Financial Crime World

Here is the rewritten article in Markdown format:

India’s Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) Programme: A Country-by-Country Breakdown

In March 2006, India framed the Prevention of Money Laundering Act (PMLA) and its accompanying rules, leading to the issuance of AML/CFT guidelines for the insurance sector. Since then, insurers have been working towards implementing an effective AML/CFT regime in India.

Guidelines and Regulations

The guidelines emphasize the importance of:

  • Customer Due Diligence: Insurers must establish systems and processes to implement customer due diligence processes.
  • Reporting Obligations: Insurers are required to report suspicious transactions and maintain records of such transactions.
  • Record-Keeping Requirements: Insurers must maintain accurate and up-to-date records of customer information.

Implementation and Monitoring

IRDAI has established systems and processes to monitor the implementation of AML/CFT guidelines by insurers. Internal audit/inspection departments regularly review these implementations, and IRDAI also monitors them.

Country-Specific Initiatives

In February 2013, a consolidated circular was issued for general insurers, advising them to apply AML/CFT requirements based on their risk assessment of each product’s profile.

IRDAI has been actively coordinating with various agencies and departments to ensure effective implementation of the AML/CFT regime in India. It is also part of:

  • Working Group for National Risk Assessment (NRA) on AML/CFT: Constituted by the Department of Revenue.
  • Core Working Group (CWG) for implementing revised recommendations from the Financial Action Task Force (FATF).

IRDAI is associated with the Eurasian Group on Combating Money Laundering and Financing of Terrorism (EAG), a FATF-style regional body. The regulator has also reported its preparedness to the concerned Ministry in relation to applicable FATF recommendations.

Central Know Your Customer (KYC) Depository

In 2012-13, the government announced the development of a Central KYC depository to facilitate banks and financial institutions with KYC-related information. As per the 2015 amendment to PML Rules:

  • Every reporting entity must file electronic copies of client KYC records: With the Central KYC Records Registry within 10 days of establishing a client-based relationship.
  • Insurers must upload individual policyholders’ KYC records: To the registry and communicate their KYC identifier in a confidential manner. Insurers have also been instructed to update existing KYC records periodically.

Aadhaar and Form/60

In January 2019, IRDAI issued a circular advising insurers not to mandatorily seek Aadhaar and Form/60 from proposers/policyholders as part of KYC. However:

  • Insurers may accept the Aadhaar card: As one of the documents for establishing identity and/or address for KYC purposes subject to certain conditions.

Recent Developments

In February 2019, the Ministry of Finance notified “Prevention of Money-Laundering (Maintenance of Records) Amendment Rules, 2019”, allowing online authentication of Aadhaar only by banking companies and telecom industries. Insurers are allowed to perform offline verification under the Aadhaar (Targeted Delivery of Financials and other Subsidies, Benefits and Services) Act, 2016.

In April and August 2020, 29 and 24 insurers respectively were notified to undertake Aadhaar Authentication service of UIDAI under section 11A of PML Act 2002. IRDAI has also issued a circular on “Video Based Identification Process” in September 2020 to simplify the KYC process by leveraging electronic platforms.

This article provides a comprehensive overview of India’s AML/CFT programme, including guidelines, regulations, and country-specific initiatives.