KYC Directions 2016 Overview

Questions and Answers

Which of the following is a requirement for branches and majority-owned subsidiaries of regulated entities located abroad regarding KYC/AML standards?

They can ignore the regulations of their home country.

They may choose between stricter local and RBI standards. (correct)

They are exempt from any KYC/AML requirements.

They must adopt the host country's KYC/AML standards.

What effective date is established for the Reserve Bank of India KYC Directions, 2016?

The end of the financial year they are introduced.

The day the guidelines are published in newspapers.

The day they are placed on the Reserve Bank's official website. (correct)

The day a regulatory board approves them.

Which term is defined in the context of the Prevention of Money-Laundering Act, 2002?

Aadhaar number (correct)

Financial Identity Proof

KYC Verification Code

Digital Identity Number

Which of the following statements is true regarding the applicability of the KYC Directions?

They apply to all entities that the Reserve Bank regulates. Signup and view all the answers

Under which circumstances can foreign branches of regulated entities not implement RBI guidelines for KYC?

If local laws explicitly prohibit them. Signup and view all the answers

What constitutes a beneficial owner in the case of a company?

A natural person who has controlling ownership interest or exercises control Signup and view all the answers

In the context of a partnership firm, how is a beneficial owner determined?

The natural person with ownership of more than 15 percent of capital or profits Signup and view all the answers

What percentage of shares or capital defines a controlling ownership interest in a company?

More than 10 percent Signup and view all the answers

Who qualifies as a beneficial owner in an unincorporated association?

A natural person with ownership of more than 15 percent of property or profits Signup and view all the answers

What does 'Control' refer to in the context of determining beneficial ownership?

The ability to appoint majority directors or manage decisions Signup and view all the answers

Study Notes

Introduction to KYC Directions 2016

Called the Reserve Bank of India (Know Your Customer (KYC)) Directions, 2016.
Effective from the date posted on the Reserve Bank of India’s official website.

Applicability

Applies to all entities regulated by the Reserve Bank of India except specified otherwise.
Extends to branches and majority-owned subsidiaries located abroad, adhering to local laws.
Requires disclosure to Reserve Bank of India if local laws hinder guideline implementation.
Allows adoption of the stricter KYC/AML standards between Reserve Bank of India and host country regulators.

Key Definitions

Aadhaar Number: Defined under the Aadhaar Act, 2016, it pertains to a unique identification number for individuals.
Act and Rules: Refers to the Prevention of Money-Laundering Act, 2002, and associated rules, including amendments.
Authentication: Specifically related to the Aadhaar process for verification purposes.

Beneficial Owner (BO)

For Companies: Identifies a natural person with a controlling interest (ownership of over 10% of shares/capital).
For Partnership Firms: Owner must hold more than 15% of capital or profits to qualify as a beneficial owner.
For Unincorporated Associations: Similar ownership criteria of more than 15% apply in terms of property or profits.
Emphasizes compliance with prescribed standards equivalent to face-to-face Customer Identification Process (CIP).

Wire Transfer Definitions

Batch Transfer: Multiple individual wire transfers sent to the same institution, may target different recipients.
Beneficiary: Individual or legal entity recognized as the recipient of the wire transfer by the originator.
Beneficiary RE: Financial institutions regulated by RBI, responsible for receiving wire transfers.
Cover Payment: A wire transfer with a direct payment message and routing of funds through intermediaries.
Cross-Border Wire Transfer: Transfers where sending and receiving institutions are in different countries; may involve multiple countries as well.

Description

Explore the Reserve Bank of India's KYC Directions issued in 2016. This quiz covers its applicability, key definitions, and critical requirements for entities regulated by the RBI. Test your understanding of KYC and AML standards and their implications.