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Policy framework on "know your customer" and "anti-money laundering measures"


Objectives :


  • To prevent the Company from being used, intentionally or un-intentionally, by criminal elements for money laundering activities.
  • To know/understand the Customers and their financial dealings better which, in turn, help in managing their risks prudently?
 

Key elements of the policy :


  • Customer Acceptance Policy
  • Customer Identification Procedures
  • Monitoring of Transactions
  • Risk Management
 

Definition of customer


  • A person or entity that maintains an account and/or has a business relationship with the Company either as a depositor or as a borrower.
  • One on whose behalf the account is maintained (i.e. the beneficial owner)
  • Beneficiaries of transactions conducted by professional intermediaries, such as stock brokers, chartered accountants, solicitors etc., as permitted under law, and
  • Any person or entity connected with a financial transaction which can pose significant reputational or other risks to the Company, say, a wire transfer or issue of a high value demand draft as a single transaction
 

Customer acceptance policy (cap)


Explicit criteria for acceptance of customers:


  • No account is opened in anonymous or fictitious / benami name(s)
  • Parameters of risk perception are defined in Para 5
  • Customers are categorized into different level of risk perception as in Para 5
  • Documentation requirements and other information to be collected in respect of different categories of customers depending upon the perceived risk and keeping in mind the requirements of Prevention of Money Laundering Act, 2002.
  • Not to open an account or close an existing account where the Company is unable to apply appropriate customer due diligence measures, i.e. unable to verify the identity and /or obtain documents required as per the risk categorization due to non co-operation of the customer or non reliability of the data/information furnished to the Company
  • However, care should be taken that the implementation of the policy do not lead to harassment of the customer,
  • Circumstances in which a customer is permitted to act on behalf of another person/entity should be clearly spelt out in the relevant document supporting it, which should be in conformity with the established law and practices.
  • Cross Checks should be made to confirm that the identity of the customer does not match with any person with known criminal background or with banned entities such as individual terrorists or terrorist organizations etc.
  • The branches will maintain a customer profile as per annexure, containing information relating to the customer's identity, social/financial status, nature of business activity information about client's business and their location etc.
  • This customer profile will be a confidential document and details contained therein shall not be divulged for cross selling or any other purposes.
 

Categorization of customers according to risk profile


Low Risk Customers

Customers requiring basic verification of identity and location.

  • Salaried employees whose salary structures are well defined
  • People belonging to lower economic strata of society whose accounts show small balances and low turnover
  • Government departments and Government owned companies
  • Regulators and statutory bodies
 

Medium Risk Customers


  • Non-Resident customers
  • High Net-Worth individuals
  • Trusts, Charities, Non-Government Organizations (NGO) and organizations receiving donations
  • Companies having close family shareholding or beneficial ownership
  • Firms with 'sleeping partners'
 

High Risk Customers

Customers requiring thorough probe

  • Politically Exposed Persons (PEP) of foreign origin
  • Non-face to face customers
  • Those with dubious reputation as per public information available

The categorization of customers as per risk profile and implementation of the measures, however, should not result in denial of Company's services to general public, especially to those, who are financially or socially disadvantaged.

 

Customer Identification Procedure

As per the Rule 9 of the Prevention of Money Laundering (Maintenance of Records of the Nature and Value of Transactions, the Procedure and Manner of Maintaining and Time for Furnishing information and Verification and Maintenance of Records of the Identity of the clients of the Banking Companies, Financial Institutions and Intermediaries) Rules, 2005 (PML Rules) requires that our company:

  • At the time of commencement of an account-based relationship, identify its customers, verify identity and obtain information on the purpose and intended nature of business relationship.
    Customer Identification means identifying the customer and verifying his/her identity by using reliable, independent source documents, data or information.
  • Customer Identification Procedure will be carried out at different stages as follows:
  • While establishing a relationship
  • Transaction of an amount equal to or exceeding rupees fifty thousand, whether conducted as a single transaction or several transaction that appear to be connected, or
  • Any international money transfer operations

When the Company has a doubt about the authenticity/veracity or the adequacy of the previously obtained customer identification data, company may further demans data as follows:

  • For customers that are natural persons, sufficient identification data to verify the identity of the customer, his address/location and also his recent photograph.
  • For Customers that are legal persons or entities, the legal status of the legal person/entity should be verified through proper and relevant documents. For any person purporting to act on behalf of the legal person/entity, it has to be verified whether he is so authorized and his identification has to be verified. Also, the ownership and control structure of the customer should be understood so as to determine who are the natural persons who ultimately control the legal person.
  • Customer identification requirements in respect of a few typical cases, especially legal persons requiring an extra element of caution are given in Annexure 1.
  • An indicative list of the nature and type of documents/information that may be relied upon for customer identification is given in Annexure 2.
 

Monitoring Of Transactions


  • Ongoing monitoring is an essential element of effective KYC procedures.
  • Special attention will be paid to all complex, unusually large transactions and all unusual patterns which have no apparent economic or visible lawful purpose.
  • The Branches will have to regularly monitor the transactions of over Rs.10 lakhs.
  • The monitoring will be done according to the Risk level of the borrowers and any abnormal transaction will have to probed.
  • A record of such transactions which are inconsistent with the level of the borrowers and also transactions of suspicious nature will be maintained at the branch in terms of Section 12 of Prevention of Money Laundering Act, 2002.
  • Any cash transaction of over Rs.10 lakhs and also of any suspicious nature has to be reported by the branches to Registered Office of the company on a monthly basis in the following format. If no transaction of such nature has taken place, the branch should report 'nil' statement to Registered Office.

Name of the Account, Date of transaction, Amount involved, Remarks

 

Risk Management


  • All branches will strictly comply with the laid down policies on Accounting, Lending, Recovery etc., and also the guidelines issued from Registered Office from time to time.
  • The auditors auditing the branches will thoroughly check the application of KYC norms in the branches and comment on the lapses observed in this regard. Compliance on KYC norms by branches will be put before the Audit Committee at regular intervals.
  • Registered Office will ensure that all the frontline staff members are kept informed well of the KYC norms and procedures for implementation.
 

Customer Education

Registered Office will be providing specific literature/pamphlets to educate the customers on the objectives of KYC norms and procedures seeking their cooperation in getting the information required from them.

 

Introduction Of New Technologies

Registered Office will ensure that necessary control mechanism will be built in the Software packages to be implemented in the branches to prevent the use of the technology for money laundering purposes

 

Kyc For The Existing Accounts


  • The Branches will apply the KYC norms to the existing customers on the basis of materiality and risk. Transactions in existing accounts will be continuously monitored and any unusual pattern will be reviewed by the branch manager.
  • The existing term deposit accounts will be treated as new accounts at the time of renewal and KYC norm will be applied.
  • Inspite of the best efforts on its part, if the branch is unable to get the desired information from the account holder due to his non-cooperation , the branch should consider closing the account and terminate the business relationship after issuing notice to the customer explaining the reasons for taking such a decision and recommend the closure of the account to Registered Office, who will advice the branch accordingly / suitably.
 

Appointment Of Principal Officer


  • General Manager of the Company at Registered Office will be Principal Officer of the Company to coordinate the implementation of KYC norms in the Company.
  • The Principal Officer is authorized to fix the accountability for serious lapses and intentional circumvention of prescribed procedures and guidelines, in consultation with the Managing Director of the Company.
 

Maintenance Of Records Of Transactions


  • All branches will be maintaining proper record of transactions prescribed under Rule 3 of the Prevention of Money Laundering Act, 2002 as mentioned below
  • All cash transactions of the value of more than Rs.10 lakhs or its equivalent in foreign currency.
  • All series of cash transactions integrally connected to each other which have been valued below Rupees ten lakhs where such series of transactions have taken place within a month and the aggregate value of such transactions exceeds rupees ten lakhs.
  • All transactions involving receipts by non-profit organizations of rupees ten lakhs or its equivalent in foreign currency,
  • All cash transactions where forged or counterfeit currency notes or bank notes have been used as genuine and where any forgery of a valuable security has taken place
  • All suspicious transactions whether or not made in cash and by way of as mentioned in the rules.
  • The branches are required to maintain proper record of all cash transactions of Rs.10 lakhs and above. Further, all such transactions/suspicious transactions whether made in cash or other wise, to be reported to Registered Office by the branches, on fortnightly basis.
  • The branches are required to maintain the following information in respect of transactions referred to Rule 3 of the prevention of Money Laundering.
    • The nature of transactions
    • The amount of the transaction and the currency in which it was denominated
    • The date on which the transaction was conducted and
    • The parties to the transaction
 

Maintenance And Preservation Of Records


  • The branches will maintain the records for atleast 10 years from the date of cessation of transaction between the bank and the client so as to retrieve the transactions and provide evidence for prosecution of persons involved in criminal activity.
  • All branches will maintain the records pertaining to the identification of the customers and their addresses including copies of passports, identity card, driving licenses, pan, utility bills, obtained while opening the account and during the course of business relationship and properly preserve for at least 10 years after the business relationship is ended. The identification records and transaction data should be made avilable to the competant auathorities upon request.
 

Reporting To Financial Intellegence Unit India

The Company will be reporting the information in the proper format, transactions relating to cash and suspicious nature to the Director, Financial Intelligence Unit-India (FIU-IND) at the following address:

Director, FIU-IND
Financial Intelligence Unit India
6th Floor, Hotel Samrat
Chanakyapuri
New Delhi :- 110 021

  • The information in respect of the transactions referred to in clause (A), (B) and (BA) of sub-rule (1) of rule 3 of the PML Rules (i.e. clauses mentioned in para 13 above) is to be submitted to the Director every month by the 15th day of succeeding month. (Annexure 3-10)
  • The information to be submitted to the Director promptly, in writing or by E-mail, or by fax, not later than seven working, days from the date of occurrence of such transaction and on being satisfied that the transaction is suspicious. (As per Annexure 3-10)
 

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