Financial Crime World

Stringent Due Diligence Procedures, Customer Profiling, and Transaction Monitoring: Essential Tools for Identifying and Preventing Suspicious Activities

In a bid to prevent illicit financial activities and ensure the integrity of the securities market, regulatory authorities in India have introduced stringent due diligence procedures, customer profiling, and transaction monitoring measures.

Regulatory Efforts

The Securities and Exchange Board of India (SEBI) has mandated comprehensive KYC standards and guidelines for financial intermediaries and investors. Meanwhile, the Insurance Regulatory and Development Authority of India (IRDAI) has established specific AML regulations targeting certain classes of insurers to combat money laundering and the financing of terrorism.

India’s Prevention of Money Laundering Act (PMLA), 2002, and subsequent amendments have served as a robust shield against the illicit flow of funds and the manipulation of financial institutions for criminal gains. The PML (Maintenance of Records) Rules, 2005, requires reporting entities to:

  • Maintain records of transactions
  • Provide suspicious transaction reports to the FIU-IND
  • Maintain CDD records

Recent Amendments

In March this year, the PML (Maintenance of Records) Amendment Rules, 2023, aimed to:

  • Widen the scope of reporting entities
  • Bolster customer due diligence requirements
  • Introduce stricter KYC norms for professionals like chartered accountants and company secretaries
  • Extend AML measures to include cryptocurrency and virtual digital asset (VDA) transactions

Challenges and Opportunities

As technology continues to reshape the way we conduct transactions and interact with financial systems, regulatory authorities must stay ahead of evolving laundering tactics and emerging risks in the digital and fintech space. International cooperation and information sharing are crucial in combating cross-border money laundering activities.

Solutions

To effectively address these challenges, KYC Hub offers online KYC Verification Solutions tailored to the Indian customer and legislative challenges they encounter. With an unwavering focus on utilizing cutting-edge technologies like AI and machine learning, KYC Hub empowers businesses to:

  • Stay ahead of evolving regulations
  • Ensure regulatory adherence
  • Drive innovation

Key Takeaways

  • Stringent due diligence procedures, customer profiling, and transaction monitoring are essential to identify and prevent suspicious activities.
  • Regulatory authorities must stay ahead of evolving laundering tactics and emerging risks in the digital and fintech space.
  • International cooperation and information sharing are crucial in combating cross-border money laundering activities.
  • KYC Hub offers online KYC Verification Solutions tailored to the Indian customer and legislative challenges they encounter, ensuring regulatory adherence and innovation.