Taking stringent stance on money laundering, RBI mandates citing buyer’s name on Demand Draft

New Delhi, July 13: The rising concern and misuse of demand draft for money laundering have resulted in strengthening the norms of the banking system. In a series of measures taken by the Reserve Bank of India to make banking strategies safer and stronger, the central bank on Thursday said it has decided to make it mandatory to mention the name of a purchaser on the demand draft (DD) at a bank branch.

In the current system, only the name of a person in whose favor a DD is to be prepared is mentioned on it. The apex bank has also decided to include pay order and bankers cheques under the new rule from September 15.

"To address the concerns arising out of the anonymity provided by payments through demand drafts and its possible misuse for money laundering, it has been decided that the name of the purchaser be incorporated on the face of the demand draft, pay order, banker's cheques, etc, by the issuing bank. These instructions shall take effect for such instruments issued on or after September 15, 2018," the RBI said in a statement.

 

The statement also initiated that accordingly, Section 66 of the Master Direction on KYC dated February 25, 2016, as amended on April 20, 2018, has been amended and following paragraph has been added:

Further, the name of the purchaser shall be incorporated on the face of the demand draft, pay order, banker’s cheques, etc., by the issuing bank. These instructions shall take effect for such instruments issued on or after September 15, 2018.

The central bank has asked all the banking institutions to comply with the new guidelines. A total of 5,152 cases of fraud involving over Rs 28,459 crore were reported in various banks of the country in the past year from April 2017 to March 1, 2018.

Some of these measures include remittance of DD above Rs 50,000 by debit or cheques, issuance of small funds against cash even if a customer has an account in some other bank, and acceptance of small denomination notes for the issuance of DD, etc.

Many of such frauds are committed by finding dodges in the banking instruments such as demand draft. With the government taking tough stance on corruption and bank-related frauds, the RBI too has stepped up security measures to curb illegal flow of money.