RBI norms to check terror funding soon

Though RBI deputy governor K. J. Udeshi declined to divulge any details on the issue, she did say that “the impact of money laundering is now beginning to extend from economic crimes to international terrorism. As financial transactions grow more complex, it becomes more difficult for banks to maintain a customer profile. The challenge, therefore, is to ensure that banks know their customers without hindering the smooth flow of financial transactions,” Udeshi said while addressing a banking conference on Tuesday.

Referring to RBI’s present guidelines on KYC Principle, she said “the basic aim is to prevent banks being unwillingly used as a channel for funds derived from criminal activity or financing terrorism.” The guideline relates to identification of depositors and systems and procedures to control financial frauds of money laundering and suspicious activities and scrutiny and monitoring of large-value transactions, she added.

Confirming the developments, senior bank officials told the media that the monitoring of ‘suspicious’ transactions would be tightened. Banks would be setting up ‘anti-money laundering cells’ for this purpose, which would coordinate with RBI. The banks are expecting the new RBI directive on this matter by April next year and it would be implemented by second quarter of 2004.

Though the new money laundering act broadly laid down the guidelines, the government had asked RBI to come up with detailed directive for enabling the government to trace money laundering and terror funding.