The Reserve Bank of India (RBI) has amended the Master Direction (MD) on Know Your Customer (KYC) guidelines, aiming to redefine and provide clearer parameters for identifying Politically Exposed Persons (PEPs).
- The move will make it easier for those individuals to carry out various banking transactions, including availing loans.
- In the amended KYC master direction, RBI defines PEPs as “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.”
- Bank accounts of PEPs have additional KYC norms under the current provisions and special due diligence has to be undertaken by a senior bank official.
- RBI mandated Regulated Entities (REs) to conduct Customer Due Diligence (CDD) following the outlined procedures for their clientele.
- 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.
