Beware of jewellers & bullion dealers: RBI

Apex bank warns NBFCs following fears of illicit money dealings in the mint market

The RBI direction to NBFCs follows a similar guideline announced for the banks in January, wherein they were asked to treat jewellers and bullion dealers as high-risk customers. Their transactions are highly cash intensive in nature and it is feared that they could be used for flow of black money into the banking system.

It is also feared that these entities prefer to do business with NBFCs, as the regulatory framework for non-banking lenders is considered less strict. Now, NBFCs would also have to conduct a stricter than normal due diligence before opening accounts for such entities and subject their transactions to a strict monitoring process.

In a circular dated March 8, RBI has said that it was modifying the master circular for KYC (Know Your Customer) norms and anti-money laundering standards/combating of financing of terrorism obligations of NBFCs to classify bullion dealers and jewellers as “high risk customers.”

Risk assessment

Both banks and NBFCs would also need to immediately inform enforcement agencies about any suspicious activities in the accounts of these entities and non-compliance to the guidelines would attract hefty penalties.

“... in view of the risks involved in cash intensive businesses, accounts of bullion dealers and jewellers should also be categorised by NBFCs as ‘high risk’ requiring enhanced due diligence,” the RBI circular said. RBI also asked NBFCs to subject these high risk accounts to intensified transaction monitoring and take the same into account while identifying suspicious transactions for filing Suspicious Transaction Reports to Financial Intelligence Unit – India (FIU-IND).

Others being treated as high-risk customers by RBI include non­resident customers, HNIs, trusts, charities, NGOs and organisations receiving donations, companies having close family shareholding or beneficial ownership, politically exposed persons and those with dubious reputation.

On the other hand, salaried people, government departments and government-owned companies, regulators and statutory bodies are treated as low-risk customers.

The high-risk accounts need to be subjected to intensified monitoring for issues like background of the customer, sources of funds and high-value transactions.