The Reserve Bank of India (RBI) has announced an amendment to the Master Direction (MD) on Know Your Customer (KYC) guidelines, aiming to redefine and provide clearer parameters for identifying Politically Exposed Persons (PEPs).
In a circular dated January 4, the RBI referred to the existing master direction on KYC and subsequent amendments, which mandated Regulated Entities (REs) to conduct Customer Due Diligence (CDD) following the outlined procedures for their clientele.
In the extant direction, the definition of Politically Exposed Persons (PEPs) is provided in sub-clause (xvii) of clause (a) of Section 3 of the master direction on KYC. However, in order to provide better clarity, RBI said it has decided to include the definition of PEPs as an explanation to Section 41 of the Master Direction as under:
"Explanation: For the purpose of this Section, 'Politically Exposed Persons' (PEPs) are individuals who are or have been entrusted with prominent public functions by a foreign country, including the Heads of States/Governments, senior politicians, senior government or judicial or military officers, senior executives of state-owned corporations, and important political party officials," the central bank said.
Notably, screening for a politically exposed person (PEP) is a vital component of the know your customer (KYC) process due to an increase in potential risks.
(Edited by : Anshul)
First Published: Jan 4, 2024 5:03 PM IST
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