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RBI Warns Banks To Strictly Follow KYC Rules

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Concerned over violation of anti- money laundering norms by banks, the RBI on Friday warned them to meticulously follow its instructions with regard to walk-in customers while selling insurance, mutual fund, gold and other products above Rs 50,000 or face action.

"It is reiterated that banks should meticulously follow the instructions in letter and spirit and ensure that violations of (KYC and anti-money laundering norms) do not recur. Such violations would be viewed seriously by the Reserve Bank and would involve imposition of penalties," RBI said in a notification.

The RBI warning to banks comes against the backdrop of the expose by online portal Cobrapost, which had revealed violation of the KYC (know your customer) and anti-money laundering guidelines with regard to marketing and distribution of third party products as agents.

The guidelines require that banks should verify the identity and address of walk-in-customers while selling third party products, like insurance, mutual funds, gold coins.

As per the norms, quoting of PAN is mandatory for transactions exceeding Rs 50,000.

The instructions in "respect of third party products would also apply to sale of banks' own products, payment of dues of credit cards/sale and reloading of prepaid/travel cards and any other product above the threshold of Rs 50,000", Reserve Bank of India (RBI) added.

It had fined the top-three private sector banks -- ICICI Bank, HDFC Bank and Axis Bank -- for violation of norms following an enquiry into the Cobrapost expose.