The recent amendments to the Master Direction – Know Your Customer (KYC) Direction, 2016, aim to align guidelines with recent regulatory updates, including amendments to the Prevention of Money Laundering (Maintenance of Records) Rules, 2005, and the Unlawful Activities (Prevention) Act (UAPA), 1967. These amendments impact the procedures that Regulated Entities (REs) must follow in Customer Due Diligence (CDD) for their clients, with immediate effect.
Key changes are outlined across multiple paragraphs in the Master Direction. Paragraph 10 updates the Customer Acceptance Policy, specifying that REs must apply the CDD procedure at the Unique Customer Identification Code (UCIC) level. This means an existing KYC-compliant customer seeking to open a new account or use an additional product with the same RE does not need to undergo another CDD check, provided their identification remains unchanged.
In Paragraph 37, the explanation that “high-risk accounts have to be subjected to more intensified monitoring” has been clarified and repositioned to ensure it applies to the relevant sub-paragraphs, specifically targeting high-risk accounts.
Paragraph 38 has introduced the term “periodic updation” to clarify the requirement for regular KYC updates. This term now appears alongside “updation” in several sub-paragraphs, underscoring the need for ongoing review and refresh of KYC information.
Changes to Paragraph 56 focus on the CDD procedure and data-sharing with the Central KYC Records Registry (CKYCR). In Paragraph 56(h), it is mandated that REs should incrementally upload KYC data of individual customers and Legal Entities (LEs) to the CKYCR, especially for accounts opened before the stipulated dates. This periodic or early update is required whenever new KYC information is received. If any updated KYC information is received, REs must upload it within seven days or within a timeframe notified by the government, ensuring timely updates across REs that have interacted with the customer.
Furthermore, Paragraph 56(j) clarifies when REs may require additional KYC documentation, even if CKYCR information is accessible. Such instances include changes in customer details, incomplete records, expired document validity, or a need for enhanced due diligence based on customer risk profiling.
Finally, Annex II updates the designation of the Central Nodal Officer for the UAPA, changing it from “Additional Secretary” to “Joint Secretary.” Additionally, the entire Master Direction now uses the term “paragraph” instead of “section,” making internal references consistent.
These changes aim to streamline KYC processes, improve monitoring of high-risk accounts, and facilitate efficient sharing of updated customer information across entities, ultimately reinforcing compliance and reducing redundancy in CDD for customers.
