Mumbai: The Reserve Bank today asked banks to strictly follow the Know Your Customer (KYC) norms or Anti- Money Laundering (AML) standards, failing which it will take penal action. "Any contravention thereof or non-compliance shall attract penalties under Banking Regulation Act, 1949," RBI said in a notification. Banks are required to strictly adhere to Know-Your- Customer (KYC) norms, Anti-Money Laundering (AML) standards, Combating of Financing of Terrorism (CFT), Obligation of banks under Prevention of Money Laundering Act (PMLA), 2002, it said. RBI said banks are required to prepare a risk profile of each customer and apply enhanced due diligence measures on higher risk customers. Banks and Financial Institutions should have policies, controls and procedures, duly approved by their boards, in place to effectively manage and mitigate their risk adopting a risk-based approach, it said. As a corollary, banks would be required to adopt enhanced measures for products, services and customers with a medium or high risk rating, it added. In this regard, it said, Indian Banks'' Association (IBA) has taken initiative in assessment of money laundering and financial terror and risk in the banking sector. The IBA guidance also provides an indicative list of high risk customers, products, services and geographies. Banks may use the same as guidance in their own risk assessment, it added.