The following guidelines are issued to safeguard banks against their involvement in money-laundering activities, and other unlawful trades. These will add to or reinforce the precautions, banks may have been taking this regard;

(a) Before extending banking services, bank shall make reasonable efforts to determine the true identity of customer. Particular care should be taken to identify ownership of all accounts and those using safe-custody facilities. Effective procedures should be instituted for obtaining identification form new customers. As explicit policy should de devised to ensure that significant business transactions are not conducted with customers who fail to provide evidence of their identity.

(b) Banks shall ensure that banking business is conducted in conformity with high ethical standards and that banking laws and regulations are adhered to. It is accepted that banks normally do not have effective means of knowing whether a transaction stems from or forms part of wrongful activity. Similarly in an international context it may be difficult to ensure that cross border transaction on behalf of customers are in compliance with the regulations of another country. Nevertheless banks should not set out to offer services or provide active assistance in transactions which in their opinion are associated with money derived from illegal activities.

(c) Specific procedures be established for ascertaining customer’s status and his source of earnings, for monitoring of accounts on a regular basis, for checking identities and bonafides of remitters and beneficiaries, for retaining internal record of transactions for future reference. The transactions which are out of character with the normal operation of the account involving heavy deposits/withdrawals/transfers should be viewed with suspicion and properly investigated.

(d) For an effective implementation of banks’ policy and procedures, suitable training be imparted to members of staff and they be informed of their responsibility in this regard.

(e) Banks may make arrangements for setting up an Internal Audit System in order to establish an effective means of testing/checking and compliance with the Bank Policy and procedures established by it.

2. Keeping in view the above principles, banks shall issue necessary instructions for guidance and implementation by staff members.

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