Reserve Bank of India has been issuing guidelines in regard to Know Your Customer (KYC)standards to be followed by banks and measures to be taken in regard to Anti Money Laundering (AML)and Combating Financial Terrorism (CFT). The guidelines incorporate the:
The primary objective of the Policy is to prevent the Bank from being used, intentionally or unintentionally, by criminal elements for money laundering or terrorist financing activities. Purposes proposed to be served by the Policy are:
This Policy is applicable to all branches/offices of the Bank and is to be read in conjunction with related operational guidelines issued from time to time.
Section 3 of PMLA has defined the offence of money laundering as under: Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property shall be guilty of offence of money laundering. Money launderers use the banking system for cleansing dirty money obtained from criminal activities with the objective of hiding/disguising its source. The process of money laundering involves creating a web of financial transactions so as to hide the origin and true nature of these funds. For the purpose of this document, the term money laundering would also cover financial transactions where the end use of funds goes for terrorist financing irrespective of the source of the funds.
Section 12 of PMLA places certain obligations on every banking company, financial institution and intermediary, which include
Non compliance with KYC standards, use of the portals of the Bank for Money Laundering/financing terrorism activities expose the Bank to various risks, such as Operational Risk, Reputation Risk, Compliance Risk and Legal Risk etc.
A customer, for the purpose of the Policy is defined as:
The KYC Policy of the Bank has the following key elements:
While the Policy directions are given in this documents, the detailed operating guidelines are issued separately from time to time through circulars which should be referred to for effective implementation of the Policy.
Bank’s Customer Acceptance Policy (CAP) lays down the criteria for acceptance of customers. The guidelines in respect of the customer relationship in the Bank broadly are:
Circumstances in which a customer of the Bank is permitted to act on behalf of another person / entity is given as under:
Customer identification requires identifying the customer and verifying his/her identity by using reliable, independent source documents, data or information. Thus, the first requirement of Customer Identification Procedures (CIP) is to be satisfied that a prospective customer is actually who he/she claims to be. The second requirement of CIP is to ensure that sufficient information is obtained on the identity and the purpose of the intended nature of the banking relationship. This would enable risk profiling of the customer and also to determine the expected or predictable pattern of transactions. Identification data, as under, would be required to be obtained in respect of different classes of customers:
For customers that are legal persons:
Wherever applicable, information on the nature of business activity, location, mode of payments, volume of turnover, social and financial status etc. will be collected for completing the profile of the customer. Customers will be classified into three risk categories namely High, Medium and Low, based on the risk perception. The risk categorization will be reviewed periodically. The Customer Identification Procedures are to be carried out at the following stages:
With a view to ensuring financial inclusion such that persons, especially those belonging to low income group both in urban and rural areas, who are not able to produce such documents required by the Bank to satisfy about their identity and address, are not denied banking services, branches may open Small Deposit (No Frills) accounts, for natural persons only, with relaxed KYC standards. Persons desirous of opening such accounts can keep aggregate balances not exceeding Rs.50,000/- (Rupees fifty thousand only) in all their accounts taken together and the total credit, again in all accounts taken together, should not exceed Rs.1,00,000/- (Rupees one lac only) in a year. If at any point, the balances in all his/her accounts with the Bank (taken together) exceeds Rs.50,000/- (Rupees fifty thousand only) or total credit in all accounts taken together exceeds Rs.1,00,000/- (Rupees one lac only) in a year, no further transaction will be permitted until full KYC procedure is completed. Bank would notify the customers when the balances reach Rs.40,000/- (Rupees forty thousand only) or total credit in a year reaches Rs.80,000/- (Rupees eighty thousand only) so that appropriate documents, for complying with full KYC requirements are submitted well in time to avoid blocking of transactions in the account.
Monitoring of transactions will be conducted taking into consideration the risk profile of the account. Special attention will be paid to all complex, unusually large transactions and all unusual patterns, which have no apparent economic or visible lawful purpose. Transactions that involve large amounts of cash inconsistent with the normal and expected activity of the customer will be subjected to detailed scrutiny. System supported monitoring of transactions will be done by the AML team under the Principal Officer, based on alerts thrown up by the AML software acquired by the Bank and on the basis of feedback/inputs from Regional Office(s) / Branches. Simultaneously, however the branches will maintain oversight over the transactions with a view to identifying suspicious transactions and bringing them to the notice of the Principal Officer at the Head Office. After due diligence at the appropriate level in the Bank, transactions of suspicious nature and/or any other type of transaction notified under PMLA will be reported by the Principal Officer to Financial Intelligence Unit – India(FIU-IND), the appropriate authority. A record of such transactions will be preserved and maintained for the period as prescribed in PMLA. Transactions in the accounts will also be monitored with a view to timely submitting, the Cash Transaction Report(CTR) in respect of cash transactions of Rs. 10,00,000/- (Rupees ten lacs only) and above undertaken in an account either singly or in an integrally connected manner. All cash transaction, where forged or counterfeit Indian currency notes have been used, shall also be reported immediately by the branches, by way of Counterfeit Currency Reports (CCRs) to the Principal Officer, through proper channel, for onward reporting to FIU-IND.
Where the appropriate KYC measures could not be applied due to non-furnishing of information and/or non-cooperation by the customer, the account can be considered for closure or terminating the banking / business relationship. Before exercising this option, all efforts will be made to obtain the desired information and, in the event of failure, due notice, will be given to the customer explaining the reasons for taking such a decision. The competent authority to permit closure of such accounts shall be the Branch Head.
While the Bank has adopted a risk based approach to the implementation of this policy, it is necessary to establish appropriate framework covering proper management oversight, systems, controls and other related matters. Bank’s Internal Audit of compliance with KYC/AML Policy will provide an independent evaluation of the same including legal and regulatory requirements. Concurrent/Internal Auditors shall specifically check and verify the application of KYC/AML procedures at the branches and comment on the lapses observed in this regard. The compliance in this regard will be placed before the Audit Committee of the Board at quarterly intervals. The Principal Officer designated by the Bank in this regard will have overall responsibility for maintaining oversight and coordinating with various functionaries in the implementation of KYC/AML/CFT policy. However, primary responsibility of ensuring implementation of KYC/AML/CFT Policy and related guidelines will be vested with the branches. Suitable checks and balances in this regard will be put in place at the time of introducing new products/procedures as also at the time of review of existing product/procedures for overall risk and compliance management. For this purpose, Head Office will designate an official as Money Laundering Reporting Officer (MLRO) who would ensure proper implementation and reporting, as per provisions of this Policy, to the Principal Officer.
Bank will depute its employees for the training programme, of 6 days duration or more, where at least one or two sessions is devoted in KYC Standards/AML/CFT measures so that the employees are adequately trained in KYC/AML/CFT procedures.
KYC norms/AML standards/CFT measures have been prescribed to ensure that criminals are not allowed to misuse channel of the Bank. Bank will put in place necessary and adequate screening mechanism as an integral part of its recruitment/hiring process of personnel.
The Bank recognizes the need to spread awareness on KYC, Anti Money Laundering measures and the rationale behind them amongst the customers and shall take suitable steps for the purpose.
Bank will pay special attention to the money laundering threats arising from new or developing technologies and take necessary steps to prevent its misuse for money laundering activities. Bank will ensure that appropriate KYC procedures are duly applied to the customers using new technology driven products.
While the KYC guidelines will apply to all new customers, the same would be applied to the existing customers on the basis of materiality and risk. However, transactions in existing accounts would be continuously monitored for any unusual pattern in the operation of the accounts. On the basis of materiality and risk the existing accounts of companies, firms, trusts, charities, religious organizations and other institutions are subjected to minimum KYC standards which would establish the identity of the natural / legal person and those of the beneficial owners. Similarly, the Bank will also ensure that term / recurring deposit accounts are subject to revised KYC procedures at the time of renewal of the deposits on the basis of materiality and risk.
The Chairman of the bank shall be the Principal Officer for KYC/AML/CFT matters who shall be responsible for implementation of and compliance with this policy. His illustrative duties, in this regard, will be as follows :-
The Policy will be reviewed as and when considered necessary by the Board
