Regulatory Compliance and AML/KYC
What the exam tests
This domain tests RBI KYC Master Directions, PMLA obligations, sanctions screening, suspicious-transaction reporting and cooperative-bank dual regulation by RBI and the Registrar of Cooperative Societies.
Core rules
- Apply customer due diligence at onboarding and during periodic updation. Identify the customer, verify identity and address, understand the purpose of the account and identify beneficial owners for non-individual customers.
- Risk-categorise customers as low, medium or high and apply enhanced due diligence to high-risk relationships, PEPs and non-face-to-face onboarding.
- Screen against UNSC sanctions lists at onboarding and when lists change. Retain KYC and transaction records for at least five years as required under PMLA.
- File cash transaction reports for cash above ₹10 lakh per customer per month, and suspicious transaction reports with FIU-IND within seven days of forming suspicion.
- Appoint a principal officer and designated director for AML, train staff and audit the programme. Never tip off the customer.
Worked example
A customer deposits ₹9.8 lakh in cash on three consecutive days. The monthly aggregate exceeds ₹10 lakh, so a CTR is due. The pattern also suggests structuring to avoid reporting, so the bank should file an STR within seven days of forming the suspicion. Staff must not tell the customer that a report has been filed.
Traps that cost marks
Tipping off, treating Aadhaar as the only acceptable proof, accepting unverified photocopies, failing to identify beneficial owners and not re-screening after sanctions updates are common errors.