According to RBI’s KYC/AML guidelines, what framework

Q: Answer-According to RBI’s KYC/AML guidelines, what framework must Regulated Entities (REs) adopt to effecti...

RBI requires banks, NBFCs, and other Regulated Entities REs to adopt a Risk-Based Approach RBA for combating MLTF risks. Under RBA, institutions must o Identify risks related to customers, products, services, and geographies. o Assess and categorize customers into low, medium, or high risk. o Apply enhanced due diligence EDD for high-risk customers e.g., PEPs, cross-border clients. o Monitor transactions proportionately to the level of assessed risk. This ensures efficient allocation of compliance resources and strengthens the AMLCFT framework.

must Regulated Entities (REs) adopt to effectively identify, assess, and manage risks of money laundering (ML) and terrorist financing (TF)?

A Customer reference verification mechanism Correct Answer Incorrect Answer

B Market analysis of customer products and services Correct Answer Incorrect Answer

C Outsourcing of customer due diligence (CDD) Correct Answer Incorrect Answer

D Periodic customer satisfaction surveys Correct Answer Incorrect Answer

E Risk-Based Approach (RBA) Correct Answer Incorrect Answer

Solution

• RBI requires banks, NBFCs, and other Regulated Entities (REs) to adopt a Risk-Based Approach (RBA) for combating ML/TF risks. • Under RBA, institutions must: o Identify risks related to customers, products, services, and geographies. o Assess and categorize customers into low, medium, or high risk. o Apply enhanced due diligence (EDD) for high-risk customers (e.g., PEPs, cross-border clients). o Monitor transactions proportionately to the level of assessed risk. • This ensures efficient allocation of compliance resources and strengthens the AML/CFT framework.

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SIDBI Grade A (Assistant Manager)

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