The Reserve Bank of India (RBI) has updated Know Your Customer (KYC) norms for politically exposed persons (PEPs) who transact with regulated entities (REs), seeking to comply with the recommendations of intergovernmental organisation Financial Action Task Force (FATF).What additional conditions do regulated entities (REs) have to fulfill when establishing a relationship with PEPs, as per the RBI guidelines?

Solution

The Reserve Bank of India (RBI) has updated Know Your Customer (KYC) norms for politically exposed persons (PEPs) who transact with regulated entities (REs), seeking to comply with the recommendations of intergovernmental organisation Financial Action Task Force (FATF), PEPs are individuals 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. REs have the option of establishing a relationship with PEPs (whether as customer or beneficial owner). REs have to perform the regular customer due diligence and also follow additional conditions prescribed by the RBI to transact with PEPs. Some additional conditions include establishing an appropriate risk management system to determine whether the customer or the beneficial owner is a PEP. REs have to take reasonable measures for establishing the source of funds/ wealth. They also need to get approval from senior management to open an account for a PEP.