In post offices, we must maintain transaction transparency and adhere to regulatory requirements.
The recent revision of Know Your Customer (KYC), Anti-Money Laundering (AML), and Combating the Financing of Terrorism (CFT) norms, as stipulated in SB Order 12/2023, highlights the need for vigilance when handling large cash deposits. In this article, I will provide an example of a Savings Bank (SB) account holder at a post office and outline the necessary steps that postal officials must take to ensure compliance.
Key Highlights of SB Order 12/2023
SB Order 12/2023 includes the following key points:
1. Master Circular on AML/CFT Norms: The Master Circular No. 1 on AML/CFT norms applicable for Small Savings Schemes, originally circulated in SB Order No. 14D012 dated October 9, 2012, has been updated.
2. Implementation of GSPR 2018 and NSS Rules 2019: The Department of Economic Affairs, Ministry of Finance, has implemented the Government Savings Promotion General Rules 2018 (GSPR 2018) and National Savings Schemes Rules 2019 since December 18, 2019. These rules prescribe mandatory and optional documents to be obtained from depositors.
3. Changes in Reporting Processes: With the implementation of Core Banking Solutions (CBS), the process of reporting transactions has evolved.
4. Compliance with FIU-IND and FATF Guidelines: To comply with guidelines from the Financial Intelligence Unit – India (FIU-IND) and the Financial Action Task Force (FATF), revised guidelines on AML/CFT norms for post offices have been issued, superseding all previous orders on the subject.
5. Amendment to POSB (CBS) Manual: Appendix I of the POSB (CBS) Manual (updated as of December 31, 2021) has been amended to incorporate the contents of Master Circular No. 2, which is attached to SB Order 12/2023.
Lets discuss on recent case study on Large Cash Deposits that happened
On April 4, 2024, an SB account holder at a post office deposited Rs. 9,99,500 in cash. Shortly thereafter, the same individual attempted to deposit an additional Rs. 1,00,000 in cash. Given the cumulative total of Rs. 10,99,500, postal officials rightly requested verification of the source of income, as mandated by the regulations. The account holder’s response was hostile, demanding the specific rule and issuing threats.
Regulatory Framework: SB Order 12/2023
SB Order 12/2023 clearly stipulates that any cash deposits exceeding Rs. 10 lakhs within a financial year require verification of the source of income. This rule is part of a broader effort to combat money laundering and ensure financial transparency within postal savings schemes. Here’s why the postal officials’ actions were justified:
1. Mandatory Verification: The cumulative deposit amount of Rs. 10,99,500 exceeds the regulatory threshold of Rs. 10 lakhs. Therefore, verifying the source of income is not just prudent—it is mandatory. This process helps to ensure that the funds are legitimate and not part of any illicit activities. Hence request the customer proof of income or give a credible explanation for the source of the deposit. We have to communicate this clearly aligning with SB Order 12/2023.
2. Suspicious Transactions Report (STR): Given the substantial cash deposits and the account holder’s adverse reaction, it is essential to prepare and submit a Suspicious Transactions Report (STR) in detail about the transaction and any concerning behavior exhibited by the account holder to the Head of The Division on the same day. This report flags the transaction for further scrutiny by higher authorities, helping to prevent potential financial crimes.
It is also good to educate our customers. Understanding these regulations and cooperating with us can help them facilitate smooth transactions while ensuring that all financial activities comply with financial regulations.