RBI-Money Mules-NBFC-Money Laundering

Reserve Bank of India reiterated their firm stand against Money Mules whom are used for Money Laundering by various elements. In this regard the central bank of India has issued a notification for creating awareness against using Non Banking Financial Companies by money mules for laundering illegal money. The notification dated April 5, 2011 asks the NBFCs to follow the guidelines issued to create awareness regarding money laundering in a Master Circular issued by RBI in July 1, 2010. Also various other regulations are also in place in this regard.

First of all we should understand some terms.

Money Laundering

This can be ultimately defined as the process by which illegally obtained money is made to appear legitimate. The money obtained is transferred through an outside party to hide the exact source. The cash is injected into the financial system by some means firstly. Then some activities or transactions are carried out just for 

the sake of showing that this is legitimate money. Then the culprits earns more money by placing the illegal money in various transactions.

Money Mules

He is a person who transfers the illegal money from one place/country to another. One could find various kinds of scammers in internet who are mules or use mules. They will not have a true identity. They may be using fake one also.

Now there is a Know Your Customer policy or standard being followed by every bank or other financial institution. This is to prevent such institutions from being used by criminals for money laundering. The KYC policy stands on four key elements which are (1)customer acceptance policy;(2)customer identification procedures;(3)monitoring of transactions; and (4)risk management. 

The NBFCs must ensure that they follow strictly to the KYC guidelines. Apart from that the NBFCs must carry out a uniform policy regarging appointment and verification of brokers and agents connected with them. All records relating to them should be kept ready for inspection at any time. There are guidelines laid down in case of some persons in rural areas who are unable to produce documents of identity and proof of address as required. Sometimes an introduction from another account holder who has gone through full KYC procedure and whose account is old enough and containing satisfactory transactions is required.

The guidelines are very detailed. But still it require some things which should ensure an efficient prevention of money laundering. RBI is framing various guidelines from time to time relating to money laundering. Hopefully we can achieve better results. RBI has in time sensed the involvement of "money mules" who  can be used for fraud schemes.RBI asks the NBFCs to protect the customers from the fraudsters by strictly following to the guidelines.