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KYC, AML & CFT Programme for State Cooperative Banks
January 31, 2012
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KYC & AML Programme for State Cooperative
Banks
This KYC, AML and CFT programme has been developed to prevent the Bank from being unintentionally or intentionally used for money laundering and terrorist financing activities and shall enable the Bank better understand its customers and their financial activities, which in turn will help manage customer risk prudently.
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Original Issue Date: 4th October 2011 Approver: Mr. Bhima Subrahmanyam, Managing Director, NAFSCOB Author: Jocata Financial Advisory and Technology Contact Person: Prashant Muddu, Managing Director, Jocata Classification: KYC, AML & CFT Regulatory Compliance Applicability: All Branches Including Head Office of the Bank Last Revision Date: 23rd January 2012 Review Date: 27th January 2012 Version: Final
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GLOSSARY OF TERMS AML Anti-Money Laundering BM Branch Manager BDD Basic Due Diligence CAP Customer Acceptance Program CBI Central Bureau of Investigation CBS Core Banking Solution CCR Counterfeit Currency Report CRCM Customer Risk Categorisation Model CDD Customer Due Diligence CIP Customer Identification Program CRO Customer Relationship Officer CTR Cash Transaction Report DCCB District Central Cooperative Bank EDD Enhanced Due Diligence FATF Financial Action Task Force FIU-IND Financial Intelligence Unit - India HNI High Net Worth Individual HUF Hindu Undivided Family IBA Indian Banks’ Association KYC Know Your Customer ML Money Laundering NRI Non-Resident Indian PACS Primary Agricultural Cooperative Societies PEP Politically Exposed Person PIO Person of Indian Origin PMLA Prevention of Money Laundering Act 2002 PMLR Prevention of Money Laundering Rules 2005 PO Principal Officer RBI Reserve Bank of India RRB Regional Rural Banks NABARD National Bank for Agriculture and Rural Development NAFSCOB National Federation of State Cooperative Banks NRI Non Resident Indian NSDL National Securities Depository Limited NTR Non-Profit Organisation Transaction Reports SA Staff Assistant SCB State Cooperative Banks SDD Simplified Due Diligence STR Suspicious Transaction Report UAPA Unlawful Activities Prevention Act UN United Nations UNSCR United Nation Security Council Resolution
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TABLE OF CONTENTS 1 Preface .......................................................................................................................... 10
1.1 Statement of commitment....................................................................................... 10 2 Definitions ...................................................................................................................... 11
2.1 Customer ................................................................................................................ 11 2.2 High Net-Worth Individual....................................................................................... 11 2.3 Beneficial Owners................................................................................................... 11 2.4 Controlling Parties .................................................................................................. 11 2.5 Money Laundering.................................................................................................. 11 2.6 Terrorist Financing.................................................................................................. 12 2.7 Small Account......................................................................................................... 12 2.8 Financial Intermediary ............................................................................................ 12 2.9 Ordering Bank ........................................................................................................ 12 2.10 Intermediary Bank .................................................................................................. 13 2.11 Beneficiary Bank..................................................................................................... 13
3 Legislative and Regulatory Framework ......................................................................... 14 3.1 Defined legal frameworks ....................................................................................... 14
3.1.1 Prevention of Money Laundering Act 2002 ..................................................... 14 3.1.2 Rules under PMLA .......................................................................................... 14 3.1.3 Unlawful Activities (Prevention) Act, 1967....................................................... 14
3.2 Applicable Regulatory Authorities........................................................................... 14 3.2.1 Reserve Bank of India ..................................................................................... 14 3.2.2 National Bank for Agriculture and Rural Development .................................... 15 3.2.3 Financial Intelligence Unit – India.................................................................... 15
3.3 Consequences of Non-Compliance........................................................................ 15 3.3.1 Penalties for Non-Compliance......................................................................... 15 3.3.2 Reputational Risk ............................................................................................ 15
4 Governing Structure and Roles and Responsibilities at State Cooperative Banks........ 17 4.1 Overview................................................................................................................. 17 4.2 Governing Policies and Procedures ....................................................................... 17 4.3 Roles and Responsibilities ..................................................................................... 18
4.3.1 Board of Directors ........................................................................................... 18 4.3.2 Senior Management ........................................................................................ 18 4.3.3 Principal Officer ............................................................................................... 18 4.3.4 AML Compliance Group .................................................................................. 19 4.3.5 Audit and Compliance Department ................................................................. 19 4.3.6 Customer Relationship Officer ........................................................................ 19
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4.3.7 Branch Manager.............................................................................................. 19 4.3.8 Staff ................................................................................................................. 20
5 Customer Classification ................................................................................................. 21 5.1 Constitution............................................................................................................. 21 5.2 Categories .............................................................................................................. 22
5.2.1 Individuals ....................................................................................................... 22 5.2.2 Entities............................................................................................................. 22
6 Customer Acceptance Policy......................................................................................... 24 6.1 Fictitious or Benami names .................................................................................... 24 6.2 Customer Risk Categorisation................................................................................ 24
6.2.1 Business Imperative ........................................................................................ 24 6.2.2 Overview of Methodology................................................................................ 25 6.2.3 Application of Rating Methodology.................................................................. 25 6.2.4 Risk categorisation review............................................................................... 27
Appendix I to Chapter 6: Customer Risk Categorisation Variables and Scores ................... 29 Appendix II to Chapter 6: High Risk Industry Sectors........................................................... 36 7 Customer Identification and Verification Program ......................................................... 37
7.1 Overview................................................................................................................. 37 7.2 Applicability............................................................................................................. 37 7.3 Basis for Customer Identification............................................................................ 37
7.3.1 Walk-in Customers .......................................................................................... 37 7.3.2 Account Holders .............................................................................................. 38
7.4 Customer Due Diligence......................................................................................... 38 7.4.1 Basic Due Diligence ........................................................................................ 39 7.4.2 Simplified Due Diligence ................................................................................. 39 7.4.3 Enhanced Due Diligence................................................................................. 40 7.4.4 Steps to perform EDD ..................................................................................... 40 7.4.5 Special Cases for Documentary Verification ................................................... 40 7.4.6 Name Screening.............................................................................................. 41 7.4.7 External Requests for Freezing of Accounts ................................................... 43 7.4.8 Adverse Information Checks ........................................................................... 43 7.4.9 Politically Exposed Person .............................................................................. 44
Appendix I to Chapter 7: Due Diligence Checklist ................................................................ 46 Appendix II to Chapter 7: List of Officially Valid Documents................................................. 91
Address Proof Documents ................................................................................................ 92 8 Relaxations to KYC Information Collection Requirements ............................................ 94
8.1 Small Accounts....................................................................................................... 94 8.2 Customers through Introducer................................................................................ 94
9 Account Opening Process ............................................................................................. 96
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9.1 Determine Type of the Customer and Obtain Basic Customer Information............ 96 9.2 Obtain or Calculate the Customer Risk Categorisation Score................................ 96 9.3 Determine If Customer qualifies for Simplified Due Diligence ................................ 96 9.4 Verify the Identity of the Customer Using Documentary Methods.......................... 96 9.5 Perform Background Checks.................................................................................. 97 9.6 Collect Introducer Information ................................................................................ 97 9.7 Identify Details for Entity Customers ...................................................................... 98 9.8 Identify Controlling Parties and Beneficial Owners................................................. 98 9.9 Obtain Approvals .................................................................................................... 98
Appendix I to Chapter 9: Account Opening Flowchart ............................................................ 1 10 Customer Information Update .................................................................................. 100
10.1 Schedule of Reviews ............................................................................................ 100 10.2 Procedures for Periodic Reviews ......................................................................... 100 10.3 Change in Category or Constitution ..................................................................... 101
11 Account Cancellation and Closure ........................................................................... 102 11.1 Initiation of Customer Relationship Closures........................................................ 102
11.1.1 Internal Notification........................................................................................ 102 11.1.2 Scheduling Closure ....................................................................................... 102 11.1.3 Transaction cancellation................................................................................ 103
12 Internal controls........................................................................................................ 104 12.1 Products and Services Offered by the Bank......................................................... 104 12.2 Customer Acceptance and Identification Procedures........................................... 104 12.3 Country Risk Assessment Procedures ................................................................. 104 12.4 Customer Risk Assessment Procedures .............................................................. 104 12.5 KYC, AML and CFT Policy and Procedure Reviews ............................................ 105 12.6 Actions of the AML Compliance Group ................................................................ 105
12.6.1 Self-assessment Procedures ........................................................................ 105 12.6.2 Updates on Policy and Procedures ............................................................... 105 12.6.3 Perform Audits............................................................................................... 105 12.6.4 Perform Quality Assurance Tests.................................................................. 105
13 Transaction Monitoring and Reporting ..................................................................... 106 13.1 Introduction........................................................................................................... 106 13.2 Reporting Formats................................................................................................ 106 13.3 Submission of Reports to FIU-IND ....................................................................... 106 13.4 CTRs .................................................................................................................... 107
13.4.1 CTR Filing Procedures .................................................................................. 107 13.4.2 Time Frames for Filing a CTR ....................................................................... 108 13.4.3 Exemptions.................................................................................................... 108
13.5 STRs..................................................................................................................... 108
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13.5.1 Introduction.................................................................................................... 108 13.5.2 Potential Indicators of Suspicious Activity or Red Flags................................ 109 13.5.3 Transaction Types for Monitoring.................................................................. 111 13.5.4 Automated Transaction Monitoring ............................................................... 112 13.5.5 Manual Alerts ................................................................................................ 115 13.5.6 STR Filing Obligations................................................................................... 115 13.5.7 Communication with Authorities and Voluntary STRs................................... 115 13.5.8 Prohibition of Disclosure................................................................................ 116 13.5.9 Protection from Civil Liability for Reporting Information in a STR.................. 116 13.5.10 Prohibition on Retaliation........................................................................... 116 13.5.11 Failure to Comply with the Bank’s Policy................................................... 117 13.5.12 Escalation and Referral of Potentially Suspicious Activity ......................... 117 13.5.13 STR Filing Procedures............................................................................... 117 13.5.14 On-going Duty to Report............................................................................ 118 13.5.15 Time Frames for Filing a STR.................................................................... 118 13.5.16 STR Dispute Resolution ............................................................................ 119 13.5.17 Supplemental STRs................................................................................... 119 13.5.18 Closing Accounts Due to Continued Suspicious Activity ........................... 119 13.5.19 STR Record Retention............................................................................... 119 13.5.20 Regulatory and Law Enforcement Requests ............................................. 120
13.6 CCRs .................................................................................................................... 120 13.6.1 CCR Filing Procedures.................................................................................. 120 13.6.2 Time Frames for Filing a CCR....................................................................... 120
13.7 NTRs .................................................................................................................... 121 13.7.1 NTR Filing Procedures .................................................................................. 121 13.7.2 Time Frames for Filing a NTR ....................................................................... 121
13.8 Special Note on Wire Transfers............................................................................ 121 13.8.1 Requirements of Domestic Transfers............................................................ 122 13.8.2 Requirements of Cross Transfers ................................................................. 122 13.8.3 Exemption from Wire Transfer Requirements ............................................... 122
Appendix I to Chapter 13: Other Authorities for Enforcement of the PMLA........................ 123 14 Customer Record Retention and Sharing ................................................................ 124
14.1 Maintenance and Preservation of Records .......................................................... 124 14.2 Information Sharing, Legal Process and Other Matters ....................................... 124
14.2.1 Principal Officer ............................................................................................. 124 14.2.2 Sharing Process ............................................................................................ 124
15 Training and Education ............................................................................................ 126 15.1 Customer Education ............................................................................................. 126 15.2 Training................................................................................................................. 126
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15.3 KYC for Existing and New Employees ................................................................. 127 15.4 Training formats.................................................................................................... 127
Annexure A: Guidelines on Performing Background Checks using Google ....................... 128 Annexure B: Letter to Individual Customers Regarding KYC Compliance ......................... 132 Annexure C: Schedule of Offences..................................................................................... 134 Annexure D: Manual Format for Filing Cash Transaction Report ....................................... 143 Annexure E: Manual Format for Filing Suspicious Transaction Report .............................. 147 Annexure F: Manual Format for Filing of Counterfeit Currency Transaction Report........... 152
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1 Preface This policy and procedure document is a comprehensive source of reference for all the concerned and relevant activities of the Bank towards Know Your Customer (KYC), Anti Money Laundering (AML) and Combating the Financing of Terrorism (CFT) compliance. The policies and procedures developed are designed to ensure that the Bank is committed to the prevention of the use of its facilities for laundering the proceeds of crime and financing terrorist activities. It consists of the following sections:
− Risk based acceptance model to facilitate the classification of current and
existing customers on the basis of money laundering and terrorist financing risk;
− Account opening procedures including customer classification, verification of customer information using documentary and non-documentary methods and escalation processes;
− Policy for customer information updates based on the risk level of the individual or entity;
− Internal controls to measure the risk levels of products, services and customers accepted and to measure the effectiveness of current policies and procedures;
− Policies and procedures for the monitoring and reporting of transactions; − Policies and procedures for customer record maintenance, retention and their
sharing with government agencies; and − Recommendation for a training programme for Bank officials geared towards
customer identification and acceptance, customer risk ranking and detection of money laundering instances.
1.1 Statement of commitment
The goals and objectives of this KYC, AML & CFT programme are to (1) deter individuals and entities from using the Bank to launder the proceeds of illegal activities; (2) enable member branches of the Bank to comply with their obligations under the Prevention of Money Laundering Act, Unlawful Activities Prevention Act (ULPA) and regulations from Reserve Bank of India (RBI) and National Bank for Agriculture and Rural Development (NABARD), regulatory bodies for the banks; (3) manage and mitigate money laundering and terrorist financing related risks; (4) allow banks to co-operate with regulatory bodies and government agencies in detecting and deterring money laundering and terrorist financing; and (5) provide employees with guidance for actions to be taken to comply with the Bank’s obligations under the law and the Bank’s policies.
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2 Definitions
2.1 Customer
RBI defines a customer1 as any one of the following:
− A person or entity that maintains an account and/or has a business relationship with the Bank.
− One on whose behalf the account is maintained (i.e., the beneficial owner) or beneficiary of transactions conducted by professional intermediaries, such as stock brokers, chartered accountants, solicitors, etc. as permitted under the law.
− Any person or entity connected with a financial transaction or any other product offered by the Bank including walk-in customers.
2.2 High Net-Worth Individual
An individual is designated as a High Net-Worth Individual (HNI) for the purposes of the Bank if the sum of all the credits for the individual at the Bank across all products exceeds Rupees 15 lakhs (Rs. 15,00,000)
2.3 Beneficial Owners
The Beneficial Owner for an entity constitution type is any individual or entity that owns or controls over 20% of the entity. For an individual constitution type the beneficial owner refers to the individual itself or all the operators of the account.
2.4 Controlling Parties
Controlling parties are individuals or entities with direct or indirect control over the account created. For KYC purposes, the controlling parties are defined as authorized signatories, power of attorney holders, executive management (e.g. CEO, CFO, Directors) and Board of Directors. Different account types and transactions could involve different controlling parties.
2.5 Money Laundering
Money Laundering is a process by which illegal sources of money are disguised to make it appear as if they were the proceeds of legal activities. It usually occurs in three steps:
1. The placement step involving the introduction of the money into the financial
system; 2. The second step known as layering involves performing complex financial
transactions to hide the illegal source; and 1 Section 1.2 of RBI Master Circular on KYC, AML and CFT norms - July 1, 2011
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3. Finally, the integration step, during which the previously illegal proceeds enter the economy and are converted into apparently legitimate earnings.
2.6 Terrorist Financing
Terrorist Financing relates to the use of financial institutions to launder money or misdirect clean money for illegal and illegitimate terrorist activities. Terrorist financing, unlike money laundering, cares little about the source of the funds and its purpose is what defines the scope.
2.7 Small Account
A small account refers to a savings bank account where:
1. The aggregate of all credits in a financial year does not exceed Rupees one lakh (Rs. 1,00,000);
2. The aggregate of all withdrawals and transfers in a month does not exceed Rupees ten thousand (Rs. 10,000); and
3. The balance at any point of time does not exceed Rupees fifty thousand (Rs. 50,000)
2.8 Financial Intermediary
For the purposes of this document, a financial intermediary is a person or institution that acts on behalf of its customers to conduct a transaction or open an account with the Bank. As per the RBI, the term Financial Intermediary includes following persons or entities registered under Section 12 of the Securities and Exchange Board of India (SEBI) Act, 1992:
1. Stock brokers 2. Sub-brokers 3. Share transfer agents 4. Bankers to an issue 5. Trustees to trust deed 6. Registrars to issue 7. Merchant bankers 8. Underwriters 9. Portfolio Managers 10. Depositories and Participants 11. Custodian of securities 12. Credit rating agencies 13. Venture capital funds 14. Collective investment schemes including mutual funds
2.9 Ordering Bank
In relation with wire transfers, an Ordering Bank is a Bank that originates a wire transfer as per the order placed by its customers.
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2.10 Intermediary Bank
In relation with wire transfers, an Intermediary Bank provides business services on behalf of another financial institution (ordering and beneficiary bank). Intermediary Banks are also known as Correspondent Banks and are used by domestic banks in order to service transactions originating in different cities, states or foreign countries, and act as a domestic bank's agent. This is done because the domestic bank may have limited access to markets outside of its geography, and cannot service its client accounts without opening up a branch in that particular city, state or country.
2.11 Beneficiary Bank
In relation with wire transfers, a Beneficiary Bank refers to the bank identified in a payment order in which an account of the beneficiary is to be credited pursuant to the order or which otherwise is to make payment to the beneficiary if the order does not provide for payment to an account.
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3 Legislative and Regulatory Framework 3.1 Defined legal frameworks 3.1.1 Prevention of Money Laundering Act 2002
The Prevention of Money Laundering Act (PMLA) of 20022 is the legislation that forms the core of the legal framework put in to place to combat money laundering. The PMLA came into effect from 1st July 2005 with two amendments passed in May 2005 and March 2009. The act criminalises money laundering and also provides for freezing and confiscation of assets associated in money laundering. It requires financial institutions and intermediaries to verify the identity of clients, maintain records and furnish prescribed transactional information to the FIU-IND.
3.1.2 Rules under PMLA
In addition, the Government of India has strengthened the PMLA through the notification of various rules, known as Prevention of Money Laundering Rules (PMLR), to enforce the PMLA which includes defining an adjudicating authority and appellate tribunal, conferring exclusive and concurrent powers, specifying rules for receipt and management of confiscated properties, etc. A complete listing of the rules and their purpose is available on the FIU-IND website3
3.1.3 Unlawful Activities (Prevention) Act, 1967
The Unlawful Activities Prevention Act of 1967, amended in 2008, relates to the purposes of prevention, and for coping with terrorist activities. The Government of India has issued an order dated August 27 2009 detailing the procedure for implementing of section 51A of the Act and it empowers the Central Government to freeze, seize or attach funds and other financial assets or economic resources held by:
− On behalf of or at the direction of the individuals or entities listed in the
Schedule to the Order, or − Any other person engaged in or suspected to be in engaged in terrorism ,or − Prohibit any individual or entity from making any funds ,financial assets or
economic resources or related services available for the benefit of the individuals or entities listed in the Schedule or Order.
3.2 Applicable Regulatory Authorities
3.2.1 Reserve Bank of India
2 Prevention of Money Laundering Act 2002 is available at http://fiuindia.gov.in/pmla2002.htm 3 Notification section of the FIU-IND website is available at http://fiuindia.gov.in/notifications-overview.htm
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The RBI is the central banking institution in India and controls the monetary policy of the rupee and the currency reserves. Through its Master Circular on Know Your Customer (KYC) norms/Anti Money Laundering (AML) Standards/Combating of Financing of Terrorism/Obligations of Banks under PMLA, 2002 the RBI introduced KYC guidelines for all banks which it has since updated yearly. The RBI also has the authority to penalize banking institutions for violations in KYC, AML and CFT norms.
3.2.2 National Bank for Agriculture and Rural Development NABARD is the apex development bank in India and is accredited with matters
regarding policy, planning and operations in the field of credit for agriculture and other economic activities in rural regions in India. In discharging its role as a facilitator for rural prosperity, NABARD is also entrusted with acting as a regulator for Cooperative Banks and Regional Rural Banks (RRBs). NABARD created a model KYC policy for its member banks with a stipulation that it be tailored to the individual needs of the bank.
3.2.3 Financial Intelligence Unit – India FIU-IND is the central national agency responsible for receiving, processing,
analysing and disseminating information relating to suspicious financial transactions and is responsible for domestic and global efforts against money laundering and related crimes. Any reports regarding financial transactions such as Suspicious Transaction Reports (STRs) and Cash Transaction Reports (CTRs) must be filed with the agency. FIU-IND also has the authority to request additional information on individuals or entities from banks and other financial institutions.
3.3 Consequences of Non-Compliance
3.3.1 Penalties for Non-Compliance Any contravention or non-compliance with RBI’s instructions relating to KYC, AML
and CFT guidelines shall attract penalties under the provisions of Section 47(A) (1) (b) read with Section 46(4) of the Banking Regulation Act, 1949. The RBI has imposed fines on various public and private sector banks for non-compliance with KYC norms. In the first six months of 2011, over 48 cooperative banks had been fined between Rupees one lakh (Rs. 1, 00,000) and Rupees five lakh (Rs. 5, 00,000) for various KYC, AML and CFT related offences4.
Additionally, the PMLA specifies punishments of up to ten years of rigorous
imprisonment on whosoever willingly commits the offence of money laundering.
3.3.2 Reputational Risk
If the Bank is penalised for non-compliance, it can create a negative perception of the institution on customers, investors and regulators and can adversely affect the Bank’s ability to raise capital and to maintain and create business relationships.
4Press Report, 4 June 2011
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RBI has stepped up its actions against non-compliant banks and in addition to fiscal penalties, also issues notifications and press releases5 on the banks that have been fined for violation of KYC, AML and CFT guidelines. These press releases are picked up by national and international news media which can result in a severe reputational damage to the banks.
5RBI press releases documenting penalties are available in the Press Release section of http://www.rbi.org.in
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4 Governing Structure and Roles and Responsibilities at State Cooperative Banks
4.1 Overview
The short-term cooperative banking structure under NABARD is a three-tiered structure with the State Cooperative Banks (SCBs) at the apex level followed by the District Central Cooperative Banks at the intermediate level and the Primary Agricultural Credit Societies (PACS) at the village level. Certain states, however, have two-tier structures with no District Central Cooperative Bank (DCCBs) present at the intermediate level while other states have a combination of a two-tier and three-tier structure.
The DCCBs and PACS provide banking services to individuals and entities primarily in the rural and semi-urban areas. In urban areas, most SCBs provide all the regular banking services to individuals and non-individuals alike.
4.2 Governing Policies and Procedures At the present time, PACS have not been brought under the KYC, AML and CFT regulations. This KYC, AML and CFT programme explicitly addresses the requirements of the SCBs and is intended for their use. Further customisation will be required before adoption of the programme by the DCCBs.
Short Term Cooperative Structure
Apex Level
Intermediate Level
Base Level
Mostly Urban
Semi-Urban or Rural
Rural
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4.3 Roles and Responsibilities
4.3.1 Board of Directors
As per the RBI guidelines6, the Board of Directors of the Bank is responsible for ensuring that an effective KYC, AML and CFT programme is put in place by establishing procedures and ensuring their effective implementation. The programme set by the Board of Directors shall contain:
− Application procedures for AML measures developed by senior management; − Roles and responsibilities; − Training for bank officials; − Systems and controls for implementation; − Approving methodology for customer risk categorization; and − Management oversight for the KYC, AML and CFT programme.
It is the responsibility of the Board of Directors to appoint the Principal Officer (PO) of the Bank. All pertinent KYC, AML and CFT topics must be discussed by the Board of Directors in their quarterly meeting.
4.3.2 Senior Management The Senior Management is tasked with the creation of policies and procedures and
their responsibilities include but are not limited to: − Creation of KYC, AML and CFT policies subject to approval of the Board; − Deployment of suitable personnel and providing them with sufficient authority
to ensure the effective implementation and administration of KYC, AML and CFT programmes;
− Obtain periodic reports regarding transaction monitoring, KYC, AML and CFT initiatives, identified compliance deficiencies and corrective actions taken; and
− Create updates or make changes to the existing policies and procedures which will be required to be ratified by the Board of Directors.
4.3.3 Principal Officer As per the guidelines7, the Principal Officer (PO) is the officer-in-charge vested with
the authority to ensure the overall implementation of the Bank’s KYC, AML and CFT policy. The PO is also responsible for:
− Ensuring the monitoring and reporting requirements of the Bank under the PMLA are met;
− Reviewing the adequacy of systems and controls with respect to KYC, AML & CFT;
− Coordinating with regulatory and law enforcement agencies; and − Assisting Senior Management and Compliance Groups in their function.
6 RBI Circular DBOD.AML.BC.18/14.01.001/2002-03 dated August 16, 2002 7 RBI Circular DBOD.AML.BC.No.108/14.01.001/2009-10 dated June 9, 2010
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4.3.4 AML Compliance Group The AML Compliance Group is responsible for all transaction monitoring related
activity at the bank level. It is comprised of the PO and Senior Managers from the various departments of the Bank including Banking, Internal Audit and Compliance. The group is responsible for:
− Receiving Transaction Alerts escalated by the Branch Manager (BM) and either further escalating or closing out the report;
− Sampling of Transaction Alerts reports closed out by the BM to check for correctness of BM decisions relating to transaction monitoring; and
− Providing periodic reports to Senior Management regarding compliance and transaction related activities.
4.3.5 Audit and Compliance Department The Bank’s internal audit and compliance department is responsible for the following:
− Providing an independent evaluation of the policies and procedures deployed within the bank and their effectiveness; and
− Periodically checking the KYC, AML and CFT compliance levels at the branches of the Bank and providing reports of the same to the audit committee of the Board.
4.3.6 Customer Relationship Officer
The Customer Relationship Officer (CRO) or Account Opening Officer owns the relationship with the customer and is responsible for:
− Information review and approval for all new customers. While certain portions of the information collection process may be delegated to the Staff Assistant (SA), the CRO remains ultimately responsible;
− Obtaining, maintaining and updating customer KYC information and documentation in the Bank’s management systems;
− Interacting with the customer or customer contact in order to make sure that the customer identification requirements are understood;
− Forming a reasonable belief regarding the true identity of the customers; and − Performing periodic reviews and refresh of customer’s KYC information on
file.
4.3.7 Branch Manager
The BM at the bank is the branch level decision making authority for all KYC & AML policy decisions. The responsibilities of the Officer include:
− Responsible for Implementation of KYC, AML and CFT policy at the Branch level;
− Implements policy on closure or freezing of accounts for non-compliance; − Responsible for submitting monthly Cash Transaction Reports; and − Escalating transaction monitoring alerts from the branch level to the
Bank level.
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4.3.8 Staff
Bank staff that are interacting with customers and or handling customer transactions/instructions will be a Bank’s strongest defence against money laundering. Hence the communication of a Bank’s KYC, AML and CFT Programme and related training in how to apply the programme, is key to the success of anti-money laundering and counter funding of terrorism strategies. Therefore as much as it is important for the Bank to communicate the KYC, AML & CFT Programme with the staff, it is equally important for the staff to keep themselves updated with the policies and procedures related to their role in the organisation
Bank staff is also obligated to report transactions that are suspicious of nature and could be potentially money laundering or terrorist financing activity. An employee is required to report transaction activity based on mere suspicion even if he or she is not precisely sure about the underlying criminal activity or whether illegal activities have occurred.
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5 Customer Classification In order to determine the appropriate information and documentation that must be collected, all the customers at the bank are classified into distinct constitution types and categories within them.
5.1 Constitution
The information required from the customer is based on the customer type of the account holder and is referred to as the constitution. The following constitution types are applicable to the Bank:
− Individuals: All accounts opened by individuals or groups acting in an
individual capacity (e.g. Joint Accounts, Hindu Undivided Family) are present in this category.
− Business Entities: Accounts of specific corporate entities, separate and distinct from the individuals who finance it.
− Financial Institutions: Institutions that provide financial services to its members or clients including private, public and co-operative sector banks as well as non-banking institutions such as money-services businesses and chit funds.
− Government, Government Agency or Entity: Any permanent or non-permanent organization in the machinery of the government including departments, ministries and other types of public bodies.
− Trust: Trusts are classified into two types - Public trusts that are generally formed for charitable and religious purposes and are not intended for commercial activities while private trusts generate income for specified beneficiaries.
− Non Profit Organizations: Non-profit organizations or charities can be registered as trusts, societies or a private limited non-profit company under Section 25 of the Companies Act. These exist independently of the government, are self-governed, produce benefits for individuals or groups outside the membership of the organization and are prohibited from disbursing monetary residual to members. Religious organizations are set up primarily for religious purposes and must be registered with the Income Tax Department.
− Societies and Associations: A society or an association is an institution owned by its members in that the funds are raised from membership and are then used to provide common services to all the members of the organization.
Based on these definitions, a particular customer could fit into one or more constitutions listed above but will hold the same customer risk categorisation value from a KYC, AML and CFT compliance standpoint.
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5.2 Categories
All the categories for the constitutions can be broadly grouped under individual and entity constitution types as listed below:
5.2.1 Individuals The constitution type individual consists of the following sub-categories:
Non-Resident Indian: A Non-Resident Indian (NRI) is an Indian citizen who resides out of India for employment, business or other reasons for an uncertain duration of stay. NRI accounts may provide for special tax and repatriation benefits due to the status of the account holder.
Foreign National: A foreign national is an individual not of Indian nationality but currently residing in the country for various purposes. Persons of Indian Origin: A person of Indian origin is an individual who is not a citizen of India but has Indian ancestry and has obtained a valid PIO card. Minor: A minor account is an account created and operated in the name of a minor (under the age of 18) and represented by a guardian or custodian. Upon the minor attaining majority, the right of the guardian to operate the account shall cease. Staff: Account created and operated by current or past employees of the bank. Hindu Undivided Family: The Hindu Undivided Family (HUF) is a joint family consisting of members descending from a common ancestor. A senior member is designated as the ‘Karta’ responsible for managing the account for the HUF. Single: Any Indian citizen above the age of 18 and not falling under any of the categories listed above account is considered a single account holder.
Joint: A joint account type is created in the combined name of all the depositors, each of whom acting in his or her own individual capacity. A joint account can be created between any number of Individual, Minor, Staff and NRI constitution types.
5.2.2 Entities Each constitution in the entity section consists of obvious categories as listed below: Business Entities
− Proprietorship − Private Limited Company − Partnership − Co-operative − Public Limited Company − Joint Hindu Family Business − Limited Liability Partnership
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Financial Institutions − Private Banks − Public Sector Banks − Regional Rural Banks − State Co-operative Banks − District Co-operative Banks − Urban Co-operative Banks − Money Service Businesses − Non-Banking Financial Company
Government, Government Agency or Entity − State Government − Central Government − State Government Undertaking − Government of India Undertaking − Government Authorities, Autonomous & Regulatory Bodies − Liquidator − Local Bodies
Trusts − Public − Private
Non Profit Organizations − Trust − Society − Section 25 Company − Unregistered Entity
Societies and Associations − Registered − Unregistered
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6 Customer Acceptance Policy The customer acceptance policy of the Bank lays down the explicit criteria for the acceptance of customers. The policy allows for flexibility in the acceptance of the customer and its implementation must not result in the denial of banking services to the general public, especially to those customers who are financially or socially disadvantaged. Kindly refer to Section 8 of the policy for permissible relaxations with regards to customer acceptance.
6.1 Fictitious or Benami names
Rule 9 of the PMLR, sub-rule (1), clause (1C) prohibits the Bank from opening accounts or keeping accounts in fictitious or benami names where the identity of the person cannot be verified or has not been disclosed.
6.2 Customer Risk Categorisation
The Bank has adopted a risk based approach in developing and implementing its customer acceptance and identification policies and procedures as per the regulations and approved Indian Banks’ Association (IBA) August 2011 guidelines. The risk based approach has been adopted so that those attributes that might suggest a greater likelihood of money laundering are identified. The key categories chosen to classify the prospective and existing customers are:
− Customer Demographics: This category includes static customer information that describes the general characteristics of a customer such as customer type, industry sector, length of relationship and customer identification.
− Geography: This category typically includes countries associated with the customer such as Nationality and Country of Residence.
− Product: This Category includes the type of products a customer has with the Bank.
− Transaction: This Category takes into account the characteristics of the transactions that each customer makes.
6.2.1 Business Imperative
The development of a customer KYC, AML and CFT risk categorisation model referred to as the Customer Risk Categorisation (CRC) model can be used to evaluate the inherent money laundering/ terrorist financing risks for each client relationship and will assist the Bank in:
− Identifying customers or client relationships that should be subject to both Enhanced Due Diligence (EDD) measures and enhanced transaction monitoring;
− Allocating scarce compliance resources to higher risk areas; − Prioritising customer compliance and remediation efforts; and − Satisfying regulatory requirements.
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6.2.2 Overview of Methodology
The CRC model takes into consideration a total of eight parameters outlined below. The parameters chosen for Individuals and Entities are shown below.
Each variable has a possible risk-rating of 1, 2 or 3 with 1 being the lowest and 3 the highest score. Each variable is also weighted based upon the relative importance of the variable. A total score out of 100 is calculated based on the following formula: Total Score = Sum (Individual Variable Score * Weight) The total score is then divided into three categories that denote the categorisation level of the customer as Level I, Level II or Level III. Appendix 1 to Chapter 7 provides a complete breakdown of the variables and the associated weights and an explanation for the choices made.
6.2.3 Application of Rating Methodology
6.2.3.1 New Customers The risk score calculated based on the due diligence performed or captured at the time of account opening for new customers is called the Initial Customer Categorisation score. For the Initial Customer Categorisation, the variables in the Transaction Category are suppressed to account for the possibility of low volume, frequency and value of transactions. This enables the other variables to have a more pronounced effect on the Initial Customer Categorisation in the absence of sufficient transaction information. The sum of the weighted scores of variables determines the Initial Customer Categorisation score.
# Category Variables for Individuals Variables for Entities
1 Customer Demographics
Customer Type Customer Type
2 Customer Demographics
Length of Relationship Length of Relationship
3 Customer Demographics
Customer Identification Customer Identification
4 Customer Demographics
- Industry Sector
5 Geography Nationality - 6 Product Product Type Product Type 7 Transaction Cash Transaction Report Cash Transaction Report 8 Transaction Suspicious Transaction
Report Suspicious Transaction Report
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The chosen parameters and their weights at the time of Initial Customer Categorisation are shown in the tables below under the column “New Customer Weights”:
Variables for Individuals
# Category Variables for Individuals New
Customer Weights
Existing Customer Weights
1 Customer Demographics
Customer Type 1 1
2 Customer Demographics
Length of Relationship 2 2
3 Customer Demographics
Customer Identification 2 2
4 Geography Nationality 1 1 5 Product Product Type 1 1 6 Transaction Cash Transaction Report 0 2 7 Transaction Suspicious Transaction
Report 0 2
Variables for Entities
# Category Variables for Entities New
Customer Weights
Existing Customer Weights
1 Customer Demographics
Customer Type 1 1
2 Customer Demographics
Length of Relationship 2 2
3 Customer Demographics
Customer Identification 2 2
4 Customer Demographics
Industry Sector 2 2
5 Product Product Type 1 1 6 Transaction Cash Transaction Report 0 2 7 Transaction Suspicious Transaction
Report 0 2
6.2.3.2 Existing Customers
For existing customers, the variables for the Transaction Activity category are also used to calculate the Customers Risk Categorisation Score. The applicable weights
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and variables are shown in the above tables under the column “Existing Customer Weights”. The change in weights from a new customer model to an existing customer model is applicable when a customer has held the relationship with the Bank for over a year or has a CTR/STR filed within the first year.
6.2.3.3 Final Customer Categorisation Score Once the Initial Customer Categorisation or Customer Categorisation has been completed for new and existing customers, respectively, a BM may consider other factors such as country of residence, matches to any sanctions lists or Politically Exposed Persons (PEP) lists, negative news regarding customer, improper introduction of customer, additional regulatory actions or guidance and when appropriate, override a customer’s calculated customer score with a score that he or she deems more reflective of the risk associated with the customer in light of the additional information (“Branch Override”). All such Branch Overrides must follow an approval process and require a final approval from the PO of the Bank. The Final Customer Categorisation equals either the Initial Customer Categorisation or the Customer Categorisation and when applicable the Branch Override. The Final Customer Categorisation is scaled to a total score out of 100 as follows:
Final Customer
CategorisationScore
Level I < 56 Level II >= 56 and <=
78 Level III > 78
IMPORTANT NOTE Classification of a customer of the Bank into a Level III Category does not automatically mean that this customer is a money launderer or financer of terrorism. Equally, a Level I categorisation does not mean that the customer is completely devoid of any risk. The categorisation only provides a broad clue to the possibilities calling for additional monitoring and attention. The Bank staff must use their experience and exercise appropriate judgement while applying the policies and procedures.
6.2.4 Risk categorisation review The RBI guidelines recommend the review of the CRCM to be carried out at least once every six months8. The AML Compliance Group and the PO are entrusted the responsibility for the review and updation of the CRCM.
8 RBI Master Circular on KYC, AML and CFT norms - July 1, 2011
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Appendix I to Chapter 6: Customer Risk Categorisation Variables and Scores Customer Type The customer type variable evaluates the inherent risk the type of customer poses to the bank in terms of KYC, AML and CFT. This information is captured by the Bank using a combination of the Constitution and Category fields. The risk values to the customer type variable have been assigned using regulatory guidelines, industry best practices and prior experience. An example of this evaluation is as follows, if a company is publicly traded, it is less likely to pose a high risk for money laundering. This is attributed to the fact that information on publicly traded companies is made readily available to all individuals, making their financial status and overall well standing transparent to all.
The table below lists the values for Constitution and Category and the associated scores.
Constitution Category ScoreIndividual Single 2 Individual Joint 2 Individual Minor or Custodian 2 Individual Staff 2 Individual Hindu Undivided Family 2 Individual High Net Worth 3 Individual Non-Residents 3 Individual Foreign 3 Business Entities Proprietorship 3 Business Entities Private Limited Company 2 Business Entities Partnership 2 Business Entities Co-operative 1 Business Entities Public Limited Company 1 Business Entities Joint Hindu Family Business 3 Business Entities Limited Liability Partnership 2 Financial Institutions Private Banks 2 Financial Institutions Public Sector Banks 1 Financial Institutions Regional Rural Banks 1 Financial Institutions Urban Co-operative 2 Financial Institutions State Co-operative 1 Financial Institutions District Co-operative 1 Financial Institutions Money Service Businesses 3 Financial Institutions Non-Banking Financial Companies (NBFCs) 2 Govt., Govt. Agency or Entity State Government 1 Govt., Govt. Agency or Entity Central Government 1 Govt., Govt. Agency or Entity State Government Undertaking 1 Govt., Govt. Agency or Entity Government India Undertaking 1 Govt., Govt. Agency or Entity Government Authorities, Autonomous &
Regulatory Bodies 1
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Constitution Category ScoreGovt. Local Bodies 2 Trust Public 2 Trust Private 2 Non Profit Organizations Trust 3 Non Profit Organizations Society 3 Non Profit Organizations Section 25 Company 3
Length of Relationship Any new customers of the Bank should be considered to be higher risk for money laundering or terrorist financing because the Bank does not know enough about the client’s business, transaction activities and overall profile. The risk the customer poses, based on this variable, diminishes over time provided he continuous to transact actively and is subject to transaction monitoring. The table below lists the values and the associated scores.
Using the above scores in case of in-operative or dormant accounts that have been opened more than three years ago will result in a lower score. However, since the account has been inoperative or dormant the Bank does not necessarily have sufficient updated information regarding the customer’s transactions or nature of business and a resulting lower categorisation purely based on account opening is incorrect. In order to adjust for this anomaly, the last operation date or last transaction date must also be considered. Hence for all accounts that have an account opening date greater than three years the following conditions must be applied and the scores readjusted to accurately reflect the Bank’s knowledge of their customer :
Length of Relationship is greater than three years: Additional Variable Factor Score
Last Operation Date Less than one year 1 Last Operation Date one to three years 2 Last Operation Date greater than three years 3
Variable Factor ScoreLength of Relationship less than one year 3 Length of Relationship one to three years 2 Length of Relationship greater than three years 1
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Customer Identification “Customer identification means identifying the customer and verifying his/her identity by using reliable, independent source documents, data or information”9 The Customer Identification variable score is based on the Bank’s ability to collect from the customer all the required verification documentation. Lack of sufficient documentation and information that does not allow a Bank to establish, to a satisfactory level, the identity of the customer poses a higher risk to the Bank. The table below lists the values and the associated scores.
Variable Factor ScoreCustomer Identification KYC Complete 1 Customer Identification KYC Incomplete 3 Customer Identification KYC Pending (within 10 days of account
opening) 3
Customer Identification KYC Expired 2
Industry Sector The industry sector variable evaluates the inherent risk a customer poses due to the nature of business or the industry the customer operates in. Regulatory guidelines classify certain industry sectors such as bullion dealers and sub-dealers, jewellers, etc. as potentially vulnerable to money laundering and as such are considered higher risk sectors. To maintain consistency of data and reporting standards, the Bank has adopted the National Industrial Classification of 2008 (NIC), developed and maintained by the Government of India10, that seeks to provide a basis for the standardised data collection, analysis and dissemination of industry (economic activity) wise economic data for India. Due to the exhaustive nature of the list, only the industries that are vulnerable to potential money laundering and terrorist financing are listed in Annexure I. The list is also known as the Sensitive Industry List (SIL). Nationality
As a result of varying levels of corruption, organized criminal activity, and differing quality of regulation / legislation different countries create different levels of risks of money laundering and terrorist financing. The Nationality variable evaluates the risk posed by each country in
9 Reserve Bank of India, KYC Master Circular July 1 2011. RBI/2011- 12/72 DBOD. AML. BC. No. 2 /14 .01.001/2011-12 10 Central Statistical Organisation, Ministry of Statistics and Programme Implementation
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order to consider the possibility of a customer relationship being vulnerable to money laundering or terrorist financing. The ISO 3166, codes for the representation of names of countries and their subdivisions is a commonly accepted international standard. The country risk categorisation takes into consideration the following factors:
1. Whether the country is a member of the Financial Action Task Force; 2. Whether the country is on the United Nations Sanctions List; 3. Whether the country is classified as “Primary Money Laundering Concern” on the
International Narcotics Control Strategy Report 2011 (INSCR) published by the United States Government;
4. The country’s 2010 Corruption Perception Index (CPI) published by Transparency International; and
5. Whether the country is classified as a “Terrorist Safe Haven” by the United States Government.
A complete list of the countries broken down by their risk categorisation is given below. Score 3 Countries
COUNTRY NAME AFGHANISTAN GAMBIA MYANMAR ALBANIA GIBRALTAR NEPAL ALGERIA GUATEMALA NICARAGUA ANDORRA GUERNSEY NIGER ANGOLA GUINEA NIGERIA ANGUILLA GUINEA-BISSAU PAKISTAN ARGENTINA GUYANA PALAU ARMENIA HAITI PANAMA ARUBA HONDURAS PAPUA NEW GUINEA AZERBAIJAN INDIA11 PARAGUAY BAHAMAS INDONESIA PHILIPPINES BANGLADESH IRAN RUSSIAN FEDERATION BARBADOS IRAQ SAMOA BELARUS ISLE OF MAN SAO TOME AND PRINCIPE BELIZE JAMAICA SENEGAL BENIN JERSEY SEYCHELLES BERMUDA KAZAKHSTAN SIERRA LEONE BOLIVIA KENYA SOLOMON ISLANDS BOSNIA AND HERZEGOVINA KIRIBATI SOMALIA
BURKINA FASO KOREA, DEMOCRATIC PEOPLE'S REPUBLIC SRI LANKA
BURUNDI KYRGYZSTAN SUDAN
CAMBODIA LAO PEOPLE'S DEMOCRATIC REPUBLIC SYRIA
CAMEROON LEBANON TAJIKISTAN CAYMAN ISLANDS LIBERIA TANZANIA CENTRAL AFRICAN REPUBLIC LIBYA TIMOR-LESTE CHAD LIECHTENSTEIN TOGO COMOROS MACAO TONGA CONGO MADAGASCAR TURKMENISTAN 11 India is classified as a high risk jurisdiction. However, since a large majority of customers
(approximately 99%) in the co-operative sector are individuals with nationality Indian, the value of the variable is considered to be low since it is common across the entire population.
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COUNTRY NAME CONGO, THE DEMOCRATIC REPUBLIC MALAWI TURKS AND CAICOS ISLANDS COOK ISLANDS MALAYSIA UGANDA CÔTE D'IVOIRE MALDIVES UKRAINE CYPRUS MALI UZBEKISTAN DJIBOUTI MAURITANIA VANUATU DOMINICAN REPUBLIC MEXICO VENEZUELA ECUADOR MOLDOVA VIET NAM EGYPT MONACO YEMEN EQUATORIAL GUINEA MONGOLIA ZAMBIA ERITREA MONTSERRAT ZIMBABWE ETHIOPIA MOROCCO GABON MOZAMBIQUE
Score 2 Countries
COUNTRY NAME ÅLAND ISLANDS GRENADA SAINT BARTHÉLEMY
AMERICAN SAMOA GUADELOUPE SAINT HELENA, ASCENSION AND TRISTAN DA CUNHA
ANTARCTICA GUAM SAINT KITTS AND NEVIS
ANTIGUA AND BARBUDA HEARD ISLAND AND MCDONALD ISLANDS SAINT LUCIA
BAHRAIN HOLY SEE (VATICAN CITY STATE)
SAINT MARTIN (FRENCH PART)
BONAIRE, SINT EUSTATIUS AND SABA HUNGARY
SAINT PIERRE AND MIQUELON
BOUVET ISLAND ITALY SAINT VINCENT &THE GRENADINES
BRAZIL KUWAIT SAN MARINO BRITISH INDIAN OCEAN TERRITORY LATVIA SAUDI ARABIA BULGARIA LESOTHO SERBIA CHINA LITHUANIA SINT MAARTEN (DUTCH PART) CHRISTMAS ISLAND MACEDONIA SLOVAKIA COCOS (KEELING) ISLANDS MARSHALL ISLANDS SOUTH AFRICA
COLOMBIA MARTINIQUE SOUTH GEORGIA AND THE SOUTH SANDWICH ISLANDS
CROATIA MAYOTTE SOUTH SUDAN CUBA MICRONESIA SURINAME CURAÇAO MONTENEGRO SVALBARD AND JAN MAYEN CZECH REPUBLIC NAMIBIA SWAZILAND EL SALVADOR NAURU THAILAND FALKLAND ISLANDS (MALVINAS) NEW CALEDONIA TOKELAU FAROE ISLANDS NIUE TRINIDAD AND TOBAGO FIJI NORFOLK ISLAND TUNISIA
FRENCH GUIANA NORTHERN MARIANA ISLANDS TURKEY
FRENCH POLYNESIA PALESTINIAN TERRITORY, OCCUPIED TUVALU
FRENCH SOUTHERN TERRITORIES PERU
UNITED STATES MINOR OUTLYING ISLANDS
GEORGIA PITCAIRN VIRGIN ISLANDS, BRITISH GHANA RÉUNION VIRGIN ISLANDS, U.S. GREECE ROMANIA WALLIS AND FUTUNA
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COUNTRY NAME GREENLAND RWANDA WESTERN SAHARA Score 1 Countries
COUNTRY NAME AUSTRALIA GERMANY POLAND AUSTRIA HONG KONG PORTUGAL BELGIUM ICELAND PUERTO RICO BHUTAN IRELAND QATAR BOTSWANA ISRAEL SINGAPORE BRUNEI DARUSSALAM JAPAN SLOVENIA CANADA JORDAN SPAIN CAPE VERDE KOREA, REPUBLIC OF SWEDEN CHILE LUXEMBOURG SWITZERLAND COSTA RICA MALTA TAIWAN, PROVINCE OF CHINA DENMARK MAURITIUS UNITED ARAB EMIRATES DOMINICA NETHERLANDS UNITED KINGDOM ESTONIA NEW ZEALAND UNITED STATES FINLAND NORWAY URUGUAY FRANCE OMAN Product Type The product type variable is used to capture the inherent risk a product and its associated account types pose to the Bank. Certain products by their very nature are more conducive to money laundering than others. The table below lists all the products offered by the SCBs and their associated scores that can broadly be categorised into one of the following:
Product Class Product Product Sub-Type Score Current Account
- 3
Regular 1 Savings Account No Frills 1
Fixed 1 Reinvestment 1 Recurring 1
Deposit
Term Deposit
Special 1 General Purpose Loan 1 Consumer Durable Loan 1 Education Loan 1 Vehicle Loan 1
Retail Loans
Housing Loan 1 Gold Loans 3 Mortgage Loans 2 Equity Loans 1 Collateral
Loans Loan against Deposit/Savings Instrument 1 Bills and Letter of Credit 2 Short Term Loans / Cash Credit 1
Loan
Institutional Finance Medium/ Long Term Loans 1
Loan Re-Finance Short Term Loans / Cash Credit 2
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Product Class Product Product Sub-Type Score Operations Medium/ Long Term Loans 1 Transaction Activity – CTR and STR A customer’s transaction activity profile is a key variable to evaluate a potential money laundering or terrorist financing risk. There are two variables that measure the transactional activity variable of a customer: Cash Transaction Reports and Suspicious Activity Reports. The submission of a Cash Transaction Report denotes a high amount of cash activity within the accounts of a customer while a Suspicious Transaction Report denotes unusual or atypical activity within the accounts of the customer. The table below lists the values and the associated scores for Constitution Type Individual:
Variable Factor Score Cash Transaction Report Less than one 1 Cash Transaction Report Between one and three 2 Cash Transaction Report Greater than three 3
The table below lists the values and the associated scores for Constitution Type Entity:
Variable Factor Score Cash Transaction Report Less than three 1 Cash Transaction Report Between three and six 2 Cash Transaction Report Greater than six 3
The table below lists the values and the associated scores for Constitution Type Individual and Entity:
Variable Factor Score Suspicious Transaction Report No STR filed
1
Suspicious Transaction Report One STR filed
2
Suspicious Transaction Report
Greater than one STR filed
3
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Appendix II to Chapter 6: High Risk Industry Sectors # Group Industry Sector Description Risk1 252 Manufacture of weapons and ammunition H 2 304 Manufacture of weapons and ammunition H 3 321 Manufacture of jewellery, bijouterie and related articles H 4 329 Other manufacturing H 5 451 Sale of motor vehicles H 6 452 Maintenance and repair of motor vehicles H 7 453 Sale of motor vehicle parts and accessories H 8
454 Sale, maintenance and repair of motorcycles and related parts and accessories H
9 471 Retail sale in non-specialized stores H 10 472 Retail sale of food, beverages and tobacco in specialized stores H 11 473 Retail sale of automotive fuel in specialized stores H 12 478 Retail sale via stalls and markets H 13 479 Retail trade not in stores, stalls or markets H 14 561 Restaurants and mobile food service activities H 15 642 Activities of holding companies H
16 661 Activities auxiliary to financial service activities, except insurance pension funding H
17 662 Activities auxiliary to insurance and pension funding H 18 663 Fund management activities H 19 681 Real estate activities with own or leased property H 20 682 Real estate activities on a fee or contract basis H 21 771 Renting and leasing of motor vehicles H 22 791 Travel agency and tour operator activities H 23 799 Other reservation service and related activities H 24
881 Social work activities without accommodation for the elderly and disabled H
25 889 Other social work activities without accommodation H 26 920 Gambling and betting activities H 27 960 Other personal service activities H
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7 Customer Identification and Verification Program
7.1 Overview As per the PMLA mandate, a customer identification procedure must be carried out by the Bank on all its existing and new customers and includes steps for:
− Information to be obtained from the customer during the account opening process of the relationship establishment phase;
− If required, verifying the information provided by the customers using documentary and non-documentary methods;
− Specific additional due diligence performed based on the risk perception, account type and the constitution of the account holder;
− Periodic updates to customer identification data after the account is opened based on risk appraisal of account type and the customer; and
− Obtaining additional customer information during the course of a financial transaction or when the bank doubts the authenticity of previously obtained customer data or finds it inadequate.
7.2 Applicability
Customer identification is required for any entity or individual that either has an account in one or more branches of the Bank or uses one or more products of the bank even as a walk-in customer. Excepting the applicable relaxations listed in Section 8, the Bank must collect complete and up to date KYC information from all new and existing customers based on their constitution, category and risk score. As per RBI regulations12, any additional information not required for KYC purposes must not be a part of the account opening form and should be collected separately on a voluntary basis after explaining the objective to the customer.
7.3 Basis for Customer Identification
The customer identification and verification process of the Bank is based on whether the customer is a walk-in customer or an existing account holder.
7.3.1 Walk-in Customers
12 Section 2.1 of RBI Master Circular on KYC, AML and CFT norms – July 1, 2011
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Any customer that does not have an account in the Bank or any of its branches and only requires either the purchase or sale of a monetary instrument is referred to as a walk-in customer. Banks sell a variety of monetary instruments (e.g. banker’s cheques or drafts, including foreign drafts, money orders or cashier’s checks and traveller’s checks) in exchange for currency. Purchase and use of these instruments is a common method used by money launderers to evade large currency transaction reporting requirements as they can be then deposited in accounts with other banks to facilitate the movement of funds through the payment system. In many cases, the persons involved do not have an account with the bank from which the instruments are purchased. In case of transactions carried out by a walk-in customer, in line with the regulatory guidelines, the CRO or the BM must verify the identity and address of the customer when the transaction amount equals or exceeds Rupees fifty thousand (Rs. 50,000), whether conducted in a single transaction or several seemingly connected transactions and also in the case of an international money transfer operation. If the CRO or BM has reason to believe that a customer is intentionally structuring transactions below the identified threshold they may verify the identity and address information of the customer. The CRO or BM may also consider filing a STR. In order to verify the identity and address, the customer conducting the transaction must be classified into a constitution and category as listed in Appendix 1, Chapter 8 and then the information and documentation corresponding to a high risk classification must be obtained. The record for the sale or purchase of monetary instruments must include:
− Name of purchaser; − Date of purchase; − Type of instrument purchased; − Serial number; − Amount of each instrument and currency purchased in; − Purpose of instrument; and − Specific identification information.
Section 14.1 defines the record retention requirements for the Bank and it is required that information on all walk-in customers be recorded in a separate file.
7.3.2 Account Holders
All customers, excepting those qualifying for the relaxations as listed in section 8, which are currently account holders at the Bank or wish to open a new account, are subject to the Bank’s customer acceptance and identification procedures.
7.4 Customer Due Diligence
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Customer Due Diligence (CDD) can be defined as any measure undertaken by the Bank to collect and verify information provided by the customer and positively establish the identity of the customer. As listed in the IBA guidelines, the CRO must perform CDD on the customer when it:
1. Establishes a new business relationship; 2. Carries out an occasional transaction; 3. Suspects money laundering or terrorist financing; or 4. Doubts the authenticity of the documents, data or information previously
obtained for the purpose of identification or verification.
Similarly as outlined in the IBA guidelines, if the CRO is unable to apply relevant due diligence measures, he or she
1. Must not establish a business relationship or carry out an occasional transaction with the customer;
2. Should not carry out a transaction with or for a customer through a bank account;
3. Should freeze or terminate all existing business relationships with the customer; and
4. Should consider reporting it to FIU-IND or to the regulators, in accordance with the guidelines.
The Bank will perform three types of Due Diligence as follows.
7.4.1 Basic Due Diligence
All customers at the Bank must provide officially valid documents as a part of the account opening process in order to fulfil their KYC requirements. The documents required are based on the constitution, category and risk categorisation score of the customer. All low and medium risk customers must undergo Basic Due Diligence (BDD). A full list of the documents required for Basic Due Diligence for each type of customer is provided as a checklist in Appendix I, Section 7, to this chapter.
7.4.2 Simplified Due Diligence
While the current policy has been designed to provide adequate flexibility in the collection of KYC information and documentary evidence, it has been observed that in certain cases customers, especially low income groups in rural as well as urban areas, are not able to provide the documentary evidence required by the Basic Due Diligence process. RBI guidelines recommend that banks do not exclude financially weaker sections of society from access to banking services because of the KYC, AML and CFT requirements13. Any CDD measures less stringent than the Basic Due Diligence measures are termed as Simplified Due Diligence (SDD). Customers applicable for Simplified Due Diligence and its measures are listed separately in Chapter 8.
13 RBI Master Circular on KYC, AML and CFT norms – July 1, 2011
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7.4.3 Enhanced Due Diligence
Any CDD measures more stringent than the Basic Due Diligence measures are termed as Enhanced Due Diligence (EDD). The policy requires the CRO to perform EDD on high risk customers identified as part of the Customer Risk Categorisation process. A full list of the documents required for Enhanced Due Diligence for each type of customer is provided as a checklist in Appendix I, Section 7, to this chapter. Any system deployed for KYC information management at the Bank should be designed to transparently add on the EDD section based on the risk score of the account.
7.4.4 Steps to perform EDD
If the customer categorisation score is low or medium, no EDD is required on the customer. The steps for performing enhanced due diligence on high risk customers are as follows:
1. The CRO must request the customer for any additional information required; 2. If the customer fails to provide the information requested as part of the EDD
process, the BM must be notified with a recommendation for an exception or a one for account closure;
3. If the customer provides the required information, the CRO must review the information provided for accuracy, completeness and consistency with available information on the customer. If the information is found satisfactory, the CRO may open the account for the customer; and
4. As part of follow-up, the CRO or the BM, in certain cases may send a letter of thanks by registered post to the recorded address of the customer as well as the introducer. This would serve as a relationship building exercise and also allow the Bank to indirectly verify the address provided by customer as well as the introducer. In case the letter is not delivered and returned to the Bank, the Bank must try and contact the customer or the introducer to determine the reason for the return and update the information accordingly. If no contact is possible and further information is not received, the account must be closed.
No customer once classified as high risk is exempt from the EDD process.
7.4.5 Special Cases for Documentary Verification
This section covers some of the special cases that could be encountered by the Bank during documentary verification. It is assumed that for most cases the checklist provided in Appendix I of this chapter will suffice.
7.4.5.1 Documents in Languages other than English
If the customer provides a document in a language that the CRO cannot read and understand, he or she must use an internal translation resource to obtain a translation of the document in either English or Hindi or the State language. At a minimum, the
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translation must include the full customer name, a description of the type of document, the date of document and a reference to the content of the document. The translation must also include the name and designation of the translator within the bank.
7.4.5.2 NREGA Job Card or Aadhar Letter
If the individual has only provided NREGA job card or Aadhar card for complete KYC purposes, the RBI regulations require that the account opened should be subject to the conditions and limitations of a small account as defined in Section 2.4.14
7.4.6 Name Screening
As defined by the IBA August 2011 guidelines, Name Screening refers to the process of determining whether any of the Bank’s existing or potential customers are part of any blacklists or regulatory lists. The CRO must take reasonable measures to ensure that the customer or authorised signatories of the customer do not match with any known persons having a criminal background. In case of the customer being an entity the CRO must ensure that the entity is not a banned entity or a terrorist organisation.
1) List Sources RBI frequently circulates updates and notifications regarding lists such as the Interpol Terrorism Watch list, UN Sanctions list, United Nation Security Council Resolution (UNSCR) list and the Wanted Persons list published by the Central Bureau of Investigation (CBI). Occasionally these lists are also available freely on the website of the respective organisations. Companies including but not limited to Dow Jones and LexisNexis provide customized lists for a fee and include public sources as well as independently researched listings. In addition the Bank could maintain in-house “negative” or “black-list” of internal watch-lists containing a list of all individuals and entities that are not permitted to be customers of the Bank for whatever reason.
2) Updation and Validation of Lists The PO is responsible for sourcing, updating and validating all the entities or individuals on the lists. Updates to external lists must be made after a periodic semi-annual review of the list or be triggered by an update from one of the list sources itself. The internal lists are created and updated by the PO and the AML Compliance Group. The PO is also responsible for circulating the lists to all the branches of the Bank.
3) Distribution of the Lists The AML Compliance Group must set-up a distribution system to ensure that all branches receive the lists and any updates in a timely fashion. All the updates received by the Compliance Group from the RBI or a vendor must be forwarded to all the branches within 7 days of receipt.
14 Section 2.9 B of RBI KYC Master Circular July 1 2011 circular
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4) Checking and Management of Matches As a part of the account opening procedures, the CRO must perform list matching for every account holder of the individual constitution type. For entity accounts, the senior managers, beneficial owners and any other individual directly or indirectly connected with the account must undergo list matching. Additionally, such lists could also contain the names of entities and countries which are sanctioned and must be matched against entity names and the countries serviced of all entity account holders. With every update to the list received, the list matching process must be performed at a branch level on all account holders. Also RBI regulations require that the updated lists be maintained in an electronic format.
Identifying a Match The IBA guidelines from August 201115 provide guidance on determining if a match can be identified as a positive match. The list matching algorithm must not just be confined to the name of the individual or entity and should match fields such as date of birth, address, country of operations, etc. based on the constitution and category of the account. Once verified that the match is a positive match, the CRO should forward the match to the BM at the Branch. Upon BM confirmation, the customer information, account information and all particulars of the product are forwarded to the PO who is the ultimate decision making authority on reporting list matches. In order to confirm the match, the officer responsible is permitted to reach out to the account holder and verify the details provided. If the officer is satisfied with the explanation provided by the customer, the customer will be required to provide an affidavit of the explanation which shall be appended to the KYC file of the account.
Action on Confirmed Matches
The Bank must not open an account if there is a positive match with a negative or a blacklist during the account opening process. Any existing accounts that match a negative or blacklist must be frozen immediately and eventually closed. Once the PO validates the information and confirms the matches, the details of the account will be forwarded to the following agencies within 1 business day: 1) Joint Secretary (ISI) Ministry of Home Affairs Fax no: 011 23092569 Tel no: 011 23092736 Email: [email protected] 2) UAPA Nodal Officer of RBI Chief General Manager, Dept. of Banking Operations and Development
15 Section 7.9 KYC Norms and AML Standards Guidance Notes for Banks August 2011
43
Central Office, Reserve Bank of India Anti-Money Laundering division Central Office Building, 13th Floor Shahid Bhagat Singh Marg, Fort, Mumbai – 400 001 The Bank shall also file an STR with the FIU-IND covering all the transactions, carried through or attempted, in the accounts with the positive match.
White-listing A “false positive match” is the matching of two individuals that have essentially different identities. In order to deal with the customer appearing frequently as a false positive match during the name screening process, the AML Compliance Group will maintain a “white-list” that indicates that the customer is acceptable against the given negative lists. If the same customer is scanned subsequently, the system will not show a match for the customer.
7.4.7 External Requests for Freezing of Accounts
The FIU-IND or the RBI can also require the Bank to freeze certain accounts by providing information on the account or the account holder. This request could be a result of the Bank confirming a positive match or a request from a foreign country under the U.N. Security Council Resolution 1373 of 2001. The Bank is required to adhere to the request within 1 business day of receiving the request without prior intimation to the account holder.
Individuals or entities whose accounts have been frozen are allowed to petition for the unfreezing of the same by submitting an application containing requisite evidence to the Bank. The Bank is required to forward a copy of the application along with the details of the account frozen to: Joint Secretary (IS-I), Ministry of Home Affairs Tel no: 011-23092736 Fax no: 011-23092569 Email: [email protected] Within fifteen days a decision on the unfreezing of the account shall be conveyed to the account holder.
7.4.8 Adverse Information Checks In order to capture the risk associated with any publicly available negative news, the CRO must check for any adverse information on the customer with respect to money laundering, terrorist financing, fraud investigations, etc. The procedure to check for any adverse information on the customer is listed below:
44
− The CRO must conduct an Internet search using Google. For guidelines on how to search the Internet using Google, please refer to Annexure A, Guidelines on Performing Background Checks using Google.
− If any relevant and valid negative information is not found, evidence of the search performed is entered into the KYC file of the account holder as an attachment and no further action is deemed necessary.
− If however, adverse information is available, the CRO is responsible for saving the information into a document and entering the same into the KYC file of the customer. The customer must then be referred to the BM for a final decision on the account. The final decision on the account must be one of the following:
i. Accept the customer without any further Enhanced Due Diligence steps if the adverse information is not substantial and does not pose an increased risk to the Bank.
ii. Accept the customer and perform EDD. iii. Reject the customer if the risk posed is deemed too high.
7.4.9 Politically Exposed Person As per the RBI definition16, PEPs are individuals who are or have been entrusted with prominent public functions in a foreign country e.g., Heads of States or Governments, senior politicians, senior government/judicial/military officers, senior executives of state-owned corporations, important political party officials, etc. Such individuals are considered risky from a money laundering perspective and require additional due diligence and transactional scrutiny. For the Bank, the risks associated with these individuals are not just from a compliance perspective but also from a reputational one. Companies such as Dow Jones and LexisNexis provide customized PEP lists for a fee and the Bank can also conduct an Internet search using Google. For guidelines on how to search the Internet using Google, please refer to Annexure A, Guidelines on Performing Background Checks using Google. Once a customer or a person associated with an account is identified as a PEP or the close relative of a PEP, the Bank is required to perform the following steps:
− The CRO or the BM should gather all the available information on the PEP
and confirm it against information available on the public domain; − The CRO or BM must obtain information on the identity of the PEP and
source of funds for the account; and − The PO at the Bank must sign off on the acceptance of the customer,
categorize him as high risk and perform EDD. The account must also be subjected to enhanced transaction monitoring.
16 RBI KYC Master Circular – July 1, 2011 (section 2.5)
45
In the event that an existing customer or beneficial owner is identified as PEP, the PO along with the AML Compliance Group will be required to sign off on continuing the relationship. The account and the individual will then be subject to the same process as above for a new PEP account.
46
Appendix I to Chapter 7: Due Diligence Checklist Checklist 1 Constitution
Individual Category Non Resident Indian
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Full legal name − Date of birth − Address in India − Product type or account type applied for − Country of residence − Visa type for the country of residence
− Current residential address − Introducer information − Source of funds − Anticipated account activity
Documentary Verification Additional Documentary Verification − Obtain a copy of passport page containing photograph
to serve as photo identity
− Obtain a copy of passport page containing address to serve as address proof. If the address does not match address in India, proof can be provided by establishing relationship using the documents listed in Appendix II, Chapter 8
− Obtain a copy of a valid visa granted for the current country of residence
− Obtain an additional photo identity document from list provided in Appendix II, Chapter 8
− Obtain additional address proof document from list in Appendix II, Chapter 8
47
Checklist 2 Constitution
Individual Category Foreign National
Basic Due Diligence Enhanced Due Diligence Required Information − Full legal name − Address in India − Nationality − Date of birth − Product type or account type applied for − Indian visa type − Information on the Indian employer (name, address
etc.). − PEP check
Additional Information − Address in home country − Introducer information − Source of funds − Anticipated account activity
Documentary Verification Additional Documentary Verification − Obtain a copy of passport pages containing valid Indian
visa and photograph. If the home address is displayed on the passport, obtain a copy of it
− Obtain a copy of the appointment letter along with an affidavit from the current employer verifying the address of the foreign national
− Obtain a copy of the employer’s PAN card or TIN Number
− Obtain a copy of another photo identity − Obtain a copy of another address proof
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Checklist 3 Constitution
Individual Category Person of Indian Origin
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Full legal name − Address in India − Nationality − Date of birth − Product type or account type applied for − If applicable, Indian employer information − PEP check
− Address in home country − Introducer information − Source of funds − Anticipated account activity
Documentary Verification Additional Documentary Verification − Obtain a copy of the passport pages containing
photograph and address − Obtain a copy of the Person of Indian Origin card − If employed in India, obtain a copy of the appointment
letter along with an affidavit from the current employer verifying the address of the customer
− Obtain a copy of another photo identity − Obtain a copy of another address proof − If available, obtain a copy of the employer’s PAN card or TIN
number
49
Checklist 4 Constitution
Individual Category Minor
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Full legal name − Date of birth of minor account holder − Full name of the guardian − Date of birth of guardian − Relationship of minor account holder with guardian − Address of the guardian − Product type or account type applied for
− Introducer information − Source of funds − Anticipated account activity
Documentary Verification Additional Documentary Verification − Obtain an affidavit from the guardian indicating the
relationship with the minor. Optionally, obtain a copy of one of the relationship establishment documents listed in Appendix II, Chapter 8 containing the name of the minor and the guardian and indicating a relationship between them.
− Obtain a copy of the KYC information (photo and address proof) of the guardian using the documents in Appendix II, Chapter 8
− Obtain two copies of photo identity proof documents of the guardian from the Preferred Documents list in Appendix II, Chapter 8
− Obtain two copies of address proof documents of the guardian from the Preferred Documents list in Appendix II, Chapter 8
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Checklist 5 Constitution
Individual Category Staff
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Full legal name − Date of birth − Home address − Product type or account type applied for − Employee code or number
− For ex-staff, if employed, obtain current employer information
− Source of funds − Anticipated account activity
Documentary Verification Additional Documentary Verification − For ex-staff members, obtain a copy of one photo
identity document out of the listing in Appendix II, Chapter 8 except for the identity provided by the Bank
− For ex-staff members, obtain a copy of one address proof document out of the listing in Appendix II, Chapter 8 except for the identity provided by the Bank. In the case of address proof not being available, the account holder can provide the address proof using the KYC information of another individual and establishing the relationship using the documents listed in Appendix II, Chapter 8
− For ex-staff members, obtain documentation certifying past employment with the Bank ( pay slip, letter of appointment, etc)
− Obtain two copies of photo identity proof documents from the Preferred Documents list in Appendix II, Chapter 8
− Obtain two copies of address proof documents from the Preferred Documents list in Appendix II, Chapter 8
51
Checklist 6 Constitution
Individual Category Hindu Undivided Family
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Full legal name of Karta − Date of birth − Home address − Product type or account type applied for
− Introducer information − Source of funds − Anticipated account activity
Documentary Verification Additional Documentary Verification − Obtain a letter from the designated Karta indicating the
account category as HUF and listing the names of members of the family
− Obtain complete KYC information of the Karta (photo and address proof) for account opening purposes using the documents list provided in Appendix II, Chapter 8
− Obtain two copies of photo identity proof documents of the Karta from the Preferred Documents list in Appendix II, Chapter 8
− Obtain two copies of address proof documents of the Karta from the Preferred Documents list in Appendix II, Chapter 8
52
Checklist 7 Constitution
Individual Category Regular
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Full legal name − Date of birth − Home address − Product type or account type applied for
− Introducer information − Employer information (name, address and industry sector) − Source of funds − Anticipated account activity
Documentary Verification Additional Documentary Verification − Obtain a copy of one photo identity document out of the
listing in Appendix II, Chapter 8 − Obtain a copy of one address proof document out of the
listing in Appendix II, Chapter 8. In the case of address proof not being available, the client can indirectly provide proof via a combination of the relationship establishment documents as listed in Appendix II, Chapter 8 and the KYC (photo and address proof) of the individual establishing relationship with
− Obtain two copies of photo identity proof documents from the Preferred Documents list in Appendix II, Chapter 8
− Obtain two copies of address proof documents from the Preferred Documents list in Appendix II, Chapter 8
53
Checklist 8 Constitution
Individual Category Joint
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Full legal name of all the account holders − Date of birth of all account holders − Home address of all the account holders − Product type or account type applied for − Relationship between account holders
− Obtain all the information for a high risk classification of each member of the joint account based on their respective category within the individual constitution
− Source of funds − Anticipated account activity
Documentary Verification Additional Documentary Verification − Obtain complete KYC documentation on all account
holders based on their category within the individual constitution
− Obtain all the documentation for a high risk classification of each member of the joint account based on their respective category within the individual constitution
54
Checklist 9 Constitution
Business Entities
Category
Proprietorship
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Name of proprietorship − Address of proprietorship − Full legal name of the proprietor − Home address of the proprietor − Industry sector of proprietorship − Product type or account type applied for
− Products and services offered − Markets serviced (domestic/ international/ high risk
jurisdictions) − Purpose of account (vendor accounts, accounts receivable,
etc.) − Source of funds − Anticipated account activity
Documentary Verification Additional Documentary Verification − Obtain a letter of proprietorship to be completed by the
client − Obtain a copy of any two of the documents under Proof
of Proprietorship Documents listing in Appendix II, Chapter 8
− Obtain KYC documentation of the proprietor (photo and address proof) from Appendix II, Chapter 8 for account opening purposes
− Copy of financials − Obtain two copies of photo identity proof documents of the
proprietor from the Preferred Documents list in Appendix II, Chapter 8
− Obtain two copies of address proof documents of the proprietor from the Preferred Documents list in Appendix II, Chapter 8
− Attach results of address validation through registered post. Optionally, perform a site visit to verify the address of the concern
55
Checklist 10 Constitution
Business Entities
Category
Private Limited
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Name of the company − Principal place of business − Mailing address of the company − Telephone/Fax number − Industry sector of concern − Names and addresses of account operators and
beneficial owners − Product type or account type applied for
− Products and services offered − Markets serviced (domestic/ international/ high risk
jurisdictions) − Purpose of account (vendor accounts, accounts receivable,
etc.) − Source of funds − Anticipated account activity
Documentary Verification Additional Documentary Verification − Obtain a copy of the Certificate of Incorporation for the
entity − Obtain a copy of the Memorandum and Articles of
Association for the entity − If available, obtain a copy of the license for the line of
business of the entity or any other government registration document available for the entity
− Obtain a copy of the PAN card or TIN number of the entity
− Obtain a copy of the board resolution listing the authorized signers for the account. Optionally, obtain a power of attorney or official document authorizing the individuals operating the account
− Copy of financials or annual reports − Public information in standard industry guides, periodicals,
publications − Attach results of address validation through registered post.
Optionally, perform a site visit to verify the address of the concern
56
− Obtain complete KYC documentation of all account operators based on their category within the individual constitution
Checklist 11 Constitution
Business Entities
Category
Cooperative
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Name of cooperative − Principal address of the cooperative − Industry sector of cooperative − Names and addresses of authorized account operators
and senior managers − Product type or account type applied for
− Anticipated account activity − Products and services offered − Markets serviced (domestic/ international/ high risk
jurisdictions) − Purpose of account (vendor accounts, accounts receivable,
etc.) − Source of funds
Documentary Verification Additional Documentary Verification − Obtain a copy of the registration documents for the
entity − Obtain a copy of the Byelaws of the cooperative − Obtain a copy of the board resolution listing the
− Copy of financials or annual reports − Public information in standard industry guides, periodicals,
publications − Attach results of address validation through registered post.
57
authorized signers for the account. Optionally, obtain a power of attorney or official document authorizing the individuals operating the account
− Obtain complete KYC documentation of all account operators based on their category within the individual constitution
Optionally, perform a site visit to verify the address of the concern
58
Checklist 12 Constitution
Business Entities
Category
Partnership
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Name of partnership − Office address of the partnership − Telephone/Fax number of the partnership − Names and addresses of all the partners − Product type or account type applied for − Industry sector of partnership
− Anticipated account activity − Products and services offered − Markets serviced (domestic/ international/ high risk
jurisdictions) − Purpose of account (vendor accounts, accounts receivable,
etc.) − Source of funds
Documentary Verification Additional Documentary Verification − Obtain a copy of the partnership deed signed by all the
partners − If available, obtain a copy of the license for the line of
business of the partnership. Or optionally if partnership is registered, obtain a copy of registration documents
− If available, obtain a copy of the PAN card or TIN number of the entity
− Obtain a copy of the telephone bill (within 6 months of account opening date) in the name of the entity or the partners
− Obtain complete KYC documentation of all partners based on their category within the individual constitution
− Copy of financials or annual reports − Attach results of address validation through registered post.
Optionally, perform a site visit to verify the address of the concern
59
Checklist 13 Constitution
Business Entities
Category
Limited Liability Partnership
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Name of the entity − Office address of the entity − Telephone/Fax number of the entity − Names and addresses of all the partners and senior
managers − Product type or account type applied for − Industry sector of concern
− Anticipated account activity − Products and services offered − Markets serviced (domestic/ international/ high risk
jurisdictions) − Purpose of account (vendor accounts, accounts
receivable, etc.) − Source of funds
Documentary Verification Additional Documentary Verification − Obtain a copy of the partnership deed signed by all the
partners − If available, obtain a copy of the license for the line of
business of the partnership. Or optionally, obtain a copy of the registration documents
− Obtain a copy of the PAN card or TIN information of the entity − Optionally, obtain a power of attorney or legal document
authorizing members of the partnership to operate the account
− If available, obtain a copy of the telephone bill (within 6 months of account opening) in the name of the entity
− Obtain complete KYC documentation of all partners based on their category within the individual constitution
− Copy of financials or annual reports − Public information in standard industry guides,
periodicals, publications − Attach results of address validation through registered
post. Optionally, perform a site visit to verify the address of the concern
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Checklist 14 Constitution
Business Entities
Category
Public Limited
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Name of the company − Principal place of business − Mailing address of the company − Telephone/Fax number − Industry sector of concern − Names and addresses of authorized account operators, senior
managers and beneficial owners − Product type or account type applied for
− Anticipated account activity − Products and services offered − Markets serviced (domestic/ international/ high risk
jurisdictions) − Purpose of account (vendor accounts, accounts
receivable, etc.) − Source of funds
Documentary Verification Additional Documentary Verification − If available, obtain a copy of the license for the line of business
of the entity. Optionally obtain a government registration document for the entity
− Obtain a copy of the PAN card or TIN number of the entity − Obtain a copy of the Certificate of Incorporation for the entity − Obtain a copy of the Memorandum and Articles of Association
for the entity − Obtain a copy of the board resolution listing the authorized
signers for the account. Optionally, obtain a power of attorney or official document authorizing the individuals operating the
− Copy of financials or annual reports − Public information in standard industry guides,
periodicals, publications − Obtain name and address of beneficial owners of
the entity − Attach results of address validation through
registered post. Optionally, perform a site visit to verify the address of the concern
61
account − Obtain complete KYC documentation of all account operators
based on their category within the individual constitution Checklist 15 Constitution
Business Entities
Category
Hindu Undivided Family
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Name of the entity − Principal place of business − Mailing address of the entity − Industry sector of concern − Name and address information of Karta and senior managers − Product type or account type applied for
− Anticipated account activity − Products and services offered − Markets serviced (domestic/ international/ high risk
jurisdictions) − Purpose of account (vendor accounts, accounts
receivable, etc.) − Source of funds
Documentary Verification Additional Documentary Verification − If available, obtain a copy of the license for the line of business
of the entity. Optionally, obtain any government registration document available for the entity
− Obtain a declaration from the Karta regarding the setting up of the account
− Obtain all KYC documentation of the Karta based on the Karta’s categorization within the individual constitution
− If available, obtain a copy of the PAN card or TIN number of the entity
− Copy of financials or annual reports − Public information in standard industry guides,
periodicals, publications − Attach results of address validation through
registered post. Optionally, perform a site visit to verify the address of the concern
62
63
Checklist 16 Constitution
Trust Category
Public
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Legal name of trust − Complete address of trust − Names of trustees, settlors and signatories − Names and addresses of account operators, founders
and the senior managers − Product type or account type applied for
− Purpose of account (vendor accounts, accounts receivable, etc.)
− Anticipated account activity − Purpose of trust − Source of funds
Documentary Verification Additional Documentary Verification − Obtain a copy of the trust deed − Obtain a copy of the certificate of registration for the
trust − Any officially valid document identifying trustees, settlors
and authorized signatories − Obtain complete KYC information of all account
operators based on their category within the individual constitution
− Obtain a copy of the managing body resolution listing the authorized signers for the account. Optionally, obtain a copy of the power of attorney or official document authorizing the members operating the account
− Public information in standard industry guides, periodicals, publications
− Copy of financials or annual reports − Attach results of address validation through registered
post. Optionally, perform a site visit to verify the address of the concern
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Checklist 17 Constitution
Trust Category
Private
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Legal name of trust − Purpose of trust − Complete address of trust − Names and addresses of account operators, trustees,
senior managers and the beneficiaries − Product type or account type applied for
− Anticipated account activity
− Purpose of account (vendor accounts, accounts receivable, etc.)
− Details of international presence
− Source of funds
Documentary Verification Additional Documentary Verification − Obtain, if available, a copy of the trust deed − Obtain a copy of the certificate of registration for the
entity − Any official document identifying trustees, settlors and
beneficiaries − Obtain a copy of the managing body resolution listing
the authorized signers for the account. Optionally, obtain a copy of the power of attorney or official document authorizing the members operating the account
− Obtain complete KYC documentation of all account operators based on their category within the individual
− Copy of financials or annual reports
− Public information in standard industry guides, periodicals, publications
− Obtain name and address of beneficial owners, trustees and senior managers of the trust
− Attach results of address validation through registered post. Optionally, perform a site visit to verify the address of the concern
65
constitution
66
Checklist 18 Constitution
Non Profit Organizations Category
Trust
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Legal name of trust − Purpose of trust − Complete address of trust − Names and addresses of account operators, trustees
and the senior managers − Product type or account type applied for
− Anticipated account activity
− Details of international presence
− Purpose of account (vendor accounts, accounts receivable, etc.)
− Details of international presence
− Source of funds
Documentary Verification Additional Documentary Verification − Obtain a copy of the trust deed − Obtain a copy of the certificate of registration for the
trust − Any official document identifying trustees, settlors and
beneficiaries − Obtain a copy of the managing body resolution listing
the authorized signers for the account. Optionally, obtain a copy of the power of attorney or official document listing the members authorized to operate the account
− If available, obtain a copy of the Annual Reports and financial documents of the entity
− Public information in standard industry guides, periodicals, publications
− Attach results of address validation through registered post. Optionally, perform a site visit to verify the address of the concern
67
− Obtain complete KYC documentation of all account operators based on their category within the individual constitution
Checklist 19 Constitution
Non Profit Organizations Category
Society
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Legal name of Society − Purpose of Society − Complete address of Society − Product type or account type applied for − Names and addresses of account operators, trustees and
beneficial owners
− Anticipated account activity
− Details of international presence
− Purpose of account (vendor accounts, accounts receivable, etc.)
− Source of funds
Documentary Verification Additional Documentary Verification − Obtain a copy of the board resolution listing the
authorized signers for the account. Optionally, obtain a copy of the power of attorney or official document authorizing the members operating the account
− Obtain a copy of the Byelaws of the society − Obtain a copy of the registration documents for the
entity
− Public information in standard industry guides, periodicals, publications
− Attach results of address validation through registered post. Optionally, perform a site visit to verify the address of the concern
68
− If available, obtain a copy of the Annual Reports and financial documents of the entity
− Obtain complete KYC documentation of all account operators based on their category within the individual constitution
69
Checklist 20 Constitution
Non Profit Organizations Category
Section 25
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Legal name of organization − Purpose of organization − Complete address of organization − Product type or account type applied for − Names and addresses of account operators, trustees
and the senior managers
− Anticipated account activity
− Details of international presence
− Purpose of account (vendor accounts, accounts receivable, etc.)
− Source of funds
Documentary Verification Additional Documentary Verification − Obtain a copy of the board resolution listing the
authorized signers for the account. Optionally, obtain a copy of the power of attorney or official document authorizing the members operating the account
− Obtain a copy of the Memorandum and Articles of Association of the entity
− Obtain a copy of the registration documents for the entity
− Optionally, obtain a copy of the Annual Reports and financial documents of the entity
− Obtain complete KYC documentation of all account operators based on their category within the individual
− Public information in standard industry guides, periodicals, publications
− Attach results of address validation through registered post. Optionally, perform a site visit to verify the address of the concern
70
constitution
71
Checklist 21 Constitution
Societies and Associations Category
Registered
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Legal name of Society − Purpose of Society − Complete address of Society − Product type or account type applied for − Names and addresses of account operators
− Anticipated account activity
− Purpose of account (vendor accounts, accounts receivable, etc.)
− Source of funds
Documentary Verification Additional Documentary Verification − Obtain a copy of the board resolution listing the
authorized signers for the account. Optionally, obtain a copy of the power of attorney or official document authorizing the members operating the account
− Obtain a copy of the Byelaws of the society − Obtain a copy of the Annual Reports or financial
documents of the entity − Obtain a copy of the registration documents for the
entity − Obtain complete KYC documentation of all account
operators based on their category within the individual constitution
− Public information in standard industry guides, periodicals, publications
− Attach results of address validation through registered post. Optionally, perform a site visit to verify the address of the concern
72
Checklist 22 Constitution
Societies and Associations Category
Unregistered
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Name of Society − Purpose of Society − Complete address of Society − Product type or account type applied for − Names and addresses of account operators
− Anticipated account activity
− Purpose of account (vendor accounts, accounts receivable, etc.)
− Source of funds
Documentary Verification Additional Documentary Verification − Obtain a copy of the board resolution listing the
authorized signers for the account. Optionally, obtain a copy of the power of attorney or official document authorizing the members operating the account
− Obtain a copy of the Byelaws of the society − Optionally, a copy of the Annual Reports or financial
documents of the entity − Obtain complete KYC documentation of all account
operators based on their category within the individual constitution
− Public information in standard industry guides, periodicals, publications
− Attach results of address validation through registered post. Optionally, perform a site visit to verify the address of the concern
73
Checklist 23 Constitution
Government, Government Agency or Entity
Category
State Government
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Legal name − Purpose of government body; − Complete address − Product type or account type applied for − Names and addresses of account operators
− Anticipated account activity
− Products and services offered
− Purpose of account (vendor accounts, accounts receivable, etc.)
Documentary Verification Additional Documentary Verification − Obtain an authorization letter from the government
body wishing to open an account indicating the officials authorized to operate the account
− Obtain complete KYC documentation of all account operators based on their category within the individual constitution
Additional Checks − It is recommended that the bank verify the request to
open the account through an enquiry with the controlling department of the government
− Attach results of address validation through registered post. Optionally, perform a site visit to verify the address of the concern
74
Checklist 24 Constitution
Government, Government Agency or Entity
Category
Central Government
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Legal name − Purpose of government body − Complete address − Product type or account type applied for − Names and addresses of account operators
− Anticipated account activity
− Products and services offered
− Purpose of account (vendor accounts, accounts receivable, etc.)
Documentary Verification Additional Documentary Verification − Obtain an authorization letter from the government body − Attach results of address validation through registered post.
75
wishing to open an account indicating the officials authorized to operate the account
− Obtain complete KYC documentation of all account operators based on their category within the individual constitution
Additional Checks − It is recommended that the bank verify the request to
open the account through an enquiry with the controlling department of the government
Optionally, perform a site visit to verify the address of the concern
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Checklist 25 Constitution
Government, Government Agency or Entity
Category
State Government Undertaking
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Legal name − Industry sector of undertaking − Complete address − Product type or account type applied for − Names and addresses of account operators
− Anticipated account activity
− Products and services offered
− Purpose of account (vendor accounts, accounts receivable, etc.)
Documentary Verification Additional Documentary Verification − Obtain a copy of the Certificate of Incorporation of the
entity − Obtain a copy of the Memorandum and Articles of
Association of the entity − Obtain a copy of the audited annual report − Obtain a board resolution indicating the officials
authorized to operate the account − Obtain complete KYC documentation of all account operators
based on their category within the individual constitution
Additional Checks − It is recommended that the bank verify the request to
open the account through an enquiry with the controlling
− Attach results of address validation through registered post. Optionally, perform a site visit to verify the address of the concern
77
department of the government agency or entity Checklist 26 Constitution
Government, Government Agency or Entity
Category
Central Government Undertaking
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Legal name − Industry sector of undertaking − Complete address − Product type or account type applied for − Names and addresses of account operators
− Anticipated account activity
− Products and services offered
− Purpose of account (vendor accounts, accounts receivable, etc.)
Documentary Verification Additional Documentary Verification − Obtain a copy of the Certificate of Incorporation of the
entity − Obtain a copy of the Memorandum and Articles of
Association of the entity − Obtain a copy of the audited annual report − Obtain a board resolution indicating the officials
authorized to operate the account − Obtain complete KYC documentation of all account
operators based on their category within the individual constitution
Additional Checks − It is recommended that the bank verify the request to
− Attach results of address validation through registered post. Optionally, perform a site visit to verify the address of the concern
78
open the account through an enquiry with the controlling department of the government agency or entity
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Checklist 27 Constitution
Government, Government Agency or Entity
Category
Liquidator
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Legal name − Complete address − Product type or account type applied for − Name of company under liquidation − Industry sector of company under liquidation − Names and addresses of account operators
− Anticipated account activity
− Purpose of account (vendor accounts, accounts receivable, etc.)
Documentary Verification Additional Documentary Verification − Obtain an authorization letter from the government body
wishing to open an account indicating the officials authorized to operate the account
− Obtain complete KYC documentation of all account operators based on their category within the individual constitution
− Obtain a copy of the court order of appointment to act as liquidator
− Attach results of address validation through registered post. Optionally, perform a site visit to verify the address of the concern
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Checklist 28 Constitution
Government, Government Agency or Entity
Category
Government Authorities, Autonomous & Regulatory Bodies
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Legal name − Purpose of government body − Complete address − Product type or account type applied for − Names and addresses of account operators
− Anticipated account activity
− Products and services offered
− Purpose of account (vendor accounts, accounts receivable, etc.)
Documentary Verification Additional Documentary Verification − Obtain an authorization letter from the government body
wishing to open an account indicating the officials authorized to operate the account
− Obtain complete KYC documentation of all account operators based on their category within the individual constitution
Additional Checks − It is recommended that the bank verify the request to
open the account through an enquiry with the controlling department of the government agency or entity
− Attach results of address validation through registered post. Optionally, perform a site visit to verify the address of the concern
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Checklist 29 Constitution
Government, Government Agency or Entity
Category
Local Bodies
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Legal name − Purpose of government body − Complete address − Product type or account type applied for − Names and addresses of account operators
− Anticipated account activity
− Purpose of account (vendor accounts, accounts receivable, etc.)
Documentary Verification Additional Documentary Verification − Obtain an authorization letter from the government body
wishing to open an account indicating the officials authorized to operate the account
− Obtain complete KYC documentation of all account operators based on their category within the individual constitution
Additional Checks − It is recommended that the bank verify the request to
open the account through an enquiry with the controlling department of the government agency or entity
− Attach results of address validation through registered post. Optionally, perform a site visit to verify the address of the concern
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Checklist 30 Constitution
Financial Institutions
Category
Public Sector Banks
Basic Due Diligence
Enhanced Due Diligence
Required Information Additional Information − Legal name − Complete address − Product type or account type applied for − Names and addresses of account operators and senior
managers
− Anticipated account activity
− Products and services offered
− Markets serviced (domestic/ international/ high risk jurisdictions)
− Purpose of account (vendor accounts, accounts receivable, etc.)
Documentary Verification Additional Documentary Verification − Obtain a copy of the RBI registration or license information for
the bank − Obtain a copy of the PAN card or TIN number of the entity − Obtain a copy of the board resolution or an official letter
indicating the officials authorized to operate the account − Obtain a copy of the Memorandum, Certificate of
Incorporation and the Articles of Association for the bank − It is desirable to obtain, in affidavit form, the KYC policy of the
bank − Obtain a copy of the annual audited report for the previous
− Public information in standard industry guides, periodicals, publications
− Attach results of address validation through registered post. Optionally, perform a site visit to verify the address of the concern
− Obtain information on AML measures implemented
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financial year − Obtain complete KYC documentation of all account operators
based on their category within the individual constitution
Checklist 31 Constitution
Financial Institutions
Category
Private Sector Banks
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Legal name − Complete address − Product type or account type applied for − Names and addresses of beneficial owners, account
operators and senior managers
− Anticipated account activity
− Products and services offered
− Markets serviced (domestic/ international/ high risk jurisdictions)
− Purpose of account (vendor accounts, accounts receivable, etc.)
Documentary Verification Additional Documentary Verification − Obtain a copy of the RBI registration or license
information for the bank − Obtain a copy of the PAN card or TIN of the entity − Obtain a copy of the annual audited report for the
previous financial year − Obtain a copy of the Articles of Association and
Certificate of Incorporation for the bank
− Public information in standard industry guides, periodicals, publications
− Attach results of address validation through registered post. Optionally, perform a site visit to verify the address of the concern
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Basic Due Diligence Enhanced Due Diligence − If the company is held by a publically traded company,
obtain information on parent company’s ownership, listing and nature of activities
− Obtain a copy of the board resolution or an official letter requesting for the creation of the account and indicating the officials authorized to operate the account
− It is desirable to obtain, in affidavit form, the KYC policy of the bank
− Obtain complete KYC documentation of all account operators based on their category within the individual constitution
− Obtain information on the Board and CEO of the bank including current country of domicile
− Obtain name and address of beneficial owners of the bank
− Obtain information on AML measures implemented
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Checklist 32 Constitution
Financial Institutions
Category
Regional Rural Banks
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Legal name − Complete address − Product type or account type applied for − Holding bank information (name, address, registration
information) − Names and addresses of account operators and senior
managers
− Anticipated account activity
− Products and services offered
− Markets serviced (domestic/ international/ high risk jurisdictions)
− Purpose of account (vendor accounts, accounts receivable, etc.)
Documentary Verification Additional Documentary Verification − Obtain a copy of the PAN card or TIN number of the
bank − If available, obtain a copy of the RBI registration or
license information for the bank − Obtain a copy of the Byelaws of the bank − It is desirable to obtain, in affidavit form, KYC policy of
the bank − Obtain a copy of the annual audited report for the
previous financial year − Obtain a copy of the board resolution or an official letter
indicating the officials authorized to operate the account − Obtain complete KYC documentation of all account
operators based on their category within the individual
− Attach results of address validation through registered post. Optionally, perform a site visit to verify the address of the concern
− Obtain information on AML measures implemented
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constitution
Checklist 33 Constitution
Financial Institutions
Category
Urban Cooperative Banks
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Legal name − Complete address − Product type or account type applied for − Names and addresses of account operators and senior
managers
− Anticipated account activity
− Products and services offered
− Markets serviced (domestic/ international/ high risk jurisdictions)
− Purpose of account (vendor accounts, accounts receivable, etc.)
Documentary Verification Additional Documentary Verification − Obtain a copy of the PAN card or TIN number of the bank − If available, obtain a copy of the RBI registration or license
information for the bank − Obtain a copy of the Byelaws of the bank − It is desirable to obtain, in affidavit form, KYC policy of the bank − Obtain a copy of the annual audited report for the previous
financial year − Obtain a copy of the board resolution or an official letter
requesting for the creation of the account and indicating the officials authorized to operate the account
− Public information in standard industry guides, periodicals, publications
− Attach results of address validation through registered post. Optionally, perform a site visit to verify the address of the concern
− Obtain information on AML measures implemented
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− Obtain complete KYC documentation of all account operators based on their category within the individual constitution
Checklist 34 Constitution
Financial Institutions
Category
State Cooperative Banks
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Legal name − Complete address − Product type or account type applied for − Names and addresses of account operators and senior
managers
− Anticipated account activity
− Products and services offered
− Markets serviced (domestic/ international/ high risk jurisdictions)
− Purpose of account (vendor accounts, accounts receivable, etc.)
Documentary Verification Additional Documentary Verification − Obtain a copy of the PAN card or TIN number of the
bank − If available, obtain a copy of the RBI registration or
license information for the bank − Obtain a copy of the Byelaws of the bank − It is desirable to obtain, in affidavit form, KYC policy of
the bank
− Public information in standard industry guides, periodicals, publications
− Attach results of address validation through registered post. Optionally, perform a site visit to verify the address of the concern
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− Obtain a copy of the annual audited report for the previous financial year
− Obtain a copy of the board resolution or an official letter requesting for the creation of the account and indicating the officials authorized to operate the account
− Obtain complete KYC documentation of all account operators based on their category within the individual constitution
− Obtain information on AML measures implemented
Checklist 35 Constitution
Financial Institutions
Category
District Cooperative Banks
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Legal name − Complete address − Product type or account type applied for − Names and addresses of account operators and senior managers
− Anticipated account activity
− Products and services offered
− Markets serviced (domestic/ international/ high risk jurisdictions)
− Purpose of account (vendor accounts, accounts receivable, etc.)
Documentary Verification Additional Documentary Verification − Obtain a copy of the PAN card or TIN number of the bank − If available, obtain a copy of the RBI registration or license
information for the bank
− Attach results of address validation through registered post. Optionally, perform a site visit to
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− Obtain a copy of the Byelaws the bank − It is desirable to obtain, in affidavit form, KYC policy of the bank − Obtain a copy of the annual audited report for the previous
financial year − Obtain a copy of the board resolution or an official letter requesting
for the creation of the account and indicating the officials authorized to operate the account
− Obtain complete KYC documentation of all account operators based on their category within the individual constitution
verify the address of the concern
− Obtain information on AML measures implemented
Checklist 36 Constitution
Financial Institutions
Category
Money Service Businesses
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Legal name − Complete address − Product type or account type applied for − Names and addresses of beneficial owners, account
operators and senior managers
− Anticipated account activity
− Products and services offered
− Markets serviced (domestic/ international/ high risk jurisdictions)
− Purpose of account (vendor accounts, accounts receivable, etc.)
Documentary Verification − Obtain a copy of the PAN card or TIN number of the entity − Obtain a copy of the license to operate for entity or NFBC
Additional Documentary Verification − Public information in standard industry guides, periodicals,
publications
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status with the Reserve Bank of India − Obtain a copy of the annual audited report for the previous
financial year − Obtain a copy of the Memorandum, Articles of Association
for the entity and Certificate of Incorporation for the entity − Obtain information on the Board and CEO of the bank
including current country of domicile − Obtain a copy of the board resolution or an official letter
requesting for the creation of the account and indicating the officials authorized to operate the account
− Obtain complete KYC documentation of all account operators based on their category within the individual constitution
− Attach results of address validation through registered post. Optionally, perform a site visit to verify the address of the concern
− AML policies and procedures implemented
− Obtain name and address of beneficial owners of the entity
Checklist 37 Constitution Financial
Institutions Category Non-Banking Financial Company
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Legal name − Complete address − Product type or account type applied for − Names and addresses of beneficial owners, account
operators and senior managers
− Anticipated account activity
− Products and services offered
− Any additional information on purpose of business
− Markets serviced (domestic/ international/ high risk jurisdictions)
− Purpose of account (vendor accounts, accounts receivable,
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etc.)
Documentary Verification Additional Documentary Verification − Obtain a copy of the PAN card or TIN number of the
entity − Obtain a copy of the license to operate for entity − Obtain a copy of the annual audited report for the
previous financial year − Obtain a copy of the Memorandum, Articles of
Association and the Certificate of Incorporation of the entity
− Obtain information on the Board and CEO of the bank including current country of domicile
− Obtain a copy of the board resolution or an official letter requesting for the creation of the account and indicating the officials authorized to operate the account
− Obtain complete KYC documentation of all account operators based on their category within the individual constitution
− Public information in standard industry guides, periodicals, publications
− Attach results of address validation through registered post. Optionally, perform a site visit to verify the address of the concern
− AML policies and procedures implemented
− Obtain name and address of beneficial owners of the entity
Appendix II to Chapter 7: List of Officially Valid Documents
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Verification documents for individuals (identity and address proof) are divided into preferred and acceptable documents. It is recommended that whenever available, documents from the preferred list should be used for verification purposes. Photo Identity Documents
Address Proof Documents
Preferred Documents − Driving License − PAN Identity Card − Passport − Voter Identity Card
Acceptable Documents − Aadhaar card* − Govt. Department Identity Card − Letter from MP/MLA/MC/GZ Officer including a notarized photograph − NREGA Job Card* − Social Security Card (If Applicable)
Preferred Documents − Driving License − Passport − Voter Identity Card
Acceptable Documents − Any id containing address issued by Govt. − Bank Account Statement (for six months prior to account opening) − Bank Passbook − Employer certificate (not older than six months from account opening) − Gas Bill (not older than six months from account opening) − Income Tax Return (latest) − Letter from MP/MLA/MC/GZ Officer attesting to address − NREGA Job Card − Property Tax Assessment Order − Residential Permit issued by state police − Water Bill (not older than six months from account opening)
* Please note that if the Aadhar Card, Aadhar Letter or the NREGA Job card is exclusively provided for KYC purposes, then the bank account opened will be subjected to all conditions and limitations prescribed for small accounts as described in section 2.4
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Relationship Establishment Documents Proof of Proprietorship Documents (Any two documents required in the name of the proprietary concern)
List of Documents − Certificate/license issued by Municipal Authorities under Shop & Establishment Act − Certificate/registration document issued by Sales Tax/Service Tax/ Professional Tax authorities − CST/VAT certificate − License issued by Registering authority like Certificate of Practice issued by Institute of Chartered
Accountants of India, Institute of Cost Accountants of India, Institute of Company Secretaries of India, Indian medical Council and Food and Drug Control Authorities
− Registration certificate issued in the name of the proprietary concern by the Central Government or State Authority Department
− Sales and Income Tax returns − IEC (Importer Exporter Code) issued by the office of DGFT
Listed Documents
− Birth Certificate − Marriage Certificate − PAN Card − Passport − School certificate showing relationship − Voter ID Card − Any other document establishing relationship issued by the Govt. of India
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8 Relaxations to KYC Information Collection Requirements
Relaxation in Due Diligence procedures also known as SDD as defined in section 7.4.2 are prescribed to allow customers access to banking services in spite of not being able to produce the requisite documentation at the time of account opening.
8.1 Small Accounts
A definition of small accounts is provided in Section 2.4 and these accounts are allowed relaxations in procedures subject to the following conditions:
− The individual wishing to create the account produces a self-attested photograph and affixes his or her signature or thumb print on the account opening form;
− The designated officer of the bank, while opening the small account, certifies with his or her signature that the above step was conducted in the officer’s presence;
− The branch at which the small account has been created is on CBS or is in a branch where it is possible to manually monitor the account and ensure that foreign remittances are not credited to the account and that the stipulated limits on aggregate monthly and annual transactions are not breached, before any transactions are allowed to take place;
− No foreign remittances shall be permitted to be credited into a small account unless the identity of the individual operating the account has been fully established by the production of valid documents via the usual KYC procedures;
− The small account is monitored and when any suspicion of money laundering or financing of terrorism or a high risk scenario is reported through the monitoring mechanism, then the identity of the individual shall be established via the usual KYC procedures within two months; and
− A small account shall initially remain operational for a period of twelve months beyond which only if the account holder provides evidence of having applied for the officially required identifying documents shall the account be permitted to operate. The entire relaxation of documentary provisions shall be reviewed with respect to the account at the end of a twenty four month period.
If the conditions of a Small Account are violated, the account shall be required to fulfil its CDD obligations, based on the new constitution and category assigned, within a period of 30 days. Failing KYC compliance beyond this period, it is recommended that activity on the account be restricted or considered for closure.
8.2 Customers through Introducer
Individuals in urban and rural areas belonging to low income groups are sometimes not able to produce documents required to meet the CDD requirements of the Bank.
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As per the RBI norms17, if these individuals intend to keep balances not exceeding Rupees fifty thousand (Rs. 50,000) in all their accounts taken together and the total credit in all their accounts taken together is not expected to exceed Rupees one lakh (Rs. 1,00,000) in a year; then The Bank can open an account subject to: − Introduction provided by another account holder who has been subjected to a full
KYC procedure and is compliant. The introducers account at the Bank should be at least six months old, currently active and not have any transaction reports filed against it. The photograph of the individual proposing to open the account as well as the address of the account holder must be certified by the introducer.
OR − Any other documentary evidence not part of the standard checklist for the individual
customer type which is however to the satisfaction of the Bank can be accepted.
The condition for Simplified Due Diligence requires the individual stay in the prescribed limits. Should the individual exceed the limits, no further transactions will be permitted until the full CDD compliance process is completed. In order not to inconvenience the customer, it is advised that the bank notify the customer once the balance reaches Rupees forty thousand (Rs. 40,000) or total credit in the account in the year reaches Rupees eighty thousand (Rs. 80,000) requesting that CDD compliance procedures be completed else operations on the account would cease upon reaching the limit.
Note that this relaxation facility is only provided for account holders of the constitution type individual.
17 Section 2.8 of RBI Master Circular on KYC, AML and CFT norms – July 1, 2011
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9 Account Opening Process
9.1 Determine Type of the Customer and Obtain Basic Customer Information
Based on constitution and category as specified in Section 5, the Staff Assistant (SA) must obtain basic information from the customer and enter the information into the customer’s KYC file. Even if the customer is an existing account holder or has transferred from another branch of the Bank, the customer (individual or entity) must complete an account opening form for the current branch.
9.2 Obtain or Calculate the Customer Risk Categorisation Score
The CRO must enter all the basic information collected into the KYC file of the customer and, if available, obtain the customer risk categorisation score from the KYC system. In the absence of an automated risk scoring module or system, the CRO must manually calculate the customer risk categorisation score on a risk scoring form. The customer categorisation score determines if any EDD needs to be performed on the customer.
9.3 Determine If Customer qualifies for Simplified Due Diligence
Once the basic customer information is in the KYC file, the CRO must document whether a request for SDD has been made. If so, the CRO must obtain any available documentary and non-documentary evidence establishing the basis of the requirement and should capture it in the KYC file of the customer. It is the BM’s prerogative to exempt the customer from BDD based on the information provided by the CRO. Relaxations are granted for small accounts and for certain accounts with valid introducer information as described in Chapter 8. Once SDD has been performed, no documentation shall be required unless the terms of the relaxation are violated.
At the end of the small account relaxation period, if the documentation is still incomplete or the account is perceived as being too high a risk, the CRO must notify the BM with a recommendation for closure of the account.
9.4 Verify the Identity of the Customer Using Documentary Methods
Once the CRO obtains the identifying information requested from the customer and adds it to the KYC file of the customer, the CRO must then conduct appropriate CDD measures and ascertain the identity of the customer using documentary evidence based on the submitted. The checklist in Appendix I,
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Chapter 7, covers the appropriate documentary evidence required for a particular customer type. Section 7.4 covers the policies and procedures to be followed for Customer Due Diligence. The CRO must also consider special cases of documentary verification as described in Section 7.4.5.
Based on the risk score generated, the CRO could be required to perform either BDD or EDD as described in section 7.4.1 or 7.4.3 and any information or documents required as a result of it must also be requested from the customer. Detailed checklist of information and documents to be collected from customers for BDD or EDD are presented in Appendix I of Chapter 7. The list of officially valid documents is presented in Appendix II of Chapter 7.
In the case where the customer is an existing account holder, and wishes to open a new account, the CRO or the officer permitting operations on the account must ensure that the customer’s existing account is compliant and if so must only request the deficit of documentation between the new and existing account types. In the case where the customer has transferred from another branch, the CRO must reach out to the previous branch and obtain the KYC, AML and CFT related documentation from the branch within a period of 30 days.
At the end of the process, if the documentation is still incomplete or the account is perceived as being too high a risk, the CRO must notify the Branch Manager with a recommendation for closure of the account.
9.5 Perform Background Checks
Any individual associated with an account as the owner, account operator or beneficiary must undergo the name screening or list matching process as described in Section 7.4.6. Foreign nationals should undergo a PEP check as described in Section 7.4.9. Individuals and Entities should also undergo adverse information checks. Additionally, the Bank could use the PAN verification services provided by the Income Tax Department18 to verify the PAN information of customers that have provided it. Additionally, in the case where the EDD process requires the use of non-documentary methods for verification, the CRO is required to conduct the process of non-documentary verification. The outcome of the verification process and the decision following the outcome must be recorded in the KYC file of the customer along with a list of next steps for the account.
At the end of the non-documentary verification process, if the account is perceived as being too high a risk, the CRO must notify the BM with a recommendation for closure of the account.
9.6 Collect Introducer Information
18 PAN verification services are available via the Tax Information Network of the Income Tax Department at https://www.tin-nsdl.com/
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It is recommended that the introducer information be captured as a part of the account opening process. The CRO is responsible for ensuring that a relationship exists between the customer and the introducer. The officer must also verify that the introducer’s account is KYC compliant and is responsible for ensuring that the introducer has not previously introduced an excessive number of accounts. The CRO must also note if the introducer is a staff member at the bank and if so, a relationship truly exists between the staff member and the customer.
9.7 Identify Details for Entity Customers
The CRO is required to create a profile of the entity from the information provided and the documentary and non-documentary evidence submitted. This profile must contain details as to whether the entity is public or private, services provided by the entity, etc. For customers such as mutual funds or investment vehicles that do not disclose the names of underlying investors or managing members, the CRO is required to make a greater effort to identify the names of key management personnel as well as obtain a general description of the fund’s targeted investor audience and capture it in the KYC file of the customer. The officer must obtain a prospectus or investment management agreement from the entity in order to ascertain this information. If the above mentioned documents are not available, the information can be obtained directly from the entity in the form of an email from an official email id, signed letter on the company letterhead or any other such official document.
9.8 Identify Controlling Parties and Beneficial Owners
The CRO must identify and ascertain the controlling parties and beneficial owners for an entity. As complex ownership structures may be used to conceal the origin of funds and identity of the ultimate beneficial owner, the account opening officer should perform all the due diligence required to identify the individuals, families and entities which are the ultimate beneficial owners of the entity.
9.9 Obtain Approvals
After completion of all of the above steps, the customer file must be signed off by the CRO with identifying information such as name and designation of the officer and entered into the file. The BM has the authority to either accept the customer, reject the customer or to refer the account to the PO for further disposition.
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Goes to the Bank
Obtains basic customer information from the customer
Customer
SA
BM
CRO
Check if SDD is applicable
Simplified Due
Diligence
Determine risk level
Customer Due Diligence
Introducer Information Capture
Individual or Entity? ID controlling
parties
Perform background checks
Approved?
Yes
EntityIndividual
Submit for approval
Customer Accepted
Customer rejected
Yes
No
Appendix I to Chapter 9: Account Opening Flowchart
No
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10 Customer Information Update The prescribed regulatory guidelines require customer information to be periodically reviewed and updated based on the customer risk categorisation score. Additionally, any new KYC related information on a customer received between periodic reviews must trigger an update to the customer information on file. The IBA guidelines from August 2011 define “KYC Updation” as a process of customer identification and consequent re-affirmation of his identity using reliable, independent source documents, data or information available, in addition to the collection of a photograph.
10.1 Schedule of Reviews
Periodic reviews conducted on all customers will help verify that the information the Bank has on file is up-to-date and accurate.
In tune with the RBI regulations, the Bank will follow a risk based approach towards updating customer information. Based on the customer’s risk categorisation, the schedule for a periodic review is listed below:
Risk
Categorization Review Period
High Risk 1 Year Medium Risk 2 Years Low Risk 3 Years
10.2 Procedures for Periodic Reviews
Procedures to be followed for conducting periodic reviews on the customers are listed below:
− Using the information on file, the CRO shall initiate the process by reaching out to the customer, for the additional information or documentation refresh, as per the requirements of the policy. Annexure B provides guidance and scripts for communicating with the customer. The CRO shall also provide a 30 day window to the customer for the submission of all the required information and documentation. The attempt to contact, its outcome and the decision following the attempt must be logged into the KYC file of the customer along with a list of next steps for the account.
− If the necessary documentation is not received by the 25th day of the
initial contact with the customer, the CRO shall contact the customer via the information available on file and request an update. Annexure B provides guidance and scripts for communicating with the customer. On
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the basis of the update provided, the CRO shall provide a further 15 day extension bringing the total exemption period to 45 days. The attempt to contact its outcome and the decision following the attempt must be logged into the KYC file of the customer along with a list of next steps for the account.
− At the end of the exemption period, if the documentation is still
incomplete, the CRO must transfer the account to the BM with a recommendation for restricting activity on the account by freezing it.
− Upon receipt of information from the Customer, the CRO shall enter the
information into the KYC file of the customer and escalate any material findings as necessary (e.g. change in risk rating of the customer or identification of a PEP). Based on these findings, the BM can request additional information or documentation from the customer subject to the earlier defined extension periods. Any written information or communication obtained from the customer should constitute a part of this update.
− Once the CRO has verified the information and completed the process,
the Officer shall sign off on the updates provided including information identifying the Officer.
10.3 Change in Category or Constitution
In the event that an entity or individual account type requests a change in its category or constitution, the CRO or BM must examine both the current customer type and the requested customer type and obtain only the KYC information and documentation in deficit of the new requirements. The CRO must request the customer to complete a new account opening form and provide it to the bank.
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11 Account Cancellation and Closure This section lists out the procedure to be followed by the BM for the closure of a customer account or cancellation of a transaction for one of the following reasons:
− If the account or transaction poses a high risk from a money laundering
or terrorist financing perspective. − Failure of the customer to update or provide the required KYC
information. − Senior Management recommends closure of the account. − Recommendation for account closure by regulatory authorities.
11.1 Initiation of Customer Relationship Closures
The BM and the CRO must jointly agree to close the account in the case of one or more of the above mentioned reasons. The BM will document the decision to close the account in the KYC file and shall initiate the following procedure:
11.1.1 Internal Notification
The BM must notify each of the individuals or groups listed below before proceeding with account closure:
− AML Compliance Group − Audit department
In the case of an external recommendation, the regulatory authorities must be notified. A copy of the notification letter must be attached to the KYC file of the account holder.
11.1.2 Scheduling Closure
The BM in consultation with Senior Management at the head office will determine the appropriate schedule and timeline for the closure of the account based on the following two factors:
− Reason for closure of the account; and − Extent of pending business between the bank and the account holder
The CRO shall notify the client of the decision to close the account and the effective day of closure, at least 30 days before the actual closure date. A copy of the notification communication must be attached to the KYC file of the account holder. The closure will be effective on the end of business day on the date mandated for account closure. In the event of a request for extension on the account closure date, only the BM is authorized to do so after explicitly notifying the CRO and the Senior
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Management at the branch of the Bank. The decision to grant an extension must also be recorded in the KYC file of the customer.
11.1.3 Transaction cancellation
In the case of transactions by walk-in customers where there isn’t an associated account, the BM will determine if any additional steps are required beyond cancelling the transaction (e.g., prohibiting any further activity, such as account opening, for the non-customer). In order to do so for walk-in customers, the Bank should add them to their “negative” or black-list.
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12 Internal controls Internal Controls are necessary in order to limit the Bank’s KYC, AML and CFT risk. The internal controls are designed to annually measure the overall KYC, AML and CFT risk the Bank faces and the effectiveness of the Bank in addressing them. The PO and the AML Compliance Group are responsible for developing and implementing the controls that will track the compliance with the prescribed policy and procedures including conducting and updating the various risk assessments as discussed below.
12.1 Products and Services Offered by the Bank AML Compliance group must ensure that all existing products and new products are evaluated and analysed from a KYC, AML and CFT risk perspective. The evaluation must include the approach to calculating the score for the Product Risk variable in the Customer Risk Categorisation model. All new products must be added to the model and assigned an appropriate risk score.
12.2 Customer Acceptance and Identification Procedures
The AML Compliance Group must annually review the different types of customers being accepted, their risk level and the documentation being provided for proper identification of the customer. Particular attention must be paid to high risk customers ensuring that the enhanced due diligence procedures are being followed. Any grievances regarding the customer acceptance and identification policy or procedure, for particular customer types, must be addressed as part of the review. Updates to the customer acceptance and identification policy or procedure must also be addressed as part of the review.
12.3 Country Risk Assessment Procedures
The PO and the AML Compliance Group are responsible for ensuring that the country risk rankings are annually reviewed and updated. Regulators from time to time send notices regarding updates to the UN sanction lists or jurisdictions that are not compliant with the Financial Action Task Force (FATF) recommendations. The Bank must ensure that these countries are appropriately scored and regularly updated The overall methodology of risk ranking the countries must also be reviewed periodically to apply changes in the World Bank governance rankings, changes in the Transparency International Corruption Index or changes in FATF membership, etc.
12.4 Customer Risk Assessment Procedures
The Bank currently performs customer risk categorisation using seven (7) variables for Individuals and seven (7) variables for Entities. The AML Compliance Group and the PO must annually review the customer risk categorisation model and ensure that the variables chosen continue to remain relevant and the data behind the variables is accurately being captured and scored.
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12.5 KYC, AML and CFT Policy and Procedure Reviews
The policy requires the Bank to conduct an annual review of its KYC, AML and CFT policies and procedures and their implementation to ensure:
− The Bank complies with updates or changes to regulatory requirements; − The Bank is abreast of best practices and new techniques in the field of
KYC, AML and CFT.
12.6 Actions of the AML Compliance Group
12.6.1 Self-assessment Procedures
− Create KYC, AML and CFT questionnaires to test the knowledge of the CRO, BM and other senior officials at each branch regarding the current policies and procedures being followed.
− Use the results of the test to obtain a true picture of the understanding of policies and procedures at the bank so as to apply any corrective measures if necessary.
− Any feedback obtained through the questionnaires shall be used to identify any additional money laundering and terrorist financing risks currently present but not yet identified by the Compliance Group at the Bank.
12.6.2 Updates on Policy and Procedures
− Disseminate to the officers, through training and education, any updates or changes in the regulatory policy as described in Section 15.
− Obtain industry best practices and provide them to the officers at the Bank.
12.6.3 Perform Audits
− Perform internal audits on the information and documents collected by the branches as a part of the KYC process.
− Track deficiencies and document corrective actions to be performed for the accounts at the Bank.
12.6.4 Perform Quality Assurance Tests
− Verify if Enhanced Due Diligence was performed in adherence to the policy and procedures outlined for all high risk accounts. For a certain subset of accounts, verify that the due diligence performed adhered to policies and procedures.
− Review the relevant supporting documentation to check for conformance with applicable regulations.
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13 Transaction Monitoring and Reporting
13.1 Introduction
The PMLA 2002 and the Rules specified there under (Rule 3), requires the Bank to monitor and furnish the following types of transaction reports:
− Cash Transaction Reports (CTRs) − Suspicious Transaction Reports (STRs) − Counterfeit Currency Reports (CCRs) − Non Profit Organisation Transaction Reports (NTRs)
13.2 Reporting Formats
The above mentioned transaction reports can be filed in any of the following reporting formats currently available to the Bank:
− Manual Reports; − Electronic Reports using fixed width file format; and − Electronic Reports using XML file format.
The XML file format is the preferred file format by the Financial Intelligence Unit- India (FIU-IND). The FIU-IND has also provided a data conversion utility from the fixed file format to the XML file format. Details of the XML file format and conversion utilities to it from the fixed file format to XML (Reporting Format Guide version 2.0) can be downloaded directly from the FIU-IND’ website: http://fiuindia.gov.in/furnishing-reportingformat.htm
13.3 Submission of Reports to FIU-IND
The Bank is expected to submit the report in an electronic form and should make reasonable efforts to send reports in the electronic format rather than the paper based format. The FIU-IND has designed the FINnet Gateway Portal as a comprehensive interface between the reporting entities (in this case the Bank) and FIU-IND for submission of the above mentioned four transaction reports. The Bank must register with FIU-IND to gain access to the portal which will allow the PO to upload the reports in the prescribed XML file format.
In the event that Bank is not able to upload the report or has been requested by FIU-IND to submit the report using a CD, the Bank must create a CD of the report in the XML file format. The CD created must contain a label mentioning the name of the Bank, unique identification code, type of report (CTR/STR/CCR/NTR), batch number, month and year of report for the purpose of identification. In case the size of data files exceeds the capacity of one CD, the data files should be compressed by using Winzip 8.1 or ZipItFast 3.0 (or higher version) compression utility to ensure quick and smooth
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acceptance of the file. The CD should be virus free and must be accompanied by a summary of reports duly signed by the principal officer.
If the Bank is not able to upload the report onto the FINnet Gateway Portal or create a CD with the required XML format then it may have to file the transaction report manually. In case of manual submission the Bank will use the FIU-IND provided PDF form based utilities to capture data and print the report as per the specified format. The report must be sent to FIU-IND at the following address: Director, FIU-IND Financial Intelligence Unit-India 6th Floor, Hotel Samrat Chanakyapuri, New Delhi – 110021 India In urgent cases the form must also be faxed to +91 11 26874459.
13.4 CTRs
Rule 3, sub-rule (A) and (B) of the Prevention of Money Laundering Rules, 2005 require Banks to monitor and report cash transactions that meet the following criteria:
− All cash transactions of the value of more than Rupees ten lakhs (Rs.10,00,000) or its equivalent in foreign currency; and
− All series of cash transactions integrally connected to each other which have been valued more than rupees ten lakhs (Rs. 10,00,000) or its equivalent in foreign currency where such series of transactions have taken place within a calendar month.
Note on Integrally Connected Transactions: As clarified by the RBI guidelines, integrally connected cash transactions are transactions where the sum of debits or the sum of credits for an account is more than ten lakhs in a month. Further, only transactions above Rs.50, 000 should be reported by the Bank as part of the integrally connected cash transactions.
13.4.1 CTR Filing Procedures
The manual format and general instructions for filing out a complete CTR, as provided by the FIU-IND, are provided in Annexure C to this chapter.
1. For branches not under the CBS, the monthly CTR will be compiled at the branch by the BM and forwarded to the PO of the Bank for approval and onward transmission to the FIU-IND.
2. For branches that are under CBS, the CTR reports will be compiled centrally at the data centre and forwarded to the PO of the Bank for approval and onward transmission to the FIU-IND.
3. A summary of the CTR for the Bank as a whole will be compiled by the PO every month in one of the prescribed formats as described in Section 13.2.
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4. The PO will sign and submit the CTR to FIU-IND in one of the submission formats described in Section 13.3.
5. A copy of the monthly CTR submitted to FIU-IND on behalf of the branch must be sent to and made available at each of the concerned branches for production to auditors or inspectors as required.
13.4.2 Time Frames for Filing a CTR
Rule 8 of the Prevention of Money Laundering Rules, 2005 specifies the time limit for furnishing the transaction reports to the FIU-IND. A CTR report must be submitted by the PO of the Bank every month by the 15th of the succeeding month.
13.4.3 Exemptions
CTR should contain only transactions carried out by the Bank on behalf of its clients or customers. Transactions between the internal accounts of the bank are to be excluded. While filing a CTR of a series of integrally connected transactions, details of individual transactions below Rs. Fifty Thousand (Rs. 50,000) need not be furnished.
13.5 STRs
13.5.1 Introduction
Rule 2 of the Prevention of Money Laundering Rules, 2005, defines a suspicious transaction as follows:
"Suspicious transaction" means a transaction referred to in clause (h), including an attempted transaction, whether or not made in cash which, to a person acting in good faith-
(a) gives rise to a reasonable ground of suspicion that it may involve proceeds of an offence specified in the Schedule to the Act, regardless of the value involved; or
(b) appears to be made in circumstances of unusual or unjustified complexity; or (c) appears to have no economic rationale or bonafide purpose; or (d) gives rise to a reasonable ground of suspicion that it may involve
financing of the activities relating to terrorism; Explanation: Transaction involving financing of the activities relating to terrorism includes transaction involving funds suspected to be linked or related to, or to be used for terrorism, terrorist acts or by a terrorist, terrorist organization or those who finance or are attempting to finance terrorism.
(h) "Transaction" includes deposit, withdrawal, exchange or transfer of funds in whatever currency, whether in cash or by cheque, payment order or other instruments or by electronic or other non-physical means.
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This section describes the policy and procedure of the Bank developed to identify, investigate and report unusual and potentially suspicious activity related to the customers of the Bank.
13.5.2 Potential Indicators of Suspicious Activity or Red Flags
In order to raise awareness and assist the Bank staff in recognising the types and patterns of customer behaviour and/or transactions that might require further review to determine whether the activity is suspicious, some examples in the form of red flags are listed below. The lists are categorised and provided as illustrative guidelines and do not necessarily mean that the behaviour or transaction should always be considered suspicious. The indicators only suggest that a closer review of the behaviour or transaction may be warranted.
Behavioural Indicators
− Customers with unusual or excessively nervous demeanor. − Discussion of record-keeping or reporting duties of transactions with the
intention of avoiding them. − Threatening of an employee in order to deter record-keeping or reporting
duties. − Suggestion of gratuity to an employee of the Bank. − Reluctance to proceed with a transaction on being informed of record keeping
/ information verification or currency transaction reporting requirements relevant to the Bank.
− Apparent hidden agenda or abnormal behaviour (i.e., forgo or bypass opportunities to avail higher interest rates on account balances)
− Uncharacteristic transfers or exchanges of large sums of money not associated with the account or customer type (e.g. minor or student account)
− Agent, attorney or financial advisor acting on behalf of the customer without proper documentation such as a power of attorney.
− Customers who appear to have accounts with several institutions within the same locality without any apparent logical reason.
− Customers who use separate tellers to conduct cash transaction or if applicable, foreign exchange transactions.
− A customer who often visits the safe deposit area immediately before making cash deposits, especially deposits just under defined threshold levels.
Identification Circumstances
− Customers who are reluctant in providing information normally requested at
the time of account opening; provide minimal or seemingly fictitious information or providing information that is hard to verify at the time of account opening.
− Identification documents seem forged, unusual or tampered with. − Opening of an account without identification, local references, introducer or a
local address.
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− Residential and work address provided is outside the Bank’s immediate service area or perhaps closer to another branch of the same Bank.
− A customer/company who is reluctant to provide complete information regarding the purpose of the business, prior banking relationships, officers or directors, or its locations.
− A customer who has no record of past or present employment but makes frequent large transactions.
− A customer/company who is reluctant to reveal details about its activities or to provide financial statements.
− Welcome letter to a new customer that is returned due to an incorrect address.
− Home or business phone disconnected or always unanswered.
Cash Transactions
− Frequent withdrawal of large cash amounts that do not appear to be
consistent with or justified by the customer's business activity. − Entity or Company transactions, both deposits and withdrawals, that are
denominated by unusually large amounts of cash, rather than by way of debits and credits normally associated with the normal commercial operations of the company, e.g. cheques, letters of credit, bills of exchange, etc.
− Depositing cash by means of numerous credit slips by a customer such that the amount of each deposit is not substantial, but the total of which is substantial.
− Exchanging an unusually large amount of small denomination notes for those of higher denomination.
− Deposits of cash containing many large denomination bills. − Deposits that are large sums of cash wrapped in currency straps stamped by
other banks. − Several large cash transactions at different branches for the same customer,
account or related accounts (e.g., same or similar account names, common beneficial owners, common signatories) on the same day.
− Frequent purchase of monetary instruments for cash, especially below reporting thresholds.
− Cash withdrawals from a previously dormant/inactive account, or from an account which has just received an unexpected large credit by a funds transfer;
Other Indicators
− High velocity in the movement of funds, where however, beginning and
ending daily balances are low. − A customer having a large number of accounts with the same bank, with
frequent transfers between different accounts. − Placing funds in term deposits and using them as security for more loans. − Large deposits immediately followed by funds transfers.
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− Sudden surge in activity level. − Customer regularly issues large value cheques without balance and then
deposits cash. − Customers who repay the problem loans unexpectedly. − Retail deposit of many cheques but rare withdrawals for daily operations. − Multiple deposits of money orders, Banker's cheques, drafts of third parties. − Multiple deposits of Banker's cheques, demand drafts, cross/ bearer cheques
of third parties into the account followed by immediate cash withdrawals. − Substantial difference between the anticipated and actual transaction activity
of the customer.
The decision to investigate and report suspicious behaviour or specific transactions determined as unusual must be based upon the particular facts and circumstances relating to the transactions or activity in question. Furthermore, an illustrative list of red flags is not a substitute for the judgment required to determine whether a particular transaction is suspicious or not.
13.5.3 Transaction Types for Monitoring
Rule 3 of the Prevention of Money-laundering Rules, 2005 lists the transaction types for the reporting of all suspicious transactions as follows:
Transactions whether or not made in cash and by way of
(i) Deposits and credits, withdrawals into or from any accounts in whatsoever
name they are referred to in any currency maintained by way of :
(a) Cheques including third party cheques, pay orders, demand drafts, cashier’s cheques or any other instrument of payment of money including electronic receipts or credits and electronic payments or debits, or
(b) Travellers cheques, or (c) transfer from one account within the same banking company, financial
institution and intermediary, as the case may be, including from or to Nostro and Vostro accounts, or
(d) Any other mode in whatsoever name it is referred to;
(ii) Credits or debits into or from any non-monetary accounts such as d-mat account, security account in any currency maintained by the banking company, financial institution and intermediary, as the case may be;
(iii) Money transfer or remittances in favour of own clients or non-clients from
India or abroad and to third party beneficiaries in India or abroad including transactions on its own account in any currency by any of the following:-
(a) Payment orders, or (b) Cashier’s cheques, or (c) Demand drafts, or (d) Telegraphic or wire transfers or electronic remittances or transfers, or
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(e) Internet transfers, or (f) Automated Clearing House remittances, or (g) Lock box driven transfers or remittances, or (h) Remittances for credit or loading to electronic cards, or (i) any other mode
of money transfer by whatsoever name it is called;
(iv) Loans and advances including credit or loan substitutes, investments and contingent liability by way of:
(a) Subscription to debt instruments such as commercial paper, certificate of
deposits, preferential shares, debentures, securitized participation, inter-bank participation or any other investments in securities or the like in whatever form and name it is referred to, or
(b) Purchase and negotiation of bills, cheques and other instruments, or (c) Foreign exchange contracts, currency, interest rate and commodity and
any other derivative instrument in whatsoever name it is called, or (d) Letters of credit, standby letters of credit, guarantees, comfort letters,
solvency certificates and any other instrument for settlement and/or credit support;
(v) Collection services in any currency by way of collection of bills, cheques,
instruments or any other mode of collection in whatsoever name it is referred to.
13.5.4 Automated Transaction Monitoring
Unusual or suspicious activity, especially related to behavioural indicators or identification circumstances as listed in the red flags section above, is best determined by BMs, CROs, SAs and other account opening officers who rely on their vast experience and personal knowledge of the customers. However, their capability to detect complex structuring of transactions to avoid threshold limits and unusual or suspicious activity over time is limited without the assistance of automated transaction monitoring systems.
Section 2.21 (iv) (d) of the RBI Master Circular 2011 reiterates that banks as part of the monitoring process are required to put in place appropriate software applications for the effective identification and reporting of unusual or suspicious transactions. Automated transaction monitoring systems help identify a base-line level of activity that can be termed as reasonable or normal for a particular type of customer and generate alerts for transactions that fall outside the normal pattern of activity.
13.5.4.1 Transaction Monitoring Categories
All the patterns of activity can be broadly classified into the following three major categories:
a. Cash Activities Including Structuring b. Wire or Funds Transfers
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c. Unusual Activity
13.5.4.2 Selection of Transaction Monitoring Rules
The specific transaction monitoring rules for implementation at the Bank and their thresholds are selected and set by the AML Compliance Group and the PO of the Bank. The rules and thresholds are based on the Bank’s client base, products offered, observed level of transactional activity for a particular customer type and guidelines prescribed by the regulatory bodies or guidance issued by development agencies such as the IBA.
Transaction Monitoring Rules
The set of rules chosen for each category are listed below.
Cash Activities Including Structuring
1. Accounts where cash activity represents a statistically significant portion of the total funds in/out of the account. In other words, the ratio of currency deposits/withdrawals as compared to the total account activity;
2. Multiple cash deposits such that the amount of each deposit is not substantial, but the total of the deposits is substantial within a specified time-frame;
3. Frequent withdrawals or deposits of large cash amounts, depending upon the customer type, in a 9 day rolling calendar period;
4. Multiple cash deposits/withdrawals in a 30 day rolling period where the aggregate of the deposits/ withdrawals is between Rs. 9,00,000 and Rs. 9,99,999;
5. Two or more purchases of monetary instruments between Rs. 40,000 and Rs. 49,999 by the same purchaser within 2 days of each other;
6. Multiple occurrences of purchase of monetary instruments over Rs. 1,00,000
on consecutive days over a 3 day period;
Funds Transfers
1. Excessive transfers to multiple unique beneficiaries from a single customer’s account or related accounts, inconsistent with past behavior;
2. Excessive transfers from multiple unique originators to the Bank’s customer’s
account or related accounts, inconsistent with past behavior;
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3. Concentration of funds (by domestic funds transfer) into a single account over a specific time period followed by a funds transfer out of the account for the same or similar amount.
4. Series of cash deposits followed by an outgoing funds transfer for the same
amount (or within a +/- five percent bound) within a 9 calendar day period. 5. Series of cash withdrawals following an incoming funds transfer for the same
amount (or within a +/- five percent bound) within a 9 calendar day period. Unusual Activity
1. Transactions occurring within nine (9) calendar days where the ratio of funds
inflow to funds outflow is between an upper bound of 110 % and a lower bound of 90%;
2. Large value transaction in a dormant account; 3. Customers engaging in any transaction for any account type over Rs. X in a
single transaction; 4. Multiple occurrences of a customer regularly issuing large value cheques
without sufficient balance and then depositing cash; 5. Large number of accounts introduced by the same introducer; 6. Significant deviation from the known transaction pattern of the customer; and
7. Multiple Customers having same address/telephone number/id.
13.5.4.3 Update of Transaction Monitoring Rules
Based on the periodic review of the quality of alerts being generated, the AML Compliance Group or the PO may from time-to-time recommend changes to a particular rule or its threshold. All such instances, where a change is requested by the AML Compliance Group or the PO, must be documented and approved in writing by the Senior Management of the Bank including the Managing Director or the CEO.
13.5.4.4 Alert Generation and Processing
Customers and their accounts that trigger the above rules will cause an “alert” to be generated within the automated monitoring system. All the alerts generated within the system are scored with the alert score indicating the overall likelihood of the suspicious nature of the activity. The alert score takes into account the customer risk categorisation level thereby incorporating a risk based approach for transaction monitoring.
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The BM must initially review the alerts generated for customers and accounts at his branch. On review, if the activity is deemed unusual or potentially suspicious, the BM must recommend the alert to the AML Compliance Group for further investigation. All alerts that are deemed as false positives may be “cleared” by the BM and closed out within the system.
13.5.5 Manual Alerts
Suspicious Activity based on behavioural indicators and identification circumstances will require an employee to create a “Manual Alert” within the system that can then be automatically routed as required to the BM or AML Compliance Group. An employee must file a manual alert within 2 business days of the occurrence of the suspicious activity or event.
Important Notice for Suspicious Transaction Monitoring
The following important points must be noted with respect to the Bank’s obligation to file a STR:
− Only the Bank’s PO and his or her designee is allowed to file a STR with the
FIU-IND. − Every employee has a responsibility to refer potentially suspicious activity for
investigation to his supervisor. − Employees do not have to be certain that illegal activity has occurred; the
existence of suspicion is sufficient. An employee’s obligation is to refer potentially suspicious activity to the Bank’s PO in a prescribed manner, who will investigate the matter. The PO is responsible for determining whether a SAR should be filed.
− Statutory deadlines, outlined in section 13.5.15, determine the timeline for filing a SAR, therefore prompt referral of potentially suspicious activity is critical.
13.5.6 STR Filing Obligations
The PO of the Bank must file an STR if he or she has reasonable ground to believe that the attempted transaction(s), transaction(s) or a series of integrally connected transactions involve proceeds of an offense, generally irrespective of the amount of the transaction(s), as described in Section 12 of the PMLA 2002. The Schedule to the PMLA, 2002 lists all such offences and is provided as Appendix I to this chapter.
13.5.7 Communication with Authorities and Voluntary STRs
In situations where the STR filing obligations are not met, the Bank may choose to voluntarily file an STR. This decision must be made by the PO in order for the Bank to provide assistance to the authorities in the enforcement of the PMLA. The PO may contact officers empowered and required to assist authorities in the enforcement of the PMLA about any emergent or otherwise deserving situation. Any
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such contact should be documented by the PO in a separate file or electronically in the KYC/AML system. A complete list of officers empowered and required to assist authorities in the enforcement of the PMLA are provided in Appendix I - Other Authorities for Enforcement of the PMLA, to this chapter. However, such contact does not substitute for the obligation to file a STR, if that obligation otherwise is present.
13.5.8 Prohibition of Disclosure
Rule 8 of the Prevention of Money Laundering Rules, 2005 prohibits a financial institution that files a STR from notifying any person involved in the suspicious transaction that the transaction has been reported. In light of the highly confidential nature of STRs, and to guard against unauthorized disclosure of this information, information concerning STR filings will only be shared with employees on a need to know basis.
Under no circumstances may a customer be tipped off or informed of a STR, investigation related to an STR, STR content, or the Bank’s concerns about potential suspicious activity. Furthermore, employees should not put any apparent restrictions on operations in accounts (which would alert the customers) for which a STR has been filed. Any inquiries in this regard must be referred to the PO promptly. Every employee has a responsibility to refer potentially suspicious activity for investigation to his supervisor
13.5.9 Protection from Civil Liability for Reporting Information in a STR
Illegal or suspicious activity reported on STRs is protected under Section 14 of the PMLA 2002 and neither the Bank nor its officers will be held liable for civil consequences of the filing of a STR. The Bank’s employees are always under a duty to act with the utmost of good faith regarding the reporting of potentially suspicious activity.
Note:
The PMLA contains no protection from criminal liability with respect to any reports filed with the FIU. However, protection from criminal liability is provided by a provision in the Indian Penal Code (Chapter IV s.76), which specifies that no criminal offence can occur with respect to an act done by a person who is either legally bound to do the act, or who believes in good faith that he/she is legally bound by law to do it. Under this provision, criminal liability does not exist for filing a STR in good faith.
13.5.10 Prohibition on Retaliation
No employee shall be subject to retaliation of any kind by the BM, PO, Bank staff and senior management for escalating, investigating or reporting potentially suspicious activity.
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13.5.11 Failure to Comply with the Bank’s Policy
Any failure to comply with this policy and the underlying principles within it could potentially expose the Bank to significant legal, regulatory, reputational, and financial risk. This could potentially result in regulatory censure and, in some cases, criminal liability for the Bank’s staff, with corresponding reputational damage and the need for remedial action. Failure to comply with this policy by staff would, therefore, be regarded as grounds for disciplinary action.
13.5.12 Escalation and Referral of Potentially Suspicious Activity
All employees have a duty to refer potentially suspicious activity. Employees must report potentially suspicious activity to his or her supervisor through written correspondence for documentation or by creating a manual alert in the monitoring system. The supervisor must immediately inform the AML Compliance Group within the Bank, responsible for follow-up and further review of the escalated activity. All automated alerts generated by the system are initially reviewed by the BM and reported to the AML Compliance Group if deemed suspicious. The responsibility of investigating and arriving at a conclusion of whether a STR needs to be filed lies with the AML Compliance Group and ultimately the PO. If available, the reporting employee must also be able to provide any additional information required by the AML Compliance group during the review of the escalated activity. If an employee believes that his or her supervisor may be involved in the potentially suspicious activity, the employee may contact the PO or the CGM-Banking directly without supervisor notification. Depending on the circumstances of a particular case, the filing of a STR may be warranted even where a prospective customer has not yet opened an account at the Bank. An employee who identifies potential suspicious conduct involving a prospective customer, who has not yet opened an account, should still report such information by generating a manual alert. The manual alert must provide as much detail as possible regarding the customer and his or her intended transactions.
13.5.13 STR Filing Procedures
The manual format and general instructions for filing out a complete STR, as provided by the FIU-IND, are provided in Annexure D to this chapter.
1. Once a decision to file a STR has been reached by the AML Compliance
Group, a draft copy of the STR must be completed (along with all the supplemental documents) and submitted to the PO. The PO will approve the STR and submit it using one of the reporting formats mentioned in Section 13.2.
2. The AML Compliance Group must maintain a copy of the STR for a period of ten years since the date of filing an STR. Any physical documentation must
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be locked in a separate storage area accessible to only the AML Compliance Group and the PO. All electronic evidence and documents must be backed-up and made accessible on request.
3. The PO must create, update and maintain a STR log that includes the following:
a. STR Number b. Activity Referral Date c. Review Start Date d. Review Complete Date e. STR Type f. STR Author g. Customer or Entity Name h. Customer ID or Account Number i. Total Unusual Activity Amount in Rupees j. Reason for Reporting k. Comments
Only the PO and the AML Compliance Group must have access to the STR log.
4. AML Compliance Group must provide monthly statistics on the STRs filed and alerts investigated must be presented to Senior Management for review. Discussions with management should include recommendations such as closure of accounts, limits of permissible activity, updates to risk scoring model, additional rules for alert detection, etc.
5. The individual or entity on whose name the STR is filed should be added to the internal watch-list of the Bank to ensure no accounts in the same name exist in different branches of the Bank.
13.5.14 On-going Duty to Report
If unusual activity in the account continues, employees must continue to report the activity to their supervisor or the AML Compliance Group. Previous referrals on the account do not necessarily discharge an employee from his or her duty to report ongoing or potentially new suspicious activity. Employees must continue to maintain confidentiality with respect to the account and customer under review.
13.5.15 Time Frames for Filing a STR
If any attempted transaction, transaction or a series of integrally connected transactions are identified as suspicious in nature, they must be submitted as a STR within 7 working days of arriving at that conclusion. The total time frame from the review of an alert(s), either manual or automated, to the submission of a STR must not exceed 60 days. The BM and subsequently the AML
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Compliance Group must initiate the review promptly and complete it in a reasonable amount of time not exceeding the 60 day time limit specified above. In the event of serious violations of law or regulation that require immediate attention, in addition to promptly faxing the STR information to FIU-IND, the PO must notify by phone or in person the appropriate law enforcement agency and document the conversation.
13.5.16 STR Dispute Resolution
The decision to file or not to file a STR finally rests with the PO. If an employee or a member of the AML Compliance Group disagrees with the PO’s decision to not file a STR, he or she may contact the General Manager of the Banking Department.
If the General Manager of the Banking Department agrees with the employee’s recommendation to file a STR, the General Manager will present the proposed STR filing to Senior Management for assessment and final disposition. The PO’s decision not to file a STR will be documented in a memorandum and stored along with the documents pertaining to the review.
13.5.17 Supplemental STRs
If a STR on an individual or entity was filed previously and the unusual activity continues, a supplemental STR needs to be prepared and filed. The STR reporting format takes into account if an STR is related to a previous filing and allows for the filing of a supplemental STR. The PO must specially bring to the notice of Senior Management the supplemental filing and a decision on how to respond to the recurrent indicators of suspicious activity must be taken. Senior Management may consider restricting the account or in certain cases closure of the account.
13.5.18 Closing Accounts Due to Continued Suspicious Activity
The AML Compliance Group and the PO shall maintain a STR log that lists all the accounts and customers that have been subjected to a STR filing. The AML Compliance group must review the log and try and identify patterns of activity, trends and any other indicators for categorisation into the types of unusual or suspicious activity detected. In the event that the activity persists and supplemental STRs are filed, the PO, in consultation with Senior Management may decide on terminating the relationship with the customer and closing related accounts.
Banks must be careful in the manner in which the customer is dealt with while closing the account. As described in Section 13.5.7, the Bank must not disclose that a STR or multiple STRs have been filed on the customer.
13.5.19 STR Record Retention
Rule 6 of the PML Rules, 2005 stipulates that all records referred to in Rule 3, The Maintenance of Records of Transactions, that include transactions identified as potentially suspicious must be maintained for a period of ten years from the date of
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the transactions between the client and the Bank. The record retention policy of the Bank is described in Section 14.
13.5.20 Regulatory and Law Enforcement Requests
Occasionally the Bank and its employees may be contacted by regulatory authorities or law enforcement agencies for additional documentation on a STR filed or to check for activity of certain customers at the Bank. All such requests must be immediately routed to the PO of the Bank.
Prior to fulfilling any request, the PO must verify the authenticity of the request (i.e. that the requestor is a representative of an appropriate regulatory or law enforcement agency). The verification methods may include requiring written requests on letterhead that should be followed up with a phone call to the certified phone number of the appropriate agency confirming the request.
Once a request is received and confirmed, the request along with its pertinent details must be logged and stored separately in either electronic or file format with the PO.
13.6 CCRs
Rule 3, sub-rule (C) of the Prevention of Money Laundering Rules, 2005 require Banks to monitor and report all cash transactions where forged or counterfeit currency notes or bank notes have been used as genuine or where any forgery of a valuable security or a document has taken place facilitating the transactions.
13.6.1 CCR Filing Procedures
1. All employees have a duty to refer counterfeit currency. Employees must report counterfeit currency detected to the BM immediately.
2. The employee and/or BM must attempt to understand or extract information from the customer regarding the movement of the currency (how he or she came into possession of the currency) identified as counterfeit.
3. The BM must “seize” the counterfeit currency from the customer and forward them to the PO for further inspection.
4. The employee must create a counterfeit currency alert in the monitoring system. 5. The PO will sign and submit the CCR to FIU-IND in one of the submission
formats described in Section 13.3
13.6.2 Time Frames for Filing a CCR
Rule 8 of the Prevention of Money Laundering Rules, 2005 specifies the time limit for furnishing the transaction reports to the FIU-IND. A CCR report must be submitted by the PO of the bank no later than 7 working days from the date of occurrence of the transaction containing the counterfeit currency.
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13.7 NTRs
Rule 3, sub-rule (BA) of the Prevention of Money Laundering Rules, 2005 require Banks to monitor and report all transactions involving receipts by non-profit organisations of value more than rupees ten lakhs (Rs. 10,00,000), or its equivalent in foreign currency.
Rule 2, sub-rule (1) clause (CA), defines Non-Profit Organisation (NPO) as any entity or organisation that is registered as a trust or a society under the Societies Registration Act, 1860 or any similar State legislation or a company registered under Section 25 of the Companies Act, 1956. The Bank must pay special attention to any unregistered associations operating as a NPO and if applicable, must file a NTR for the same.
13.7.1 NTR Filing Procedures
1. The automated monitoring system will automatically create an alert within the system for any transaction involving receipts by non-profit organisations of value more than Rupees ten lakhs (Rs. 10,00,000), or its equivalent in foreign currency.
2. The BM must verify that the customer or the account that receives the money is indeed a non-profit organisation.
3. The PO will sign and submit the NTR to FIU-IND in one of the submission formats described in Section 13.3
13.7.2 Time Frames for Filing a NTR
Rule 8 of the Prevention of Money Laundering Rules, 2005 specifies the time limit for furnishing the transaction reports to the FIU-IND. A NTR report must be submitted by the PO of the bank no later than 7 working days from the date of occurrence of the transaction.
13.8 Special Note on Wire Transfers
Wire transfer is an electronic transfer of funds from one person or institution (entity) to another. Because of the capability of transferring funds instantaneously wire transfers have become the preferred mode of transfer of funds, especially internationally. There are two types of wire transfers:
− Domestic wire transfers are any transfers where the originator and the beneficiary banks are located within the same country. A transaction involving a chain of wire transfers that take place within the borders of single country is a domestic wire transfer even if the system used for effecting the transactions is located outside the country.
− Cross-Border wire transfers mean any wire transfer where the originator and the beneficiary banks or financial institutions are located in different countries. It may include any chain of wire transfers that has at least one cross-border element.
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Because of lesser human intervention and reduced scrutiny, wire transfers also lend themselves as a preferred method for criminals and terrorists to transfer their funds. To address this, the Financial Action Task Force in its Special Recommendations has recommended some minimum requirements for wire transfers.
13.8.1 Requirements of Domestic Transfers
The CRO must ensure that the following minimum requirements are met while taking an order for a domestic wire transfer:
− Information accompanying all domestic wire transfers of Rs. 50,000 and
above must include complete originator information including name, address and account number etc. unless this information can be made available to the beneficiary bank by other means.
− If a bank has reason to believe that a customer is intentionally structuring wire transfers below Rs. 50,000 to several beneficiaries in order to avoid reporting or monitoring, the bank must insist on complete customer identification before accepting the transfer. In case of no cooperation from the customer, efforts should be made to establish his identity and an STR must be filed with FIU-IND.
13.8.2 Requirements of Cross Transfers
The CRO must ensure that the following minimum requirements are met while taking an order for a cross border wire transfer:
− All cross border wire transfers must include complete originator information
that is accurate. − Information accompanying all cross border wire transfers must include the
name, address and account number and place where account exists. In the absence of an account number a unique reference number as prevalent in the country concerned must be included.
− Where several individual transfers from a single originator are bundled in a batch file for transmission to beneficiaries in another country, they may be exempted from including full originator information, provided they include the originator’s account number or unique reference number as mentioned above.
13.8.3 Exemption from Wire Transfer Requirements
Inter-Bank transfers and settlements where both the originator and beneficiary are banks or financial institutions are exempted from the above requirements.
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Appendix I to Chapter 13: Other Authorities for Enforcement of the PMLA Section 54 of the Prevention of Money Laundering Act, 2002 empowers and requires various authorities to assist in the enforcement of the act. The following officers are hereby empowered and required to assist the authorities in the enforcement of this Act, namely:-
(a) Officers of the Customs and Central Excise Departments; (b) Officers appointed under sub-section (1) of Section 5 of the Narcotic Drugs and
Psychotropic Substances Act, 1985 (61 of 1985);
(c) Income-tax authorities under sub-section (1) of Section 117 of the Income-tax Act, 1961 (43 of 1961);
(d) Officers of the stock exchange recognized under Section 4 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956);
(e) Officers of the Reserve Bank of India constituted under sub-section (1) of Section 3 of the Reserve Bank of India Act, 1934 (2 of 1934);
(f) Officers of Police;
(g) Officers of enforcement appointed under sub-section (1) of Section 36 of the Foreign Exchange Management Act, 1973 (40 of 1999);
(h) Officers of the Securities and Exchange Board of India established under Section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992);
(i) Officers of any other body corporate constituted or established under a Central Act or a State Act; and
(j) Such other officers of the Central Government, State Government, local authorities or banking companies as the Central Government may, by notification, specify, in this behalf.
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14 Customer Record Retention and Sharing
14.1 Maintenance and Preservation of Records The rules and regulations regarding maintenance and preservation of records are based on the type of record:
1. Transaction Record: Records of all transactions, domestic or international, shall be maintained for at least ten years after the date of completion of the transaction and should include all necessary information to allow for the exact reconstruction of the transaction (including receiver information, amount, currency, etc.).
2. Account Records: KYC information collected as a part of account opening and updates shall also be maintained for at least ten years after the date of account closing. This shall also include customer profiles or risk levels generated during the course of the relationship with the customer.
3. Transaction Reports: Any STRs, CTRs or other reports recorded by the bank must be retained by the bank for at least ten years after the date of filing. All the documents, office records and memorandum pertaining to the transactions, purpose thereof and findings and notes on the same at the branch or bank level must also be retained.
4. Training and Education: All records of training conducted in the areas of KYC, AML and CFT shall be retained for a period of ten years from the completion of the training session and shall also include a list of attendees and their designation and the date and location of the training programme.
All the identification and transaction records must be maintained in a manner to be available to competent authorities, bank officials or audit teams on request.
14.2 Information Sharing, Legal Process and Other Matters
14.2.1 Principal Officer As per the definition of the RBI, the PO is responsible for sharing all the information with third parties such as enforcement agencies, banks and other institutions. The officer will act as the designated compliance officer for the Bank and will liaison with all regulatory authorities as described in Section 4.2.4.
14.2.2 Sharing Process The information sharing process between the Bank and other authorities shall be conducted in the following manner:
− The PO will be contacted by bank authorities, regulatory or law enforcement officials for a request for information sharing. The PO can share customer
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information with agencies or officers of agencies listed in Appendix 1, Chapter 13
− Once a request is received, all pertinent information is logged and the case file is also copied to the legal team at the bank.
− The PO is required to review the requests to determine its validity. In case where the Officer decides to deny the information sharing request, a copy of the decision and documents in support of it must be forwarded to Senior Management.
− A request for information sharing regarding an account or transaction could potentially lead to a Suspicious Activity Report being filed by the PO if the Officer independently corroborates the account to be containing information and transactions that could be deemed suspicious in nature.
− The regulatory authorities could periodically provide the Bank with a list of names of individuals/entities to be matched against their customers. If the particulars of a customer at the Bank match the details provided in the list, the Bank must notify the Joint Secretary, Ministry of Home affairs along with the UAPA Nodal Officer, the regulatory authorities and the FIU-IND. Internally details of matches should go into the KYC file of the customer as well as be forward to the Senior Management. Regulations require that once identified, these individuals or entities must be prevented from conducting financial transactions and all of their transactions, actual or attempted, must be covered in an STR19.
− In the case where the PO accepts the request for information sharing from a regulatory authority, the name of the account holder could be entered into the Bank’s internal watch list.
− In addition, the PO will process all the requests from the regulatory agencies to freeze, seize or attach funds and other financial assets held by, on behalf of or at the direction of individuals or entities that are suspected of money laundering and terrorist financing related activities.
19 Procedure for implementation of Section 51A of the Unlawful Activities (Prevention) Act, 1967 File no. 17015/10/2002-IS-VI
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15 Training and Education
15.1 Customer Education
Implementation of a KYC programme requires banks to ask for additional information that previously would have never been asked for. The customer could question the motive and the purpose of collecting this additional information. It is advised that the bank create specific literature, pamphlets, brochures, etc. to educate the customer regarding the need and the objectives of a KYC, AML and CFT programme. These brochures must contain information on:
− Purpose of the information collected being to meet guidelines from regulatory authorities such as the RBI.
− Information collected for KYC purposes must be differentiated from the information required for other purposes such as marketing with the KYC related information being clearly marked as mandatory.
15.2 Training
It is advised that all employees undergo a training programme tailored to their respective job profiles:
1. CROs: The CROs perform a majority of the customer interaction and so are required to be very familiar with the policies and procedures and be able to justify the reasons for the same. They will need to educate the customers and field questions or queries the customer might have. As they also serve as the de-facto account opening officers, they will also be required to undergo training for the systems put in place by the Bank for KYC, AML and CFT compliance.
2. Audit teams: The audit teams will be required to have an in-depth understanding of the policies and procedures put in place and the systems used for their implementation so that they can perform an effective audit of the compliance of the bank.
3. Principal Officers and Senior Management: These officials will primarily be concerned with the policies and procedures as they will be responsible for the creation and updates to the same. In addition, the PO will be required to understand the systems put in place to sign off on exceptions or evaluate any exceptions.
4. Other staff: The general staff at the bank will be required to understand the policies and procedures so as to correctly obtain customer information and documentation required and meeting compliance requirements.
Records of employees attending training must be maintained and any employee’s failure to undergo new employee or annual training must be recorded.
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15.3 KYC for Existing and New Employees
As a part of the hiring process the Bank will require any new employee to undergo the KYC procedure for an individual i.e. submit identity and address proof. It will be the responsibility of the Human Resources department at the Bank to ensure that the documentation submitted by the staff member is updated with time as per KYC, AML and CFT norms.
It is required that all new employees undergo KYC, AML and CFT training within the first three months of joining.
15.4 Training formats
The training for AML and KYC policies and procedures will be available to the employees in the following formats:
1. Circulars distributed: Circulars distributed by government agencies such as
NABARD, RBI and FIU-IND should be sent across to all concerned bank officials with any changes in policy and procedure highlighted and notes on customizing the same to the Bank.
2. Classroom training: Classroom teaching will cover the laws and regulations related to KYC, AML and CFT as well as the bank’s policies and procedures on the same. Any conferences or seminars attended by the staff shall fall under this category.
3. Computer based training: Computer based training shall be primarily used as a tool to test the knowledge of the officers that have undergone training.
4. On-the-Job training: All staff members will receive on-the-job training in addition to the formal training sessions described above.
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Annexure A: Guidelines on Performing Background Checks using Google The Google search engine shall be used by the officers of the Bank to perform background and adverse information checks on new and existing customers. In order to obtain the desired results the search process must be performed using the following steps: 1. Access the Google website
The Google website can be accessed by typing on the web browser: http://www.google.com Once the page is loaded, the user is presented with the default Google homepage as shown below:
2. Perform the search
To search for an individual or entity, type the customer name within quotation marks. Ensure that the quotation marks enclose the name of the customer. If the desired result of the query is to provide adverse information, add the following string as is after entering the name of the customer: Scam OR Investigation OR Fraud OR Criminal OR Terrorism OR Regulatory OR Fine OR Laundering OR Penalty OR Jail A search for adverse information for the entity XYZ Corp needs to be entered as shown below:
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For each alias of the customer, a separate search must then be performed by replacing the old name with the alias.
3. Results of search As a result of the search, one of the two following screens will be displayed:
1) No search results The screenshot below displays the Google result for a search for XYZUW Corp which does not yield any results.
In the case of no results for the customer name or any of the aliases, the background search will be ended with the search and the results logged.
2) Search results found
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In the case where results are found, further parsing and validation of the results will be required and should be performed by clicking on the Advanced Search link of the page as shown:
4. Parsing and validating the results The results obtained must then be parsed so that they are relevant to the criteria of the Bank criteria and refer to customer in question. It is recommended that the validation of customer identity be performed at least across the following four parameters:
1) Match granularity: The name of the individual or entity must exactly match the name being searched or one of the aliases. Failing this criterion no result should be considered a match.
2) Location: The information found should place the individual or entity in the same country as in the Bank records.
3) Content: The information published must pertain to an actual crime in the area of money laundering and terrorist financing committed by the customer. It is recommended that instead of looking for isolated incidents, the officer performing the screening look for a pattern of ongoing or recent illegal activities.
4) Age of information: It is recommended that the information be screened on the basis of the date of publishing and only three years from the current date be considered.
Beyond these, the officer performing the search is free to use any other additional criteria as seen fit with the Bank’s policy. The Advanced Search link on the Google webpage contains additional parameters that can assist with the parsing as shown:
Click on Advanced Search for tools to assist in parsing
lt
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Search by Date
Search by Location
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Annexure B: Letter to Individual Customers Regarding KYC Compliance The following is the sample letter written to individual customers requesting for the update of KYC information on file: Branch Manager, Branch name or number State Cooperative Bank Address 1 Address 2 City, State Date: DD/MM/YYYY Subject: Compliance required to meet RBI Guidelines on Know Your Customer Norms Dear Sir or Madam, The Reserve Bank of India guidelines on Know Your Customer (KYC) Norms requires us to perform periodic updates on the identity and address proof of account holders. We regret to inform you that as per our records your account is not compliant with the current regulations in place. We request you to provide us the documents listed below along with the completed KYC compliance forms enclosed with this letter on or before DD/MM/YYYY at a bank working day during the regular office hours. We shall retain a copy of the documents for our records and return the originals immediately after. Please note that if the documentation is not received within 30 days of the date of letter, the regulations require us to restrict operations on your account leading up to the closure of the account for non-compliance. 1) Documents accepted as identity and address proof
Documents Accepted as Proof of Identity
(Any one)
Documents accepted as Address Proof
(Any one)
Passport Passport
PAN Identity Card Voter ID
Driving License Driving License
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NREGA Job Card Ration card
Aadhaar card Depository Account Statements
Government Department Identity card Letter from MP/MLA/MC/GZ Officer attesting to address
Voter Identity Card Bank Account Statement (six months from date of submission)
NREGA Job Card Bank Passbook
Govt. Department Identity Employer certificate (six months from account opening)
Aadhaar card Property Tax Assessment Order
Social Security Card Income Tax Return
Letter from MP/MLA/MC/GZ Officer including a notarized photograph
Any other id containing address issued by Govt.
Residential Permit issued by state police
Water Bill (six months from date of submission)
Gas Bill (six months from date of submission)
Any documents that are currently expired will not be acceptable for KYC purposes. If you have submitted your documents after DD/MM/YYYY, you are not required to submit them again. We trust you will treat the matter of KYC Compliance as most urgent and thank you for your continued support of our banking establishment. Yours faithfully, Name Designation
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Annexure C: Schedule of Offences As per 2(1)(y) of the Prevention of Money Laundering Act, 2002, Scheduled offence means
• The offences specified under Part A of the Schedule, or • The offences specified under Part B of the Schedule if the total value involved in
such offences is thirty lakh Rupees or more, or • The offences specified under Part C of the Schedule.
The Schedule to the Prevention of Money Laundering Act, 2002 lists all such offences. Offences to Part A of the Schedule Paragraph 1 - The Indian Penal Code, 1860 Section Description of Offence
121 Waging, or attempting to wage war or abetting waging of war, against the Government of India.
121A Conspiracy to commit offences punishable by section 121 against the State. 489A Counterfeiting currency notes or bank notes. 489B Using as genuine, forged or counterfeit currency notes or bank notes
Paragraph 2 - The Narcotic Drugs and Psychotropic Substances Act, 1985 Section Description of Offence 15 Contravention in relation to poppy straw. 16 Contravention in relation to coca plant and coca leaves. 17 Contravention in relation to prepared opium. 18 Contravention in relation to opium poppy and opium. 19 Embezzlement of opium by cultivator. 20 Contravention in relation to cannabis plant and cannabis. 21 Contravention in relation to manufactured drugs and preparations
22 Contravention in relation to psychotropic substances. 23 Illegal import into India, export from India or transhipment of narcotic drugs and
psychotropic substances 24 External dealings in narcotic drugs and psychotropic substances in contravention of
section 12 of the Narcotics Drugs and Psychotropic Substances Act, 1985. 25A Contravention of orders made under section 9A of the Narcotic Drugs and Psychotropic
Substances Act, 1985 27A Financing illicit traffic and harbouring offenders. 29 Abetment and criminal conspiracy.
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Paragraph 3 - The Explosive Substances Act, 1908 Section Description of Offence 3 Causing explosion likely to endanger life or property. 4 Attempt to cause explosion, or for making or keeping explosives with intent to endanger
life or property. 5 Making or possessing explosives under suspicious circumstances.
Paragraph 4 - The Unlawful Activities (Prevention) Act, 1967
Section Description of Offence 10 read with section 3 Penalty for being member of an unlawful association, etc. 11 read with sections 3, 7
Penalty for dealing with funds of an unlawful association.
13 read with section 3 Punishment for unlawful activities. 16 read with section 15 Punishment for terrorist act. 16A Punishment for making demands of radioactive substances, nuclear
devices, etc. 17 Punishment for raising fund for terrorist act. 18 Punishment for conspiracy, etc. 18A Punishment for organising of terrorist camps. 18B Punishment for recruiting of any person or persons for terrorist act. 19 Punishment for harbouring, etc. 20 Punishment for being member of terrorist gang or organization. 21 Punishment for holding proceeds of terrorism. 38 Offence relating to membership of a terrorist organization. 39 Offence relating to support given to a terrorist organization.
Offences to Part B of the Schedule Paragraph 1 - The Indian Penal Code, 1860 Section Description of Offence 120 B Criminal conspiracy. 255 Counterfeiting Government stamp. 257 Making or selling instrument for counterfeiting Government stamp. 258 Sale of counterfeiting Government stamp. 259 Having possession of counterfeit Government stamp. 260 Using as genuine a Government stamp known to be counterfeit. 302 Murder. 304 Punishment for culpable homicide not amounting to murder. 307 Attempt to murder. 308 Attempt to commit culpable homicide.
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Section Description of Offence 327 Voluntarily causing hurt to extort property, or to constrain to an illegal act. 329 Voluntarily causing grievous hurt to extort property, or to constrain to an illegal act. 364A Kidnapping for ransom, etc. 384 to 389
Offences relating to extortion
392 to 402
Offences relating to robbery and dacoity.
411 Dishonestly receiving stolen property. 412 Dishonestly receiving property stolen in the commission of a dacoity. 413 Habitually dealing in stolen property. 414 Assisting in concealment of stolen property. 417 Punishment for cheating. 418 Cheating with knowledge that wrongful loss may ensure to person whose interest
offender is bound to protect. 419 Punishment for cheating by personation. 420 Cheating and dishonesty inducing delivery of properties. 421 Dishonest or fraudulent removal or concealment of property to prevent distribution
among creditors. 422 Dishonestly or fraudulently preventing debt being available for creditors. 423 Dishonest or fraudulent execution of deed of transfer containing false statement of
consideration. 424 Dishonest or fraudulent removal or concealment of property. 467 Forgery of a valuable security, will, etc. 471 Using as genuine a forged document or electronic record. 472 and 473
Making or possessing counterfeit seal, etc. with intent to commit forgery.
475 and 476
Counterfeiting device or mark.
481 Using a false property mark. 482 Punishment for using false property mark. 483 Counterfeiting a property mark used by another. 484 Counterfeiting a mark used by a public servant. 485 Making or possession of any instrument for counterfeiting a property mark. 486 Selling goods marked with a counterfeit property mark. 487 Making a false mark upon any receptacle containing goods. 488 Punishment for making use of false mark.;
Paragraph 2 - The Arms Act, 1959 Section Description of Offence 25 To manufacture, sell, transfer, convert, repair or test or prove or expose or offer for sale
or transfer or have in his possession for sale, transfer, conversion, repair, test or proof, any arms or ammunition in contravention of section 5 etc.
26 To do any act in contravention of any provisions of section 3, 4, 10 or 12 of the Arms Act, 1959 in such manner as specified in sub-section (1) of section 26 of the said Act etc.
27 Use of arms or ammunitions in contravention of section 5 or use of any arms or ammunition in contravention of section 7 of the Arms Act, 1959.
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Section Description of Offence 28 Use and possession of fire arms or imitation fire arms in certain cases. 29 Knowingly purchasing arms from unlicensed person or for delivering arms, etc., to
person not entitled to possess the same. 30 Contravention of any condition of a licence or any provisions of the Arms Act, 1959 or
any rule made there under.
Paragraph 3 - The Wild Life (Protection) Act, 1972
Section Description of Offence 51 read with section 9
Hunting of wild animals
51 read with section 17A
Contravention of provisions of section 17A relating to prohibition of picking, uprooting, etc., of specified plants.
51 read with section 39
Contravention of provisions of section 39 relating to wild animals, etc., to be Government property.
51 read with section 44
Contravention of provisions of section 44 relating to dealings in trophy and animal articles without licence prohibited.
51 read with section 48
Contravention of provisions of section 48 relating to purchase of animal, etc., by licensee.
51 read with section 49B
Contravention of provisions of section 49B relating to prohibition of dealings in trophies, animal articles etc., derived from scheduled animals.
Paragraph 4 - The Immoral Traffic (Prevention) Act, 1956 Section Description of Offence 5 Procuring, inducing or taking person for the sake of prostitution. 6 Detaining a person in premises where prostitution is carried on. 8 Seducing or soliciting for purpose of prostitution. 9 Seduction of a person in custody.
Paragraph 5 - The Prevention Of Corruption Act, 1988 Section Description of Offence 7 Public servant taking gratification other than legal remuneration in respect of an official
act. 8 Taking gratification, in order, by corrupt or illegal means, to influence public servant. 9 Taking gratification, for exercise of personal influence with public servant.
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10 Abetment by public servant of offences defined in section 8 or section 9 of the Prevention of Corruption Act, 1988.
13 Criminal misconduct by a public servant.
Paragraph 6 - The Explosives Act, 1884
Section Description of Offence 9-B Punishment for certain offences. 9-C Offences by Companies. 25 read with section 3
Contravention of export trade in antiquities and art treasure.
28 Offences by Companies. 25 read with section 3
Contravention of export trade in antiquities and art treasure.
Paragraph 7 - The Antiquities and Arts Treasures Act, 1972
Section Description of Offence 25 read with section 3
Contravention of export trade in antiquities and art treasure.
28 Offences by Companies.
Paragraph 8 - The Securities and Exchange Board Of India Act, 1992
Section Description of Offence 12A read with section 24
Prohibition of manipulative and deceptive devices, insider trading and substantial acquisition of securities or control.
Paragraph 9 - The Customs Act, 1962 Section Description of Offence 135 Evasion of duty or prohibitions.
Paragraph 10 - The Bonded Labour System (Abolition) Act, 1976 Section Description of Offence
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16 Punishment for enforcement of bonded labour. 18 Punishment for extracting bonded labour under the bonded labour system. 20 Abetment to be an offence.
Paragraph 11 - The Child Labour (Prohibition and Regulation) Act, 1986 Section Description of Offence 14 Punishment for employment of any child to work in contravention of the provisions of
section 3.
Paragraph 12 - The Transplantation Of Human Organs Act, 1994 Section Description of Offence 18 Punishment for removal of human organ without authority. 19 Punishment for commercial dealings in human organs. 20 Punishment for contravention of any other provision of this Act.
Paragraph 13 - The Juvenile Justice (Care and Protection Of Children) Act,2000 Section Description of Offence 23 Punishment of cruelty to juvenile or child. 24 Employment of juvenile or child for begging. 25 Penalty for giving intoxicating liquor or narcotic drug or psychotropic substance to
juvenile or child. 26 Exploitation of juvenile or child employee.
Paragraph 14 - The Emigration Act,1983 Section Description of Offence 24 Offences and penalties.
Paragraph 15 - The Passport Act,1967 Section Description of Offence 12 Offences and penalties.
Paragraph 16 - The Foreigners Act,1946
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Section Description of Offence 14 Penalty for contravention of provisions of the Act, etc. 14B Penalty for using forged passport. 14C Penalty for abetment.
Paragraph 17 - The Copyright Act,1957 Section Description of Offence 63 Offence of infringement of copyright or other rights conferred by this Act. 63A Enhanced penalty on second and subsequent convictions. 63B Knowing use of infringing copy of computer programme. 68A Penalty for contravention of section 52A.
Paragraph 18 - The Trade Marks Act,1999 Section Description of Offence 103 Penalty for applying false trademarks, trade description, etc.
104 Penalty for selling goods or providing services to which false trademark or false trade description is applied.
105 Enhanced penalty on second or subsequent conviction. 107 Penalty for falsely representing a trade mark as registered. 120 Punishment of abetment in India of acts done out of India.
Paragraph 19 - The Information Technology Act, 2000 Section Description of Offence 72 Penalty for breach of confidentiality and privacy. 75 Act to apply for offence or contravention committed outside India.
Paragraph 20 - The Biological Diversity Act,2002
Section Description of Offence 55 read with 6 Penalties for contravention of section 6, etc.
Paragraph 21 - The Protection Of Plant Varieties and Farmers’ Rights Act,2001
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Section Description of Offence
70 read with 68 Penalty for applying false denomination, etc.
71 read with 68 Penalty for selling varieties to which false denomination is applied.
72 read with 68 Penalty for falsely representing a variety as registered.
73 read with 68 Penalty for subsequent offence.
Paragraph 22 - The Environment Protection Act,1986
Section Description of Offence 15 read with 7 Penalty for discharging environmental pollutants. 15 read with 8 Penalty for handling hazardous substance.
Paragraph 23 - The Water (Prevention and Control Of Pollution) Act,1974 Section Description of Offence 41(2) Penalty for pollution of stream or well. 43 Penalty for contravention of provisions of section 24.
Paragraph 24 - The Air (Prevention And Control Of Pollution) Act,1981 Section Description of Offence 37 Failure to comply with the provisions for operating industrial plant.
Paragraph 25 - The Suppression of Unlawful Acts Against Safety Of Maritime Navigation and Fixed Platforms on Continental Shelf Act, 2002 Section Description of Offence 3 Offences against ship, fixed platform, cargo of a ship, maritime navigational facilities,
etc.
Offences to Part C of the Schedule An offence which is the offence of cross border implications and which is specified in,-
(1) Part-A; or
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(2) Part-B without any threshold; or the offences against property under chapter XVII of the Indian Penal Code.
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Annexure D: Manual Format for Filing Cash Transaction Report
The CTR in manual form consists of the following four (4) forms:
1. Summary of Cash Transaction Reports (Contains summary of enclosed CTRs) 2. CTR Form (Details of bank account and cash transactions) 3. Annexure C.1 – Individual Detail Sheet (Identification details of individual) 4. Annexure C.2 – Legal Person/Entity Detail Sheet (Identification details of legal
person /entity)
Summary of Cash Transaction Reports PART 1: DETAILS OF THE SUMMARY
1.1 Month and year of summary 1.2 Is this a supplementary to an earlier summary? NO YES (Tick as
applicable) 1.3 Date of sending original summary if this is a supplemental report. Separate summary should be furnished for each month. Supplementary summary is required to be submitted where a summary for the month has already been submitted. In case of supplementary summary, only additional CTRs need to be enclosed.
PART 2: DETAILS OF PRINCIPAL OFFICER
2.1 Name of Bank 2.2 BSR code 2.3 ID allotted by FIU-IND ID allotted by FIU-IND may be left blank till the same is communicated by FIU-IND. 2.4 Category of bank “D” for Co-operative Bank 2.5 Name of principal officer Principal Officer is the officer designated by the Bank under PMLA, 2002 2.6 Designation 2.7 Address (No., Building) 2.8 Street/Road 2.9 Locality 2.10 City/Town, District 2.11 State, Country 2.12 Pin code 2.13 Tel (with STD code) 2.14 Fax 2.15 E-mail
PART 3: STATISTICS FOR THE MONTH
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3.1 Number of total branches 3.2 Number of branches which have sent reports (including NIL report) 3.3 Number of branches which have submitted CTRs (excluding NIL report) 3.4 Number of original CTRs (bank accounts) enclosed with this summary
Number of original CTRs (bank accounts) should match with the original CTRs enclosed with this summary
3.5 Number of replacement CTRs (bank accounts) enclosed with this summary Number of replacement CTRs (bank accounts) should match with the replacement CTRs enclosed with this summary. All replacement CTRs received from branches should be enclosed at the end of the reports for the month.
3.6 Total original CTRs (bank accounts) reported for the month (cumulative) This figure should be the cumulative total of 3.4. above for the all the summaries of the month
CTR Form PART 1: DETAILS OF REPORT
1.4 Date of sending report Date of sending report is the date on which the principal officer sends the report to Director (FIU-IND).
1.2 Is this a replacement to an earlier report? NO YES (Tick as applicable) 1.3 Date of sending original report if this is a replacement report. Replacement report is a report submitted in replacement of an earlier CTR. When a replacement report is submitted, date of submitting original CTR may be mentioned and the complete CTR has to be submitted again.
PART 2: DETAILS OF REPORTING BRANCH
2.1 Name of Bank 2.2 BSR code 2.3 ID allotted by FIU-IND ID allotted by FIU-IND may be left blank till the same is communicated by FIU-IND. 2.4 Address (No., Building) 2.5 Street/Road 2.6 Locality 2.7 City/Town, District 2.8 State, Country 2.9 Pin code 2.10 Tel (with STD code) 2.11 Fax 2.12 E-mail
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PART 3: DETAILS OF BANK ACCOUNT
A separate CTR is required to be filed for each reported bank account
3.1 Account Number 3.2 Type of Account
A. Savings Account B. Current Account C. Cash Credit Account
3.3 Type of Account Holder A. Individual B. Legal Person/Entity C. Central/ State Government D. Central/ State Government owned undertaking E. Other
3.4 Date of Account Opening DD-MM-YYYY
PART 4: LIST OF ACCOUNT HOLDERS List of Account Holders Name of Individual/Legal Person/Entity Customer ID/number Annexure Mention A for Individual and B for Legal Person/Entity PART 5: LIST OF OTHER RELATED PERSONS List of Related Persons (other than mentioned above) Name of Individual/Legal Person/Entity Customer ID/number Relation Annexure Mention B for Authorised Signatory, D for Introducer. E for Guarantor, Z for others Mention A for Individuals, B for Legal Person/Entity
PART 6: DETAILS OF TRANSACTIONS Transaction Details
Date of Transaction Debit (D for Debit and C for Credit) Amount in Rupees Remarks
PART 7: CUMULATIVE TOTALS Cumulative Totals
Total debits in the bank account in the financial year Total credits in the bank account in the financial year (Total of entries in the bank account from 1st April of the financial year till the date of reporting)
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Annexure C.1 – Individual Detail Sheet
Use separate for each individual. Kindly fill in CAPITAL.
1 Name of bank (with branch) 2 BSR code 3 Annexure enclosed with (Tick as applicable)
A. Cash Transaction Report B. Counterfeit Currency Report C. Suspicious Transaction Report
4 Full name of individual 5 Customer ID/number (If allotted ) 6 Name of father/spouse 7 Occupation 8 Date of birth 9 Sex (M/F) 10 Nationality 11 Identification document
Passport Election ID card PAN card ID card Driving license Account introducer Other (Specify)
12 Identification number (Number mentioned in the identification document) 13 Issuing authority (Authority which had issued the document) 14 Place of Issue (Place where the document was issued) 15 PAN 16 Communication address: No., Building 17 Street/Road 18 Locality 19 City/Town, District 20 State, Country 21 Pin code 22 Tel (with STD code) 23 Mobile number 24 E-mail 25 Name of Organisation/Employer 26 Second Address (Permanent address/Place of work): No., Building 27 Street/Road 28 Locality 29 City/Town, District 30 State, Country 31 Pin code 32 Tel (with STD code)
Annexure C.2 – Legal Person/Entity Detail Sheet
147
Use separate annexure for each individual. Kindly fill in CAPITAL.
1 Name of bank (with branch) 2 BSR code 3 Annexure enclosed with (Tick as applicable)
A. Cash Transaction Report B. Counterfeit Currency Report C. Suspicious Transaction Report
4 Name of legal person/entity 5 Customer ID/number (If allotted ) 6 Nature of business 7 Date of incorporation 8 Type of Constitution
Sole Proprietorship Partnership Firm HUF Private Limited Company Public Limited Company Society Association Trust Liquidator LLP Others (Specify) Not Categorised
9 Registration number (Number mentioned in the deed/document) 10 Registering Authority (Authority which had registered the deed/document) 11 Place of Registration (Place where the deed/document was registered) 12 PAN 13 Communication address : No., Building 14 Street/Road 15 Locality 16 City/Town, District 17 State, Country 18 Pin code 19 Tel (with STD code) 20 Fax (with STD code) 21 E-mail 22 List of directors /partners / members and other related persons
Name of Individual/Legal Person/Entity Customer ID/number Relation Annexure
Annexure E: Manual Format for Filing Suspicious Transaction Report The STR in manual form consists of the following four (4) forms:
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1. STR Form (Details of suspicious transactions) 2. Annexure D.1 – Individual Detail Sheet (Identification details of individual) 3. Annexure D.2 – Legal Person/Entity Detail Sheet (Identification details of legal
person /entity) 4. Annexure D.3 – Account Detail Sheet (Details of bank account and transactions)
STR Form
PART 1: DETAILS OF REPORT
3.5 Date of sending report Date of sending report is the date on which the principal officer sends the report to Director (FIU-IND).
1.2 Is this a replacement to an earlier report? NO YES (Tick as applicable) 1.3 Date of sending original report if this is a replacement report. Replacement report is a report submitted in replacement of an earlier STR. When a replacement report is submitted, date of submitting original STR may be mentioned and the complete STR has to be submitted again.
PART 2: DETAILS OF PRINCIPAL OFFICER
2.1 Name of Bank 2.2 BSR code 2.3 ID allotted by FIU-IND ID allotted by FIU-IND may be left blank till the same is communicated by FIU-IND. 2.4 Category of bank “D” for Co-operative Bank 2.5 Name of principal officer Principal Officer is the officer designated by the Bank under PMLA, 2002 2.6 Designation 2.7 Address (No., Building) 2.8 Street/Road 2.9 Locality 2.10 City/Town, District 2.11 State, Country 2.12 Pin code 2.13 Tel (with STD code) 2.14 Fax 2.15 E-mail
PART 3: DETAILS OF REPORTING BRANCH / LOCATION
Particulars of the branch/location in which the reported accounts are maintained should be submitted in this part.
3.1 Name of Branch/Location
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3.2 BSR code 3.3 ID allotted by FIU-IND 3.4 Address (No., Building) 3.5 Street/Road 3.6 Locality 3.7 City/Town, District 3.8 State, Country 3.9 Pin code 3.10 Tel (with STD code) 3.11 Fax 3.12 E-mail PART 4: LIST OF INDIVIDUALS LINKED TO TRANSACTIONS
Customer ID/number may be given if allotted by bank. Enclose a separate Annexure D.1 for each individual.
Name of Individual Customer ID/number (if allotted) Annexure D.1 #
PART 5: LIST OF LEGAL PERSONS/ENTITIES LINKED TO TRANSACTIONS
Customer ID/number may be given if allotted by bank. Enclose a separate Annexure D.2 for each legal person/entity. Include the details about individuals (Director/Partner/Member etc.) related to the legal person/entity
Name of legal person/entity Customer ID/number (if allotted) Annexure D.2 #
PART 6: LIST OF ACCOUNTS LINKED TO TRANSACTIONS
Enclose a separate Annexure D.3 for each account
Account Number Name of First Account Holder Annexure D.3 #
PART 7: DETAILS OF SUSPICIOUS TRANSACTION
7.1 Reasons for suspicion (Tick as many as applicable. Multiple selections are possible).
A Identity of client B Background of client C Multiple accounts D Activity in account E Nature of transaction F Value of transaction
Z Other reason (specify)
7.2 Grounds of Suspicion (Mention summary of suspicion and sequence of events)
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Annexure D.1 – Individual Detail Sheet
Use separate annexure for each individual. Kindly fill in CAPITAL.
1 Name of bank (with branch) 2 BSR code 3 Annexure enclosed with (Tick a as applicable)
D. Cash Transaction Report E. Counterfeit Currency Report F. Suspicious Transaction Report
4 Full name of individual 5 Customer ID/number (If allotted ) 6 Name of father/spouse 7 Occupation 8 Date of birth 9 Sex (M/F) 10 Nationality 11 Identification document
Passport Election ID card PAN card ID card Driving license Account introducer Other (Specify)
12 Identification number (Number mentioned in the identification document) 13 Issuing authority (Authority which had issued the document) 14 Place of Issue (Place where the document was issued) 15 PAN 16 Communication address : No., Building 17 Street/Road 18 Locality 19 City/Town, District 20 State, Country 21 Pin code 22 Tel (with STD code) 23 Mobile number 24 E-mail 25 Name of Organisation/Employer 26 Second Address (Permanent address/Place of work): No., Building 27 Street/Road 28 Locality 29 City/Town, District 30 State, Country 31 Pin code 32 Tel (with STD code)
Annexure D.2 – Legal Person/Entity Detail Sheet
151
Use separate annexure for each individual. Kindly fill in CAPITAL.
23 Name of bank (with branch) 24 BSR code 25 Annexure enclosed with (Tick a as applicable)
D. Cash Transaction Report E. Counterfeit Currency Report F. Suspicious Transaction Report
26 Name of legal person/entity 27 Customer ID/number (If allotted ) 28 Nature of business 29 Date of incorporation 30 Type of Constitution
Sole Proprietorship Partnership Firm HUF Private Limited Company Public Limited Company Society Association Trust Liquidator LLP Others (Specify) Not Categorised
31 Registration number (Number mentioned in the deed/document) 32 Registering Authority (Authority which had registered the deed/document) 33 Place of Registration (Place where the deed/document was registered) 34 PAN 35 Communication address : No., Building 36 Street/Road 37 Locality 38 City/Town, District 39 State, Country 40 Pin code 41 Tel (with STD code) 42 Fax (with STD code) 43 E-mail 44 List of directors /partners / members and other related persons
Name of Individual/Legal Person/Entity Customer ID/number Relation Annexure
Annexure D.3 – Account Detail Sheet
Use separate annexure for each individual. Kindly fill in CAPITAL.
1 Name of bank (with branch) 2 BSR code
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3 Annexure enclosed with (Tick a as applicable) A. Cash Transaction Report B. Counterfeit Currency Report C. Suspicious Transaction Report
4 Account Number 5 Type of Account
D. Savings Account E. Current Account F. Cash Credit Account
6 Type of Account Holder F. Individual G. Legal Person/Entity H. Central/ State Government I. Central/ State Government owned undertaking J. Other
7 Date of Account Opening DD-MM-YYYY 8 List of Account Holders
Name of Individual/Legal Person/Entity Customer ID/number Annexure Mention A for Individual and B for Legal Person/Entity
9 List of Related Persons (other than mentioned above) Name of Individual/Legal Person/Entity Customer ID/number Relation Annexure Mention B for Authorised Signatory, D for Introducer. E for Guarantor, Z for others
10 Transaction Details Date of Transaction Mode (A- Cheque, B- Transfer within Branch, C- Cash, D- Demand Draft, E-Electronic Funds Transfer, F- Travellers Cheque, Z-Other (Specify)) Debit (D for Debit and C for Credit) Amount in Rupees Remarks
11 Cumulative Totals Total debits in the bank account in the financial year Total credits in the bank account in the financial year (Total of entries in the bank account from 1st April of the financial year till the date of reporting)
12 Write up about transactions (transactions mentioned in 10 above)
Annexure F: Manual Format for Filing of Counterfeit Currency Transaction Report
The CCR in manual form consists of the following two (2) forms:
1. Summary of Counterfeit Currency Reports (Contains summary of enclosed CCRs) 2. CCR Form (Details of branch and counterfeit currency)
Summary of Counterfeit Currency Reports
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PART 1: DETAILS OF THE PRINCIPAL OFFICER
1.1 Name of Bank 1.2 Branch Reference Number 1.3 ID allotted by FIU-IND ID allotted by FIU-IND may be left blank till the same is communicated by FIU-IND. 1.4 Category of bank “D” for Co-operative Bank 1.5 Name of principal officer Principal Officer is the officer designated by the Bank under PMLA, 2002 1.6 Designation 1.7 Address (No., Building) 1.8 Street/Road 1.9 Locality 1.10 City/Town, District 1.11 State, Country 1.12 Pin code 1.13 Tel (with STD code) 1.14 Fax 1.15 E-mail
PART 2: STATISTICS
2.1 Number of Counterfeit Currency Reports enclosed
2.2 Total Value of Counterfeit Currency Total Value of counterfeit currency detected in the enclosed reports. (Sum of
value is in 2.8 of each CCR).
CCR Form
Kindly fill in CAPITAL. Read the instructions before filling the form.
PART 1: DETAILS OF REPORTING BRANCH/LOCATION
1.1 Name of Entity 1.2 Name of Branch/Location 1.3 Branch Reference Number 1.4 ID allotted by FIU-IND 1.5 Address (No., Building) 1.6 Street/Road 1.7 Locality 1.8 City/Town, District 1.9 State, Country 1.10 Pin code 1.11 Tel (with STD code) 1.12 Fax
154
1.13 E-mail
PART 2: DETAILS OF COUNTERFEIT CURRENCY
This section contains the details of counterfeit currency. Total value of counterfeit currency should match with the total calculated value of Denomination X Number of pieces.
# Denomination Number of Pieces Value 2.1 1,000 2.2 500 2.3 100 2.4 50 2.5 20 2.6 10 2.7 5 2.8 Total value of Counterfeit Currency
PART 3: DETAILS OF DETECTION
1.14 Date of Cash Tendering 1.15 Total Cash Deposited 1.16 Date of Detection 1.17 Detected at
A Cash Counter B Branch Level C Currency Chest D RBI's CVPS Z Other
1.18 Whether local police station has been informed Yes No 1.19 Details of FIR (if available) 1.20 Additional Information, if any PART 4: DETAILS OF RELATED PERSONS 4.1 Name of Tendering Person 4.2 Name of Account Holder 4.3 Account / Card No.
Checklist for Customer Due Diligence
2
1 Customer Classification
In order to determine the appropriate information and documentation that must be collected, all the customers at the bank are classified into distinct constitution types and categories within them.
1.1 Constitution
The information required from the customer is based on the customer type of the account holder and is referred to as the constitution. The following constitution types are applicable to the Bank:
− Individuals: All accounts opened by individuals or groups acting in an individual capacity (e.g. Joint Accounts, Hindu Undivided Family) are present in this category.
− Business Entities: Accounts of specific corporate entities, separate and distinct from the individuals who finance it. − Financial Institutions: Institutions that provide financial services to its members or clients including private, public and co-operative
sector banks as well as non-banking institutions such as money-services businesses and chit funds. − Government, Government Agency or Entity: Any permanent or non-permanent organization in the machinery of the government
including departments, ministries and other types of public bodies. − Trust: Trusts are classified into two types - Public trusts that are generally formed for charitable and religious purposes and are not
intended for commercial activities while private trusts generate income for specified beneficiaries. − Non Profit Organizations: Non-profit organizations or charities can be registered as trusts, societies or a private limited non-profit
company under Section 25 of the Companies Act. These exist independently of the government, are self-governed, produce benefits for individuals or groups outside the membership of the organization and are prohibited from disbursing monetary residual to members. Religious organizations are set up primarily for religious purposes and must be registered with the Income Tax Department.
− Societies and Associations: A society or an association is an institution owned by its members in that the funds are raised from membership and are then used to provide common services to all the members of the organization.
3
Based on these definitions, a particular customer could fit into one or more constitutions listed above but will hold the same customer risk categorisation value from a KYC and AML compliance standpoint.
1.2 Categories
All the categories for the constitutions can be broadly grouped under individual and entity constitution types as listed below:
1.2.1 Individuals The constitution type individual consists of the following sub-categories:
Non-Resident Indian: A Non-Resident Indian (NRI) is an Indian citizen who resides out of India for employment, business or other reasons for an uncertain duration of stay. NRI accounts may provide for special tax and repatriation benefits due to the status of the account holder.
Foreign National: A foreign national is an individual not of Indian nationality but currently residing in the country for various purposes.
Persons of Indian Origin: A person of Indian origin is an individual who is not a citizen of India but has Indian ancestry and has obtained a valid PIO card.
Minor: A minor account is an account created and operated in the name of a minor (under the age of 18) and represented by a guardian or custodian. Upon the minor attaining majority, the right of the guardian to operate the account shall cease.
Staff: Account created and operated by current or past employees of the bank.
Hindu Undivided Family: The Hindu Undivided Family (HUF) is a joint family consisting of members descending from a common ancestor. A senior member is designated as the ‘Karta’ responsible for managing the account for the HUF.
Single: Any Indian citizen above the age of 18 and not falling under any of the categories listed above account is considered a single account holder.
4
Business Entities
Business Entities Proprietorship Private Limited Company Partnership Co-operative Public Limited Company Joint Hindu Family Business Limited Liability Partnership
Financial Institutions
Private Banks Public Sector Banks Regional Rural Banks State Co-operative Banks District Co-operative Banks Urban Co-operative Banks Money Service Businesses Non-Banking Financial Company
Societies & Associations
Registered Unregistered
Trusts
Public Private
Non Profit Organisations
Trust Society Section 25 Company Unregistered Entity
Joint: A joint account type is created in the combined name of all the depositors, each of whom acting in his or her own individual capacity. A joint account can be created between any number of Individual, Minor, Staff and NRI constitution types.
1.2.2 Entities Each constitution in the entity section consists of categories as listed below:
Government, Government Agency or Entity
State Government Central Government State Government Undertaking Government of India Undertaking Government Authorities, Autonomous & Regulatory Bodies Liquidator Local Bodies
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Due Diligence Checklist
Checklist 1 Constitution
Individual Category Non Resident Indian
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Full legal name − Date of birth − Address in India − Product type or account type applied for − Country of residence − Visa type for the country of residence
− Current residential address − Introducer information − Source of funds − Anticipated account activity
Documentary Verification Additional Documentary Verification − Obtain a copy of passport page containing photograph
to serve as photo identity
− Obtain a copy of passport page containing address to serve as address proof. If the address does not match address in India, proof can be provided by establishing relationship using the documents listed in the following section
− Obtain a copy of a valid visa granted for the current country of residence
− Obtain an additional photo identity document from list provided in the following section
− Obtain additional address proof document from list in the following section
6
Checklist 2 Constitution
Individual Category Foreign National
Basic Due Diligence Enhanced Due Diligence Required Information − Full legal name − Address in India − Nationality − Date of birth − Product type or account type applied for − Indian visa type − Information on the Indian employer (name, address
etc.). − PEP check
Additional Information − Address in home country − Introducer information − Source of funds − Anticipated account activity
Documentary Verification Additional Documentary Verification − Obtain a copy of passport pages containing valid Indian
visa and photograph. If the home address is displayed on the passport, obtain a copy of it
− Obtain a copy of the appointment letter along with an affidavit from the current employer verifying the address of the foreign national
− Obtain a copy of the employer’s PAN card or TIN Number
− Obtain a copy of another photo identity − Obtain a copy of another address proof
7
Checklist 3 Constitution
Individual Category Person of Indian Origin
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Full legal name − Address in India − Nationality − Date of birth − Product type or account type applied for − If applicable, Indian employer information − PEP check
− Address in home country − Introducer information − Source of funds − Anticipated account activity
Documentary Verification Additional Documentary Verification − Obtain a copy of the passport pages containing
photograph and address − Obtain a copy of the Person of Indian Origin card − If employed in India, obtain a copy of the appointment
letter along with an affidavit from the current employer verifying the address of the customer
− Obtain a copy of another photo identity − Obtain a copy of another address proof − If available, obtain a copy of the employer’s PAN card of TIN
number
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Checklist 4 Constitution
Individual Category Minor
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Full legal name − Date of birth of minor account holder − Full name of the guardian − Date of birth of guardian − Relationship of minor account holder with guardian − Address of the guardian − Product type or account type applied for
− Introducer information − Source of funds − Anticipated account activity
Documentary Verification Additional Documentary Verification − Obtain an affidavit from the guardian indicating the
relationship with the minor. Optionally, obtain a copy of one of the relationship establishment documents listed in the following section containing the name of the minor and the guardian and indicating a relationship between them.
− Obtain a copy of the KYC information (photo and address proof) of the guardian using the documents in the following section
− Obtain two copies of photo identity proof documents of the guardian from the Preferred Documents list in the following section
− Obtain two copies of address proof documents of the guardian from the Preferred Documents list in the following section
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Checklist 5 Constitution
Individual Category Staff
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Full legal name − Date of birth − Home address − Product type or account type applied for − Employee code or number
− For ex-staff, if employed, obtain current employer information
− Source of funds − Anticipated account activity
Documentary Verification Additional Documentary Verification − For ex-staff members, obtain a copy of one photo
identity document out of the listing in the following section except for the identity provided by the Bank
− For ex-staff members, obtain a copy of one address proof document out of the listing in the following section except for the identity provided by the Bank. In the case of address proof not being available, the account holder can provide the address proof using the KYC information of another individual and establishing the relationship using the documents listed in the following section
− For ex-staff members, obtain documentation certifying past employment with the Bank ( pay slip, letter of appointment, etc)
− Obtain two copies of photo identity proof documents from the Preferred Documents list in the following section
− Obtain two copies of address proof documents from the Preferred Documents list in the following section
10
Checklist 6 Constitution
Individual Category Hindu Undivided Family
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Full legal name of Karta − Date of birth − Home address − Product type or account type applied for
− Introducer information − Source of funds − Anticipated account activity
Documentary Verification Additional Documentary Verification − Obtain a letter from the designated Karta indicating the
account category as HUF and listing the names of members of the family
− Obtain complete KYC information of the Karta (photo and address proof) for account opening purposes using the documents list provided in the following section
− Obtain two copies of photo identity proof documents of the Karta from the Preferred Documents list in the following section
− Obtain two copies of address proof documents of the Karta from the Preferred Documents list in the following section
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Checklist 7 Constitution
Individual Category Regular
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Full legal name − Date of birth − Home address − Product type or account type applied for
− Introducer information − Employer information (name, address and industry sector) − Source of funds − Anticipated account activity
Documentary Verification Additional Documentary Verification − Obtain a copy of one photo identity document out of the
listing in the following section − Obtain a copy of one address proof document out of the
listing in the following section. In the case of address proof not being available, the client can indirectly provide proof via a combination of the relationship establishment documents as listed in the following section and the KYC (photo and address proof) of the individual establishing relationship with
− Obtain two copies of photo identity proof documents from the Preferred Documents list in the following section
− Obtain two copies of address proof documents from the Preferred Documents list in the following section
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Checklist 8 Constitution
Individual Category Joint
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Full legal name of all the account holders − Date of birth of all account holders − Home address of all the account holders − Product type or account type applied for − Relationship between account holders
− Obtain all the information for a high risk classification of each member of the joint account based on their respective category within the individual constitution
− Source of funds − Anticipated account activity
Documentary Verification Additional Documentary Verification − Obtain complete KYC documentation on all account
holders based on their category within the individual constitution
− Obtain all the documentation for a high risk classification of each member of the joint account based on their respective category within the individual constitution
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Checklist 9 Constitution
Business Entities
Category
Proprietorship
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Name of proprietorship − Address of proprietorship − Full legal name of the proprietor − Home address of the proprietor − Industry sector of proprietorship − Product type or account type applied for
− Products and services offered − Markets serviced (domestic/ international/ high risk
jurisdictions) − Purpose of account (vendor accounts, accounts receivable,
etc.) − Source of funds − Anticipated account activity
Documentary Verification Additional Documentary Verification − Obtain a letter of proprietorship to be completed by the
client − Obtain a copy of any two of the documents under Proof
of Proprietorship Documents listing in the following section
− Obtain KYC documentation of the proprietor (photo and address proof) from the following section for account opening purposes
− Copy of financials − Obtain two copies of photo identity proof documents of the
proprietor from the Preferred Documents list in the following section
− Obtain two copies of address proof documents of the proprietor from the Preferred Documents list in the following section
− Attach results of address validation through registered post. Optionally, perform a site visit to verify the address of the concern
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Checklist 10 Constitution
Business Entities
Category
Private Limited
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Name of the company − Principal place of business − Mailing address of the company − Telephone/Fax number − Industry sector of concern − Names and addresses of account operators and beneficial
owners − Product type or account type applied for
− Products and services offered − Markets serviced (domestic/ international/ high risk
jurisdictions) − Purpose of account (vendor accounts, accounts
receivable, etc.) − Source of funds − Anticipated account activity
Documentary Verification Additional Documentary Verification − Obtain a copy of the Certificate of Incorporation for the
entity − Obtain a copy of the Memorandum and Articles of
Association for the entity − If available, obtain a copy of the license for the line of
business of the entity or any other government registration document available for the entity
− Obtain a copy of the PAN card or TIN number of the entity − Obtain a copy of the board resolution listing the authorized
− Copy of financials or annual reports − Public information in standard industry guides,
periodicals, publications − Attach results of address validation through registered
post. Optionally, perform a site visit to verify the address of the concern
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signers for the account. Optionally, obtain a power of attorney or official document authorizing the individuals operating the account
− Obtain complete KYC documentation of all account operators based on their category within the individual constitution
Checklist 11 Constitution
Business Entities
Category
Cooperative
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Name of cooperative − Principal address of the cooperative − Industry sector of cooperative − Names and addresses of authorized account operators
and senior managers − Product type or account type applied for
− Anticipated account activity − Products and services offered − Markets serviced (domestic/ international/ high risk
jurisdictions) − Purpose of account (vendor accounts, accounts receivable,
etc.) − Source of funds
Documentary Verification Additional Documentary Verification − Obtain a copy of the registration documents for the
entity − Obtain a copy of the Byelaws of the cooperative − Obtain a copy of the board resolution listing the
authorized signers for the account. Optionally, obtain a power of attorney or official document authorizing the individuals operating the account
− Obtain complete KYC documentation of all account operators based on their category within the individual
− Copy of financials or annual reports − Public information in standard industry guides, periodicals,
publications − Attach results of address validation through registered post.
Optionally, perform a site visit to verify the address of the concern
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constitution
Checklist 12 Constitution
Business Entities
Category
Partnership
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Name of partnership − Office address of the partnership − Telephone/Fax number of the partnership − Names and addresses of all the partners − Product type or account type applied for − Industry sector of partnership
− Anticipated account activity − Products and services offered − Markets serviced (domestic/ international/ high risk
jurisdictions) − Purpose of account (vendor accounts, accounts receivable,
etc.) − Source of funds
Documentary Verification Additional Documentary Verification − Obtain a copy of the partnership deed signed by all the
partners − If available, obtain a copy of the license for the line of
business of the partnership. Or optionally if partnership is registered, obtain a copy of registration documents
− If available, obtain a copy of the PAN card or TIN number of the entity
− Copy of financials or annual reports − Attach results of address validation through registered post.
Optionally, perform a site visit to verify the address of the concern
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− Obtain a copy of the telephone bill (within 6 months of account opening date) in the name of the entity or the partners
− Obtain complete KYC documentation of all partners based on their category within the individual constitution
Checklist 13 Constitution
Business Entities
Category
Limited Liability Partnership
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Name of the entity − Office address of the entity − Telephone/Fax number of the entity − Names and addresses of all the partners and senior
managers − Product type or account type applied for − Industry sector of concern
− Anticipated account activity − Products and services offered − Markets serviced (domestic/ international/ high risk
jurisdictions) − Purpose of account (vendor accounts, accounts
receivable, etc.) − Source of funds
Documentary Verification Additional Documentary Verification − Obtain a copy of the partnership deed signed by all the
partners − If available, obtain a copy of the license for the line of
business of the partnership. Or optionally, obtain a copy of the registration documents
− Obtain a copy of the PAN card or TIN information of the entity − Optionally, obtain a power of attorney or legal document
− Copy of financials or annual reports − Public information in standard industry guides,
periodicals, publications − Attach results of address validation through registered
post. Optionally, perform a site visit to verify the address of the concern
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authorizing members of the partnership to operate the account
− If available, obtain a copy of the telephone bill (within 6 months of account opening) in the name of the entity
− Obtain complete KYC documentation of all partners based on their category within the individual constitution
Checklist 14 Constitution
Business Entities
Category
Public Limited
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Name of the company − Principal place of business − Mailing address of the company − Telephone/Fax number − Industry sector of concern − Names and addresses of authorized account operators, senior
managers and beneficial owners − Product type or account type applied for
− Anticipated account activity − Products and services offered − Markets serviced (domestic/ international/ high risk
jurisdictions) − Purpose of account (vendor accounts, accounts
receivable, etc.) − Source of funds
Documentary Verification Additional Documentary Verification − If available, obtain a copy of the license for the line of business
of the entity. Optionally obtain a government registration document for the entity
− Obtain a copy of the PAN card or TIN number of the entity
− Copy of financials or annual reports − Public information in standard industry guides,
periodicals, publications − Obtain name and address of beneficial owners of
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− Obtain a copy of the Certificate of Incorporation for the entity − Obtain a copy of the Memorandum and Articles of Association
for the entity − Obtain a copy of the board resolution listing the authorized
signers for the account. Optionally, obtain a power of attorney or official document authorizing the individuals operating the account
− Obtain complete KYC documentation of all account operators based on their category within the individual constitution
the entity − Attach results of address validation through
registered post. Optionally, perform a site visit to verify the address of the concern
Checklist 15 Constitution
Business Entities
Category
Hindu Undivided Family
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Name of the entity − Principal place of business − Mailing address of the entity − Industry sector of concern − Name and address information of Karta and senior managers − Product type or account type applied for
− Anticipated account activity − Products and services offered − Markets serviced (domestic/ international/ high risk
jurisdictions) − Purpose of account (vendor accounts, accounts
receivable, etc.) − Source of funds
Documentary Verification Additional Documentary Verification − If available, obtain a copy of the license for the line of business
of the entity. Optionally, obtain any government registration document available for the entity
− Obtain a declaration from the Karta regarding the setting up of
− Copy of financials or annual reports − Public information in standard industry guides,
periodicals, publications − Attach results of address validation through
20
the account − Obtain all KYC documentation of the Karta based on the
Karta’s categorization within the individual constitution − If available, obtain a copy of the PAN card or TIN number of the
entity
registered post. Optionally, perform a site visit to verify the address of the concern
Checklist 16 Constitution
Trust Category
Public
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Legal name of trust − Complete address of trust − Names of trustees, settlors and signatories − Names and addresses of account operators, founders
and the senior managers − Product type or account type applied for
− Purpose of account (vendor accounts, accounts receivable, etc.)
− Anticipated account activity − Purpose of trust − Source of funds
Documentary Verification Additional Documentary Verification − Obtain a copy of the trust deed − Obtain a copy of the certificate of registration for the
trust − Any officially valid document identifying trustees, settlors
and authorized signatories
− Public information in standard industry guides, periodicals, publications
− Copy of financials or annual reports − Attach results of address validation through registered
post. Optionally, perform a site visit to verify the
21
− Obtain complete KYC information of all account operators based on their category within the individual constitution
− Obtain a copy of the managing body resolution listing the authorized signers for the account. Optionally, obtain a copy of the power of attorney or official document authorizing the members operating the account
address of the concern
Checklist 17 Constitution
Trust Category
Private
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Legal name of trust − Purpose of trust − Complete address of trust − Names and addresses of account operators, trustees,
senior managers and the beneficiaries − Product type or account type applied for
− Anticipated account activity
− Purpose of account (vendor accounts, accounts receivable, etc.)
− Details of international presence
− Source of funds
22
Documentary Verification Additional Documentary Verification − Obtain, if available, a copy of the trust deed − Obtain a copy of the certificate of registration for the
entity − Any official document identifying trustees, settlors and
beneficiaries − Obtain a copy of the managing body resolution listing
the authorized signers for the account. Optionally, obtain a copy of the power of attorney or official document authorizing the members operating the account
− Obtain complete KYC documentation of all account operators based on their category within the individual constitution
− Copy of financials or annual reports
− Public information in standard industry guides, periodicals, publications
− Obtain name and address of beneficial owners, trustees and senior managers of the trust
− Attach results of address validation through registered post. Optionally, perform a site visit to verify the address of the concern
Checklist 18 Constitution
Non Profit Organizations Category
Trust
Low Risk Enhanced Due Diligence Required Information Additional Information − Legal name of trust − Purpose of trust − Complete address of trust − Names and addresses of account operators, trustees
− Anticipated account activity
− Details of international presence
− Purpose of account (vendor accounts, accounts receivable,
23
and the senior managers − Product type or account type applied for
etc.)
− Details of international presence
− Source of funds
Documentary Verification Additional Documentary Verification − Obtain a copy of the trust deed − Obtain a copy of the certificate of registration for the
trust − Any official document identifying trustees, settlors and
beneficiaries − Obtain a copy of the managing body resolution listing
the authorized signers for the account. Optionally, obtain a copy of the power of attorney or official document listing the members authorized to operate the account
− If available, obtain a copy of the Annual Reports and financial documents of the entity
− Obtain complete KYC documentation of all account operators based on their category within the individual constitution
− Public information in standard industry guides, periodicals, publications
− Attach results of address validation through registered post. Optionally, perform a site visit to verify the address of the concern
Checklist 19 Constitution
Non Profit Organizations Category
Society
Basic Due Diligence Enhanced Due Diligence
24
Required Information Additional Information − Legal name of Society − Purpose of Society − Complete address of Society − Product type or account type applied for − Names and addresses of account operators, trustees and
beneficial owners
− Anticipated account activity
− Details of international presence
− Purpose of account (vendor accounts, accounts receivable, etc.)
− Source of funds
Documentary Verification Additional Documentary Verification − Obtain a copy of the board resolution listing the
authorized signers for the account. Optionally, obtain a copy of the power of attorney or official document authorizing the members operating the account
− Obtain a copy of the Byelaws of the society − Obtain a copy of the registration documents for the
entity − If available, obtain a copy of the Annual Reports and
financial documents of the entity − Obtain complete KYC documentation of all account
operators based on their category within the individual constitution
− Public information in standard industry guides, periodicals, publications
− Attach results of address validation through registered post. Optionally, perform a site visit to verify the address of the concern
Checklist 20 Constitution
Non Profit Organizations Category
Section 25
25
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Legal name of organization − Purpose of organization − Complete address of organization − Product type or account type applied for − Names and addresses of account operators, trustees
and the senior managers
− Anticipated account activity
− Details of international presence
− Purpose of account (vendor accounts, accounts receivable, etc.)
− Source of funds
Documentary Verification Additional Documentary Verification − Obtain a copy of the board resolution listing the
authorized signers for the account. Optionally, obtain a copy of the power of attorney or official document authorizing the members operating the account
− Obtain a copy of the Memorandum and Articles of Association of the entity
− Obtain a copy of the registration documents for the entity
− Optionally, obtain a copy of the Annual Reports and financial documents of the entity
− Obtain complete KYC documentation of all account operators based on their category within the individual constitution
− Public information in standard industry guides, periodicals, publications
− Attach results of address validation through registered post. Optionally, perform a site visit to verify the address of the concern
26
Checklist 21 Constitution
Societies and Associations Category
Registered
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Legal name of Society − Purpose of Society − Complete address of Society − Product type or account type applied for − Names and addresses of account operators
− Anticipated account activity
− Purpose of account (vendor accounts, accounts receivable, etc.)
− Source of funds
Documentary Verification Additional Documentary Verification − Obtain a copy of the board resolution listing the
authorized signers for the account. Optionally, obtain a copy of the power of attorney or official document authorizing the members operating the account
− Obtain a copy of the Byelaws of the society − Obtain a copy of the Annual Reports or financial
documents of the entity − Obtain a copy of the registration documents for the
entity − Obtain complete KYC documentation of all account
operators based on their category within the individual constitution
− Public information in standard industry guides, periodicals, publications
− Attach results of address validation through registered post. Optionally, perform a site visit to verify the address of the concern
27
Checklist 22 Constitution
Societies and Associations Category
Unregistered
Low Risk Enhanced Due Diligence Required Information Additional Information − Name of Society − Purpose of Society − Complete address of Society − Product type or account type applied for − Names and addresses of account operators
− Anticipated account activity
− Purpose of account (vendor accounts, accounts receivable, etc.)
− Source of funds
Documentary Verification Additional Documentary Verification − Obtain a copy of the board resolution listing the
authorized signers for the account. Optionally, obtain a copy of the power of attorney or official document authorizing the members operating the account
− Obtain a copy of the Byelaws of the society − Optionally, a copy of the Annual Reports or financial
documents of the entity − Obtain complete KYC documentation of all account
operators based on their category within the individual constitution
− Public information in standard industry guides, periodicals, publications
− Attach results of address validation through registered post. Optionally, perform a site visit to verify the address of the concern
28
Checklist 23 Constitution
Government, Government Agency or Entity
Category
State Government
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Legal name − Purpose of government body; − Complete address − Product type or account type applied for − Names and addresses of account operators
− Anticipated account activity
− Products and services offered
− Purpose of account (vendor accounts, accounts receivable, etc.)
Documentary Verification Additional Documentary Verification − Obtain an authorization letter from the government
body wishing to open an account indicating the officials authorized to operate the account
− Obtain complete KYC documentation of all account operators based on their category within the individual constitution
Additional Checks − It is recommended that the bank verify the request to
open the account through an enquiry with the controlling department of the government
− Attach results of address validation through registered post. Optionally, perform a site visit to verify the address of the concern
29
Checklist 24 Constitution
Government, Government Agency or Entity
Category
Central Government
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Legal name − Purpose of government body − Complete address − Product type or account type applied for − Names and addresses of account operators
− Anticipated account activity
− Products and services offered
− Purpose of account (vendor accounts, accounts receivable, etc.)
30
Documentary Verification Additional Documentary Verification − Obtain an authorization letter from the government body
wishing to open an account indicating the officials authorized to operate the account
− Obtain complete KYC documentation of all account operators based on their category within the individual constitution
Additional Checks − It is recommended that the bank verify the request to
open the account through an enquiry with the controlling department of the government
− Attach results of address validation through registered post. Optionally, perform a site visit to verify the address of the concern
Checklist 25 Constitution
Government, Government Agency or Entity
Category
State Government Undertaking
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Legal name − Industry sector of undertaking − Complete address − Product type or account type applied for − Names and addresses of account operators
− Anticipated account activity
− Products and services offered
− Purpose of account (vendor accounts, accounts receivable, etc.)
31
Documentary Verification Additional Documentary Verification − Obtain a copy of the Certificate of Incorporation of the
entity − Obtain a copy of the Memorandum and Articles of
Association of the entity − Obtain a copy of the audited annual report − Obtain a board resolution indicating the officials
authorized to operate the account − Obtain complete KYC documentation of all account operators
based on their category within the individual constitution
Additional Checks − It is recommended that the bank verify the request to
open the account through an enquiry with the controlling department of the government agency or entity
− Attach results of address validation through registered post. Optionally, perform a site visit to verify the address of the concern
Checklist 26 Constitution
Government, Government Agency or Entity
Category
Central Government Undertaking
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Legal name − Industry sector of undertaking − Complete address − Product type or account type applied for − Names and addresses of account operators
− Anticipated account activity
− Products and services offered
− Purpose of account (vendor accounts, accounts receivable,
32
etc.)
Documentary Verification Additional Documentary Verification − Obtain a copy of the Certificate of Incorporation of the
entity − Obtain a copy of the Memorandum and Articles of
Association of the entity − Obtain a copy of the audited annual report − Obtain a board resolution indicating the officials
authorized to operate the account − Obtain complete KYC documentation of all account
operators based on their category within the individual constitution
Additional Checks − It is recommended that the bank verify the request to
open the account through an enquiry with the controlling department of the government agency or entity
− Attach results of address validation through registered post. Optionally, perform a site visit to verify the address of the concern
33
Checklist 27 Constitution
Government, Government Agency or Entity
Category
Liquidator
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Legal name − Complete address − Product type or account type applied for − Name of company under liquidation − Industry sector of company under liquidation − Names and addresses of account operators
− Anticipated account activity
− Purpose of account (vendor accounts, accounts receivable, etc.)
Documentary Verification Additional Documentary Verification − Obtain an authorization letter from the government body
wishing to open an account indicating the officials authorized to operate the account
− Obtain complete KYC documentation of all account operators based on their category within the individual constitution
− Obtain a copy of the court order of appointment to act as liquidator
− Attach results of address validation through registered post. Optionally, perform a site visit to verify the address of the concern
34
Checklist 28 Constitution
Government, Government Agency or Entity
Category
Government Authorities, Autonomous & Regulatory Bodies
Low Risk Enhanced Due Diligence Required Information Additional Information − Legal name − Purpose of government body − Complete address − Product type or account type applied for − Names and addresses of account operators
− Anticipated account activity
− Products and services offered
− Purpose of account (vendor accounts, accounts receivable, etc.)
Documentary Verification Additional Documentary Verification − Obtain an authorization letter from the government body
wishing to open an account indicating the officials authorized to operate the account
− Obtain complete KYC documentation of all account operators based on their category within the individual constitution
Additional Checks − It is recommended that the bank verify the request to
open the account through an enquiry with the controlling department of the government agency or entity
− Attach results of address validation through registered post. Optionally, perform a site visit to verify the address of the concern
35
Checklist 29 Constitution
Government, Government Agency or Entity
Category
Local Bodies
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Legal name − Purpose of government body − Complete address − Product type or account type applied for − Names and addresses of account operators
− Anticipated account activity
− Purpose of account (vendor accounts, accounts receivable, etc.)
Documentary Verification Additional Documentary Verification − Obtain an authorization letter from the government body
wishing to open an account indicating the officials authorized to operate the account
− Obtain complete KYC documentation of all account operators based on their category within the individual constitution
Additional Checks − It is recommended that the bank verify the request to
open the account through an enquiry with the controlling department of the government agency or entity
− Attach results of address validation through registered post. Optionally, perform a site visit to verify the address of the concern
36
Checklist 30 Constitution
Financial Institutions
Category
Public Sector Banks
Basic Due Diligence
Enhanced Due Diligence
Required Information Additional Information − Legal name − Complete address − Product type or account type applied for − Names and addresses of account operators and senior
managers
− Anticipated account activity
− Products and services offered
− Markets serviced (domestic/ international/ high risk jurisdictions)
− Purpose of account (vendor accounts, accounts receivable, etc.)
Documentary Verification Additional Documentary Verification − Obtain a copy of the RBI registration or license information for
the bank − Obtain a copy of the PAN card or TIN number of the entity − Obtain a copy of the board resolution or an official letter
indicating the officials authorized to operate the account − Obtain a copy of the Memorandum, Certificate of
Incorporation and the Articles of Association for the bank − It is desirable to obtain, in affidavit form, the KYC policy of the
bank
− Public information in standard industry guides, periodicals, publications
− Attach results of address validation through registered post. Optionally, perform a site visit to verify the address of the concern
− Obtain information on AML measures implemented
37
Basic Due Diligence
Enhanced Due Diligence
− Obtain a copy of the annual audited report for the previous financial year
− Obtain complete KYC documentation of all account operators based on their category within the individual constitution
Checklist 31 Constitution
Financial Institutions
Category
Private Sector Banks
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Legal name − Complete address − Product type or account type applied for − Names and addresses of beneficial owners, account
operators and senior managers
− Anticipated account activity
− Products and services offered
− Markets serviced (domestic/ international/ high risk jurisdictions)
− Purpose of account (vendor accounts, accounts receivable, etc.)
Documentary Verification Additional Documentary Verification − Obtain a copy of the RBI registration or license
information for the bank − Obtain a copy of the PAN card or TIN of the entity − Obtain a copy of the annual audited report for the
previous financial year
− Public information in standard industry guides, periodicals, publications
− Attach results of address validation through registered post. Optionally, perform a site visit to verify the address of
38
Basic Due Diligence Enhanced Due Diligence − Obtain a copy of the Articles of Association and
Certificate of Incorporation for the bank − If the company is held by a publically traded company,
obtain information on parent company’s ownership, listing and nature of activities
− Obtain a copy of the board resolution or an official letter requesting for the creation of the account and indicating the officials authorized to operate the account
− It is desirable to obtain, in affidavit form, the KYC policy of the bank
− Obtain complete KYC documentation of all account operators based on their category within the individual constitution
− Obtain information on the Board and CEO of the bank including current country of domicile
the concern
− Obtain name and address of beneficial owners of the bank
− Obtain information on AML measures implemented
39
Checklist 32 Constitution
Financial Institutions
Category
Regional Rural Banks
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Legal name − Complete address − Product type or account type applied for − Holding bank information (name, address, registration
information) − Names and addresses of account operators and senior
managers
− Anticipated account activity
− Products and services offered
− Markets serviced (domestic/ international/ high risk jurisdictions)
− Purpose of account (vendor accounts, accounts receivable, etc.)
Documentary Verification Additional Documentary Verification − Obtain a copy of the PAN card or TIN number of the
bank − If available, obtain a copy of the RBI registration or
license information for the bank − Obtain a copy of the Byelaws of the bank − It is desirable to obtain, in affidavit form, KYC policy of
the bank − Obtain a copy of the annual audited report for the
previous financial year − Obtain a copy of the board resolution or an official letter
indicating the officials authorized to operate the account − Obtain complete KYC documentation of all account
− Attach results of address validation through registered post. Optionally, perform a site visit to verify the address of the concern
− Obtain information on AML measures implemented
40
operators based on their category within the individual constitution
Checklist 33 Constitution
Financial Institutions
Category
Urban Cooperative Banks
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Legal name − Complete address − Product type or account type applied for − Names and addresses of account operators and senior
managers
− Anticipated account activity
− Products and services offered
− Markets serviced (domestic/ international/ high risk jurisdictions)
− Purpose of account (vendor accounts, accounts receivable, etc.)
Documentary Verification Additional Documentary Verification − Obtain a copy of the PAN card or TIN number of the bank − If available, obtain a copy of the RBI registration or license
information for the bank − Obtain a copy of the Byelaws of the bank − It is desirable to obtain, in affidavit form, KYC policy of the bank − Obtain a copy of the annual audited report for the previous
financial year − Obtain a copy of the board resolution or an official letter
requesting for the creation of the account and indicating the
− Public information in standard industry guides, periodicals, publications
− Attach results of address validation through registered post. Optionally, perform a site visit to verify the address of the concern
− Obtain information on AML measures implemented
41
officials authorized to operate the account − Obtain complete KYC documentation of all account operators based
on their category within the individual constitution
Checklist 34 Constitution
Financial Institutions
Category
State Cooperative Banks
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Legal name − Complete address − Product type or account type applied for − Names and addresses of account operators and senior
managers
− Anticipated account activity
− Products and services offered
− Markets serviced (domestic/ international/ high risk jurisdictions)
− Purpose of account (vendor accounts, accounts receivable, etc.)
Documentary Verification Additional Documentary Verification − Obtain a copy of the PAN card or TIN number of the
bank − If available, obtain a copy of the RBI registration or
license information for the bank − Obtain a copy of the Byelaws of the bank − It is desirable to obtain, in affidavit form, KYC policy of
− Public information in standard industry guides, periodicals, publications
− Attach results of address validation through registered post. Optionally, perform a site visit to verify the address of the
42
the bank − Obtain a copy of the annual audited report for the
previous financial year − Obtain a copy of the board resolution or an official letter
requesting for the creation of the account and indicating the officials authorized to operate the account
− Obtain complete KYC documentation of all account operators based on their category within the individual constitution
concern
− Obtain information on AML measures implemented
Checklist 35 Constitution
Financial Institutions
Category
District Cooperative Banks
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Legal name − Complete address − Product type or account type applied for − Names and addresses of account operators and senior managers
− Anticipated account activity
− Products and services offered
− Markets serviced (domestic/ international/ high risk jurisdictions)
− Purpose of account (vendor accounts, accounts receivable, etc.)
Documentary Verification Additional Documentary Verification − Obtain a copy of the PAN card or TIN number of the bank − Attach results of address validation through
43
− If available, obtain a copy of the RBI registration or license information for the bank
− Obtain a copy of the Byelaws the bank − It is desirable to obtain, in affidavit form, KYC policy of the bank − Obtain a copy of the annual audited report for the previous
financial year − Obtain a copy of the board resolution or an official letter requesting
for the creation of the account and indicating the officials authorized to operate the account
− Obtain complete KYC documentation of all account operators based on their category within the individual constitution
registered post. Optionally, perform a site visit to verify the address of the concern
− Obtain information on AML measures implemented
Checklist 36 Constitution
Financial Institutions
Category
Money Service Businesses
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Legal name − Complete address − Product type or account type applied for − Names and addresses of beneficial owners, account
operators and senior managers
− Anticipated account activity
− Products and services offered
− Markets serviced (domestic/ international/ high risk jurisdictions)
− Purpose of account (vendor accounts, accounts receivable, etc.)
Documentary Verification Additional Documentary Verification
44
− Obtain a copy of the PAN card or TIN number of the entity − Obtain a copy of the license to operate for entity or NFBC
status with the Reserve Bank of India − Obtain a copy of the annual audited report for the previous
financial year − Obtain a copy of the Memorandum, Articles of Association for
the entity and Certificate of Incorporation for the entity − Obtain information on the Board and CEO of the bank
including current country of domicile − Obtain a copy of the board resolution or an official letter
requesting for the creation of the account and indicating the officials authorized to operate the account
− Public information in standard industry guides, periodicals, publications
− Attach results of address validation through registered post. Optionally, perform a site visit to verify the address of the concern
− AML policies and procedures implemented
− Obtain name and address of beneficial owners of the entity
− Obtain complete KYC documentation of all account operators based on their category within the individual constitution
Checklist 37 Constitution
Financial Institutions
Category
Non-Banking Financial Company
Basic Due Diligence Enhanced Due Diligence Required Information Additional Information − Legal name − Complete address − Product type or account type applied for − Names and addresses of beneficial owners, account
operators and senior managers
− Anticipated account activity
− Products and services offered
− Any additional information on purpose of business
− Markets serviced (domestic/ international/ high risk
45
jurisdictions)
− Purpose of account (vendor accounts, accounts receivable, etc.)
Documentary Verification Additional Documentary Verification − Obtain a copy of the PAN card or TIN number of the
entity − Obtain a copy of the license to operate for entity − Obtain a copy of the annual audited report for the
previous financial year − Obtain a copy of the Memorandum, Articles of
Association and the Certificate of Incorporation of the entity
− Obtain information on the Board and CEO of the bank including current country of domicile
− Obtain a copy of the board resolution or an official letter requesting for the creation of the account and indicating the officials authorized to operate the account
− Obtain complete KYC documentation of all account operators based on their category within the individual constitution
− Public information in standard industry guides, periodicals, publications
− Attach results of address validation through registered post. Optionally, perform a site visit to verify the address of the concern
− AML policies and procedures implemented
− Obtain name and address of beneficial owners of the entity
List of Officially Valid Documents
46
Verification documents for individuals (identity and address proof) are divided into preferred and acceptable documents. It is recommended that whenever available, documents from the preferred list should be used for verification purposes. Photo Identity Documents
Address Proof Documents
Preferred Documents
− Driving License − PAN Identity Card − Passport − Voter Identity Card
Acceptable Documents
− Aadhaar card* − Govt. Department Identity Card − Letter from MP/MLA/MC/GZ Officer including a notarized photograph − NREGA Job Card* − Social Security Card (If Applicable)
Preferred Documents
− Driving License − Passport − Voter Identity Card
Acceptable Documents
− Any id containing address issued by Govt. − Bank Account Statement (for six months prior to account opening) − Bank Passbook − Employer certificate (not older than six months from account opening) − Gas Bill (not older than six months from account opening) − Income Tax Return (latest) − Letter from MP/MLA/MC/GZ Officer attesting to address − NREGA Job Card − Property Tax Assessment Order − Residential Permit issued by state police − Water Bill (not older than six months from account opening)
* Please note that if the Aadhar Card, Aadhar Letter or the NREGA Job card is exclusively provided for KYC purposes, then the bank account opened will be subjected to all conditions and limitations prescribed for small accounts as described in section 2.4 of the KYC, AML and CFT Programme.
47
Relationship Establishment Documents Proof of Proprietorship Documents (Any two documents required in the name of the proprietary c List of Documents
− Certificate/license issued by Municipal Authorities under Shop & Establishment Act − Certificate/registration document issued by Sales Tax/Service Tax/ Professional Tax authorities − CST/VAT certificate − License issued by Registering authority like Certificate of Practice issued by Institute of Chartered
Accountants of India, Institute of Cost Accountants of India, Institute of Company Secretaries of India, Indian medical Council and Food and Drug Control Authorities
− Registration certificate issued in the name of the proprietary concern by the Central Government or State Authority Department
− Sales and Income Tax returns − IEC (Importer Exporter Code) issued by the office of DGFT
Listed Documents
− Birth Certificate − Marriage Certificate − PAN Card − Passport − School certificate showing relationship − Voter ID Card − Any other document establishing relationship issued by the Govt. of India
