Laudering prone nations on IBA list

Indian Banks' Association has listed 23 countries in the high-risk category for the implementation of KYC (know your customer) and AML (anti-money laundering) norms by banks.

The high-risk nations include Russia, Myanmar, Nigeria, Turkmenistan, Libya and Cuba, according to an indicative list provided by IBA in a guidance note for banks. Customers living in these countries, irrespective of their nationality, have to be classified as high risk.

The opening of accounts of customers from the high-risk countries would need specific approval of senior officials. Individual banks will have to decide who will be empowered to decide the opening of accounts of such customers, IBA said.

IBA is an industry body working for the promotion and development of sound and progressive banking principles, practices and conventions. The Reserve Bank of India had entrusted IBA with the task of preparing broad outlines of a policy framework based on international practices to serve as a reference guide to banks.

This was to ensure uniformity of approach, clarity on the interpretation of the issues involved, identification of various types of risks to banks and guidance for identifying suspicious transactions.

IBA has also included in the high-risk category persons who are engaged in certain professions in which possibilities of money laundering are high. These include antique dealers (individuals and entities), money services bureaus and arms dealers.

Banks have also been advised to be on the high alert with regard to 'politically exposed persons' of foreign origin and asked to obtain additional information disclosing the source of funds that would be deposited in a particular account.

All countries in Africa and the Americas, other than the US and Canada, have been classified as medium-risk nations, and banks have to keep track of customers from these countries, accordingly.

IBA has also stated customers of current accounts should be classified in the medium-risk category if the aggregate credits to the accounts are in excess of an amount, which can be specifically decided by each bank for specific types/categories of current accounts.

The risk classification may be lower for the customers about whom there is sufficient knowledge in the public domain available to banks (for example, listed companies etc).