BEYOND KYC: STRENGTHENING ANTI-MONEY LAUNDERING PRACTICES IN INDIA'S BANKING SYSTEM

This paper analyses the effectiveness of the anti-money laundering framework in India's banking sector in the context of rapid digitalisation and financial integration. It examines the statutory obligations of banks under the Prevention of Money Laundering Act, 2002, the RBI's KYC and AML Directions, and the FATF standards, while highlighting the gap between formal compliance and substantive risk detection. The study identifies key challenges such as mechanical KYC practices, weak transaction monitoring, fintech-related risks, and limited institutional accountability. It argues for a shift towards risk-based monitoring, technological integration, stronger reporting culture, and enhanced regulatory coordination to transform banks from passive reporting entities into proactive guardians of financial integrity