Branch Compliance Officer - Bank flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

CRR

Cash Reserve Ratio: the share of Net Demand and Time Liabilities that a scheduled bank must hold as cash with the RBI under Section 42 of the RBI Act, 1934; it earns no interest.

SLR

Statutory Liquidity Ratio: the share of Net Demand and Time Liabilities a bank must hold in cash, gold, or approved unencumbered securities under Section 24 of the Banking Regulation Act, 1949.

Branch licensing

Under Section 22 of the Banking Regulation Act, 1949, a bank needs RBI approval to open, shift, or close a branch, unless the case falls under the general permission policy.

Banking definition

Section 5(b) of the Banking Regulation Act, 1949 defines banking as accepting, for lending or investment, deposits of money repayable on demand or otherwise and withdrawable by cheque, draft, or order.

Compliance function independence

The compliance function must be independent of business lines and must report to the board; the branch reports exceptions through the Branch Compliance Officer, not through the business head.

Priority Sector Lending target

PSL targets apply at bank level, commonly 40% of Adjusted Net Bank Credit or credit equivalent of off-balance-sheet exposure, whichever is higher; PSLC certificates are bought at bank level.

Officially Valid Documents

Documents accepted for KYC include Aadhaar, passport, driving licence, voter identity card, NREGA job card, and the NPR letter containing name and address.

Beneficial owner threshold

For a legal person, the beneficial owner is the natural person holding 10% or more of shares, capital, or profits, or exercising control; if none exists, the senior managing official is identified.

Periodic KYC updation

KYC records are updated on a risk-based cycle: high risk at least every 2 years, medium risk every 8 years, and low risk every 10 years.

Politically Exposed Person

An individual entrusted with a prominent public function, domestically or abroad. Establishing the relationship needs senior management approval, and the source of funds and wealth must be established.

Enhanced Due Diligence

A stricter KYC process applied to high-risk customers, PEPs, and non-face-to-face relationships, requiring deeper verification of identity, source of funds, and source of wealth.

KYC record retention

Identity and transaction records must be maintained for at least five years after the business relationship ends or the transaction is carried out, and produced to authorities on demand.

Placement stage

The first stage of money laundering, where cash from illegal sources enters the financial system, typically through deposits, remittances, or purchases; counter controls focus here.

Structuring

Splitting transactions into amounts below the reporting threshold to avoid triggering a report; also called smurfing, and it is a suspicious activity even when each transaction is legal.

Suspicious Transaction Report

A report filed with FIU-IND when the bank has reason to suspect that a transaction involves proceeds of crime, irrespective of the amount; it must be filed within 7 days.

Tipping-off prohibition

The bank and its staff must not disclose to the customer or any third party that a suspicious transaction report has been or will be filed, or that an investigation is underway.

CTR threshold

A Cash Transaction Report is filed with FIU-IND for cash transactions above the threshold prescribed by the regulator; it is filed by the bank's Principal Officer.

Sanctions screening

Checking customers and transactions against UN Security Council, RBI, and internal negative lists at onboarding and on an ongoing basis; a confirmed match requires freezing and reporting.

Preventive vigilance

The part of vigilance that removes opportunities for corruption through systems, procedures, and transparency, as distinct from punitive vigilance, which acts on established misconduct.

Maker-checker control

A segregation-of-duties rule requiring that the person who originates a transaction differs from the person who authorises it, applied to account opening, disbursement, and limit changes.

Fraud red flags

Indicators such as dormant accounts suddenly receiving large credits, repeated sub-threshold cash deposits, loans disbursed without site visits, and shared addresses or phone numbers among borrowers.

Mandatory leave and rotation

Staff in sensitive posts such as cash, clearing, and credit must be rotated periodically and must take mandatory leave, during which their work is reviewed for irregularities.

Risk-based internal audit

An audit approach that allocates resources according to the risk rating of each branch or process, so that high-risk areas are audited more frequently and in greater depth.

Three lines model

A governance model in which business units own risk, risk and compliance functions monitor it, and internal audit provides independent assurance to the board.

Compliance certificate

A periodic branch declaration that prescribed controls were followed; it must be supported by evidence such as registers and reconciliations, not merely signed by the branch head.

Audit finding components

A complete audit finding states the condition observed, the criteria breached, the root cause, the risk rating, management's response, and the target date for rectification.

Concurrent audit

A continuous audit of high-risk transactions performed alongside branch operations, with findings reported to management and to the Audit Committee of the Board.

Joint custodian cash control

A control requiring cash and the strong room to be handled under dual control by two designated officials, with cash balances verified at prescribed intervals.

Clearing differences account

A suspense account recording unmatched clearing entries; it must be reconciled daily, and long-unreconciled balances are a common inspection finding.

Integrated Ombudsman Scheme

The RBI's 2021 scheme for complaints against regulated entities; the customer must first approach the bank, which has 30 days to resolve the complaint.

Internal Ombudsman

An official within the bank who examines complaints that the bank has rejected, and who can escalate or direct redressal; the mechanism is mandated for banks by the RBI.

Digital personal data breach

Under the Digital Personal Data Protection Act, 2023, a breach of personal data must be notified to the Data Protection Board and to affected persons as prescribed.