevention of Money Laundering Act, (PMLA), 2002, as amended by Prevention of Money Laundering (Amendment) Act, 2009. iv) The Suspicious Transaction Report (STR) should be furnished within 7 days of arriving at a conclusion that any transaction, including an attempted transaction, whether cash or non-cash, or a series of transactions integrally connected are of suspicious nature. The Principal Officer should record his reasons for treating any transaction or a series of transactions as suspicious. It should be ensured that there is no undue delay in arriving at such a conclusion once a suspicious transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mplement them consistently. The steps to be taken when the staff come across any suspicious transactions (such as asking questions about the source of funds, checking the identification documents carefully, reporting immediately to the Principal Officer, etc.) should be carefully formulated by the APs (Indian Agents) and suitable procedure laid down. The APs (Indian Agents) should have an ongoing training programme for consistent implementation of the AML measures. c) Hiring of Employees It may be appreciated that KYC norms/AML standards/CFT measures have been prescribed to ensure that criminals are not allowed to misuse the system of money transfer under MTSS. It would, therefore, be necessary that adequate screening mechanism is put in place by APs (Indian Agents) as an integral part of their recruitment/hiring process of personnel to ensure high standards. Note:- (i) The Government of India had constituted a National Money Laundering / Financing of Terror Risk Assessment Committee to assess money laundering and terror financing risks, a national AML/CFT strategy and institutional framework for AML/CFT in India. Assessment of risk of Money Laundering /Financing of Terrorism he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to the satisfaction of the AP (Indian Agent) will suffice). Note :- If the address on the document submitted for identity proof by the prospective customer is same as that declared by him/her, the document may be accepted as a valid proof of both identity and address. If the address indicated on the document submitted for identity proof differs from the current address declared by the customer, a separate proof of address should be obtained. Section-III List of various reports and their formats * Cash Transaction Report (CTR) * Electronic File Structure- CTR * Suspicious Transaction Report (STR) * Electronic File Structure-STR Note: FIU-IND have now advised that the 'go-live' date is October 20, 2012 and that Authorised Persons, who are Indian agents under MTSS may discontinue submission of reports in CD format after October 20, 2012, using only FINnet gateway for uploading of reports in the new XML reporting format. Any report in CD format received after October 20, 2012 will not be treated as a valid submission by FIU-IND. Annex-II Format for Sub Agents of Indian Agents of MTSS 1. Name of the Sub Agent 2. Sub Agent Category (AD Cat-I bank/ AD Cat-II/ Other Sc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectors and key persons. * Information about the management. * Shop and establishment certificate/ other municipal certificate. Annex-III Statement showing details of quantum of remittances received through Money Transfer Service Scheme during the quarter ended __________________ Name of the Indian Agent ______________________________________ Name of the Overseas Principal Total quantum of remittances received in US $ INR equivalent Note: This statement is required to be submitted to the Regional Office concerned of the Foreign Exchange Department of the Reserve Bank and Foreign Exchange Department, Forex Markets Division, Central Office, Amar Building, Fort, Mumbai-400001 within 15 days from the close of the quarter to which it relates. Annex-IV Statement of Collateral kept by Indian Agents Name of the Indian Agent __________________________ Name of the Overseas Principal Total quantum of remittances received during the past 6 months in US $ Amount of collateral held in US $ Collateral kept in various forms (Foreign Currency Deposit/ Bank Guarantee) Last review of adequacy of collateral along with observations Note: This statement as at the end of June and Dece ..... X X X X Extracts X X X X X X X X Extracts X X X X
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