RBI asks banks, NBFCs to carry out money laundering risk assessment periodically

Mumbai: The RBI on Monday asked banks and NBFCs to carry out money laundering (ML) and terrorist financing (TF) risk assessment exercise periodically. The Reserve Bank said it has added a new section in the Master Directions on KYC.

This requires its regulated entities (REs) to carry out ML and TF risk assessment exercise periodically to identify, assess and take effective measures to mitigate its money laundering and terrorist financing risk for clients, countries or geographic areas, products, services, and transactions or delivery channels.

"While assessing the ML/TF risk, the REs are required to take cognizance of the overall sector-specific vulnerabilities, if any, that the regulator/supervisor may share with REs from time to time," the RBI said in a circular.


Further, the internal risk assessment carried out by the regulated entity should be commensurate to its size, geographical presence, complexity of activities/structure, it added.

Entities regulated by the RBI include, banks, All India Financial Institutions, NBFCs, and all payment system providers.

"Also, the REs shall apply a Risk Based Approach (RBA) for mitigation and management of the identified risk and should have Board approved policies, controls and procedures in this regard," the RBI's circular added.

The new KYC has come in force with immediate effect, the RBI added. NKD MKJ