27 Dec, 2010, 10.31PM IST,PTI

http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/banking/follow-kyc-norms-to-check-terror-funding-rbi-to-coop-banks/articleshow/7174520.cms

MUMBAI: The Reserve Bank today asked co-operative banks to strictly follow 'know your customer' norms to prevent their use by criminal elements for money laundering or terrorist financing activities.

"It has been brought to our notice that 'Money mules' can be used to launder the proceeds of fraud schemes (e.g phishing and identity theft) by criminals, who gain illegal access to deposit accounts by recruiting third parties to act as 'money mules'," the central bank said.

In a money mule transaction, an individual with a bank account is recruited to receive cheque deposits or wire transfers and then transfer these funds to accounts held on behalf of another person or to other individuals, after taking certain commission.

Many a times the address and contact details of such mules are found to be fake or not up-to-date, making it difficult for enforcement agencies to locate the account holder.

The operations of such mule accounts can be minimised if banks follow the guidelines on Know Your Customer (KYC) norms, Anti-Money Laundering ( AML )) Standards, Combating of Financing of Terrorism (CFT)/Obligation of banks, the RBI said.

"State and central Co-operative Banks are, therefore, advised to strictly adhere to the guidelines on KYC/AML/ CFT...in order to protect themselves and their customers from misuse by such fraudsters," the RBI said in a communication to chief executives of all state and central co-operative Banks.