Navigating the AML Compliance Journey under IFSCA (AML, CFT & KYC) Guidelines

The regulated entities registered with International Financial Services Centre Authority (IFSCA) are required to comply with the AML regulatory framework. In this regard, the IFSCA has issued IFSCA (AML, CFT & KYC) Guidelines, 2022, laying down the compliance obligations regulated entities must adhere to.

The IFSC-regulated entities must appoint a designated AML Principal Officer competent to manage the overall AML compliance program of the entity. The regulated entities must perform Enterprise-Wide Risk Assessment (EWRA) to identify the ML/FT risk their business is exposed to and develop the internal AML policies, procedures, systems, and controls accordingly.

Having implemented the internal AML framework, the regulated entities must apply adequate Customer Due Diligence measures, including the Know Your Customer (KYC) process, screening against sanctions, conducting customer risk assessment and applying Enhanced Customer Due Diligence measures to customers posing increased ML/FT risk to the entity. Further, KYC information about Indian resident customers must be furnished with Central KYC Records Registry.

The regulated entities are also required to implement ongoing monitoring systems, to continuously monitor customer information and transactions to identify suspicious or unusual activities.

Once the risk indicator is observed, the regulated entities should use the DARE approach to determine the suspicions, i.e.,
– Detect the red flag
– Ask the right questions without tipping off
– Review the customer’s information collected while performing CDD
– Evaluate the entire information together to conclude on the identified suspicion.
This suspicion must be reported to the FIU-IND by filing Suspicious Transaction Report (STR).

The regulated entity must maintain all the AML records for at least six (6) years from the transaction date or closure of the business relationship, whichever is later.

Further, other obligations imposed upon regulated entities under IFSCA AML CFT guidelines are AML training, AML independent Audit, etc.

Here is an informative graphic depicting the high-level compliance requirements of regulated entities subject to IFSCA (AML, CFT & KYC) Guidelines, 2022.

AML India is an AML consultancy service provider offering end-to-end AML support to regulated entities based in the GIFT City, subject to IFSCA AML guidelines. We offer support in setting up an in-house AML compliance department, conducting risk assessment and framing the customized AML policies and procedures, imparting AML training to the team, etc.