RBI Allows Multinational Banks to Retain Limited Data Abroad for AML Screening

Richard Marley

October 14, 2021

KYC data can be retained in offshore bank branches for the purpose of sanctions and AML screening.

The Reserve Bank of India has authorized foreign banks to retain certain fields of information which include name and address of customers, Know Your Customer (KYC) details, name of beneficiary, transaction details like date and amount, and reference numbers, putting an end to a long-standing debate.

According to an industry source, the regulator informed the Indian Banks’ Association (IBA) about this a week ago.

Prior to this, banks had been advised by the regulator that in the event payment data was sent to overseas servers, it had to be deleted within 24 hours, with copies of them being stored onshore. A few months back, major foreign banks appealed to the RBI, asking for permission to store certain transaction data overseas for the detection of money-laundering activities and sanctions screening. “They had asked for a whole lot of data, but RBI has finally allowed only 6 to 7 fields,” remarked a banker.

Numerous multinational firms raised concerns to the regulator prior to this step, stating that having a worldwide set of data for tracing money laundering activities was critical.

Typically, foreign banks in India generate suspicious activity reports through Anti-Money Laundering (AML) software that are housed in offshore locations. AML verification is necessary under global AML laws, non-compliance to which can lead to grey listing by the FATF. Additionally, sanctions screening refers to the verification of customer names against sanction lists to ensure the prevention of fraudulent activity.

On the other hand, the RBI has denied foreign banks the ability to retain information such as phone numbers and ‘purpose of remittance’ on servers in other countries.