Discuss the New Guidelines issued by Reserve Bank of India on 'Risk Assessment' procedure in 'Know Your Customer' norms.

In Master of Direction on Know Your Customer (vide Reserve Bank of India Circular dated April 20, 2020) added new section (5A) requiring Reporting Entities to carry out Money Laundering and Terrorist Financing, Risk Assessment exercise periodically to identify, assess and take effective measures to mitigate its money laundering and terrorist financing risk for clients, countries or geographic areas, products services, transactions or delivery channels, etc. While assessing the Money Laundering and Terrorist Financing Risk, Reporting Entities are required to take cognizance of the overall sector specific vulnerabilities, if any, that the regulator/supervisor may share with Reporting Entities from time to time. Further, the internal risk assessment carried out by the Reporting Entities should be commensurate to its size, geographical presence, complexity of activities/ structure etc. Also, the Reporting Entities shall apply a Risk Based Approach for mitigation and management of the identified risk and should have Board approved policies, controls and procedures in this regard. As per recent amendment done by the Reserve Bank of India through amendments in Master Direction on May 10, 2021, Reporting Entities (REs) may undertake V-Customer Identification Procedure to carry out Customer Due Diligence in case on boarding for individual customers, proprietor in case of proprietorship firm, authorised signatories and Beneficial Owners in case of Legal Entity customers. Provided that in case of Customer Due Diligence of a proprietorship firm, Reporting Entities shall also obtain the equivalent e-document of the activity proofs with respect to the proprietorship firm, as mentioned in Section 28 apart from undertaking Customer Due Diligence of the proprietor. Conversion of existing accounts opened in non-face to face mode using Aadhaar One Time Password based e-Know Your Customer authentication as per Section 17. Updating/Periodic updating of Know Your Customer for eligible Customers.