In a bid to combat money laundering and financial fraud, the Reserve Bank of India (RBI) has mandated banks and payment system operators to meticulously monitor domestic fund transfers. The new regulations, announced on Wednesday, require institutions to maintain detailed records of remittances.
Banks handling cash pay-outs must document the names and addresses of beneficiaries. For cash pay-ins, banks and business correspondents (BCs) must verify customers using a certified cell phone number and an ‘Officially Valid Document (OVD)’ in line with Know Your Customer (KYC) norms. Additionally, each transaction by a remitter must be validated through an Additional Factor of Authentication (AFA).
The RBI also stipulated that remitter banks must include detailed remitter information in transaction messages for IMPS and NEFT transfers. These messages should feature an identifier to mark the transaction as cash-based.
These measures come in response to the surge in banking outlets, advancements in payment systems, and the ease of fulfilling KYC requirements. RBI Governor Shaktikanta Das has emphasized the need for banks to intensify their efforts against mule accounts, which are often used in fraudulent transactions. Das highlighted concerns over the large number of such accounts and urged banks to enhance their anti-fraud measures.
Last year, the RBI had already tightened customer due diligence (CDD) norms, requiring banks and regulated entities to periodically update KYC data based on a risk-based approach. Mule accounts, which facilitate money laundering by channeling illicit funds, are a significant focus of these new regulations.
The RBI’s latest directives aim to strengthen the financial system’s integrity and prevent misuse through more robust tracking and verification processes.
