ALLAHABAD BANK

Transcription

1 ALLAHABAD BANK Policy/Guidelines on Know Your Customer (KYC) norms/ Anti Money Laundering (AML) standards/ Combating Financing of Terrorism (CFT)/ Obligations of Bank under PMLA, In lines with the Know Your Customer (KYC) Direction, 2016 Issued by Reserve Bank of India and Amendments thereon (Updated up to ) AML & KYC Cell, Head Office 2 N.S. ROAD, KOLKATA

2 INDEX Paragraph Particulars Page No. Chapter-I:: Preliminary Short Title & Commencement Applicability (a) Definitions i. Act & Rules ii. Beneficial Owner iii. Central KYC Registry (CKYCR) iv. Designated Director v. Non-profit Organizations vi. Officially Valid Document (OVD) vii. Aadhaar Number viii. Authentication ix. Resident x. Identity Information xi. e-kyc authentication facility xii. Yes/No authentication facility xiii. Person xiv. Principal Officer xv. Suspicious Transaction xvi. Small Account xvii. Transaction (b) Terminologies i. Common Reporting Standards (CRS) ii. Customer iii. Walk-in Customer iv. Customer Due Diligence (CDD) v. Customer identification vi. FATCA vii. IGA viii. KYC Template ix. Non-face-to-face customers x. On-going Due Diligence xi. Periodic Updation xii. Politically Exposed Persons (PEPs) xiii. Regulated Entities (REs) xiv. Simplified procedure xv. Shell Bank xvi. Shell Company xvii. Wire transfer xviii. Domestic and cross-border wire transfer Page 2

3 Chapter-II:: General Some Important Guidelines a) Customer identification procedure & KYC updation 21 b) Verification of Genuineness of Permanent Account Number (PAN) 21 c) KYC for sale of Third party products d) Risk Categorization of Accounts e) Monitoring & Reporting of Transactions f) Issuing of Demand Draft/Banker s Cheque/Inter Office Instrument for Rs.50,000 and above g) Structuring of transactions with value just below threshold limits h) Customer s transactions through BGL Accounts i) Transactions through NRE/NRO Accounts, Liberised Remittance Scheme and Import of gold under consignment basis j) Acceptance of Cash Deposits in accounts k) Management Overview and Compliance Culture l) Internal Audit and Concurrent Audits m) KYC Policy n) Compliance of KYC policy Chapter-III:: Customer Acceptance Policy Customer Acceptance Policy(CAP) Chapter-IV:: Risk Management Risk Management directives, Bank's Policy of Customer Risk Management Maintenance of Customers Risk Profile Management of Customer Risk Profile (i) Level - I (Low risk) customers (ii) Level - II (Medium risk) customers (iii) Level - III (High risk) customers Chapter-V:: Customer Identification Procedure (CIP) Procedure to be adopted in Customer Identification Chapter-VI:: Customer Due Diligence (CDD) Procedure Part I - CDD Procedure in case of Individuals Due Diligence for Individual Customer KYC Verification through e-kyc Due Diligence for Change in Name for Marriage/otherwise Due Diligence for Person having no OVD as PoA Due Diligence for Low Risk Customer Due Diligence for Low Risk Customer without having any one of the OVDs Page 3

4 Due Diligence for Customer without having any OVDs Due Diligence for Proof of Address Due Diligence for Close Relatives without any Proof of Address Due Diligence for Shifting of bank accounts to another centre - Proof of address Due Diligence for Existing Customer opening another account Due Diligence for Transfer of any account of Existing Customer Part II - CDD Measures for Sole Proprietary firms Part III- CDD Measures for Legal Entities Due Diligence for opening account of a Company Due Diligence for opening account of a Partnership Firm Due Diligence for opening account of a Trust Due Diligence for opening account of an unincorporated association/body of Individuals Due Diligence for opening account of Government or its Departments, societies, universities and local bodies like village panchayats 45 Part IV - Identification of Beneficial Owner 45 Part V - On-going Due Diligence Periodic Updation Partial freezing and closure of accounts Part VI - Enhanced and Simplified Due Diligence Procedure Enhanced Due Diligence I. Accounts of non-face-to-face customers II. Accounts of Politically Exposed Persons (PEPs) III. Accounts of High Net-worth Individual (HNI) Customers Simplified Due Diligence I. Simplified norms for Self Help Groups (SHGs) II. Procedure to be followed by banks while opening accounts of foreign students III. Simplified KYC norms for Foreign Portfolio Investors (FPIs) Chapter-VII:: Record Management & Reporting Obligation Record Management Reporting Requirements to Financial Intelligence Unit - India 55 Bank s Policy towards Reporting Obligation under AML Compliance Nomination of Designated Director Appointment of Principal Officer Page 4

5 7.3.3 Statutory Reports to FIU-IND Cash Transaction Reporting (CTR) Counterfeit Currency Reporting (CCR) Non-Profit Organization Transaction Report (NTR) Cross-border Wire Transfer Report (CWTR) Suspicious Transaction Report (STR) Trade Based Money Laundering (TBML) 7.4 Screening of Cash Withdrawals and Deposits for the Purpose of CTR 7.5 Requirements/obligations under International Agreements Communications from International Agencies/Combating Financing of Terrorism (CFT) Jurisdictions that Recommendations Adherence to Foreign Contribution Regulation Act (FCRA), Anti-Money Laundering Focus Implementation of UNSCR 2140(2014) and 2216(2015) pertaining to Yemen 74 do not or insufficiently apply the FATF Chapter-VIII:: Other Instructions 8.1 Secrecy Obligations and Sharing of Information 77 Due Diligence for detecting Suspicious Transaction Report related to Shell Companies CDD Procedure and sharing KYC information with Central KYC Records Registry (CKYCR) Reporting requirement under Foreign Account Tax Compliance and Common Reporting Standards (CRS) Period for presenting payment instruments White-listing of Accounts for AML System Operation of Bank Accounts & Money Mules Collection of Account Payee Cheques Unique Customer Identification Code (UCIC) Introduction of New Technologies Credit Cards/ Debit Cards/ Smart Cards/ Gift Cards/ Mobile Wallet/ Net Banking/ Mobil e Banking/ RTGS/ NEFT/ ECS/ IMPS etc. Correspondent Banks Wire transfer Issue and Payment of Demand Drafts, etc. Quoting of PAN Selling Third party products At-par cheque facility availed by co-operative banks Issuance of Prepaid Payment Instruments (PPIs) Hiring of Employees and Employee training 8.2 Act (FATCA) 9.1 Adherence to Know Your Customer (KYC) guidelines by BFCs/RNBCs and persons authorized by NBFCs/RNBCs including brokers/agents etc Chapter-IX:: General Guidelines Roles & responsibilities of bank s officers & staff 9.2 Duties/ responsibilities of officers/staff Page 5

6 Evaluation of KYC Guidelines by Internal Audit and Inspection System Training to officers/ staff Confidentiality of customer information Avoiding hardship to customers Sensitising the customers KYC for the Existing Accounts Applicability to Branches and Subsidiaries outside India Technology requirements Penalty for Non-Adherence to KYC norms Page 6

7 List of Appendix Paragraph Particulars Page No. Appendix-I Customer Identification Procedure Features to be verified and documents that may be obtained from customers 93 Appendix-II KYC documents for eligible Foreign Portfolio Investors(FPIs) under Portfolio Investment Scheme (PIS) 97 Appendix-III Foreign Portfolio Investors (FPIs) categorized by SEBI 99 Appendix-IV Indicative list of High/Medium Risk Customers 100 Appendix-V Circumstances for reporting of Off-line STRs as Attempted Transactions 104 Appendix-VI OFFLINE ALERT INDICATORS PROVIDED BY IBA STUDY FOR DETECTION OF SUSPICIOUS TRANSACTIONS AT BRANCHES 105 Appendix-VII Red Flag Indicators to be used for identifying suspicious transactions related to TBML 107 Appendix-VIII Reasons / Examples of suspicious transactions 110 Appendix-IX Government Order on Procedure for Implementation of Section 51A of The Unlawful Activities (Prevention) Act, Appendix-X Gazette Notification on Implementation of UNSCR 2140(2014) and 2216(2015) pertaining to Yemen 118 Appendix-XI KYC - Rights and responsibilities of Customers KYC - Rights and responsibilities of Bank CHECK LISTS - for KYC processes to be followed by different customers and for different activities, based on customer profiling 139 Appendix-XII An Illustrative Check-list covering Money-Laundering Activities 148 Appendix-XIII List of Circulars on Know Your Customer (KYC) Guidelines issued since 1st Dec Page 7

8 Revised Policy/Guidelines on Know Your Customer (KYC) norms/ Anti Money Laundering (AML) standards/ Combating Financing of Terrorism (CFT)/ Obligations of banks under PMLA, 2002 (In lines with the Know Your Customer (KYC) Direction, 2016 Issued by Reserve Bank of India and Amendments thereon) In terms of the provisions of Prevention of Money-Laundering Act, 2002 and the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005, Regulated Entities (REs), [which include inter-alia all Scheduled Commercial Banks (SCBs), as detailed in Point No. 3(b)xiii] are required to follow certain customer identification procedure while undertaking a transaction either by establishing an account based relationship or otherwise and monitor their transactions. Accordingly, in exercise of the powers conferred by Sections 35 A of the Banking Regulation Act, 1949 and the Banking Regulation Act (AACS), 1949, read with Section 56 of the Act ibid and Rule 9(14) of Prevention of MoneyLaundering (Maintenance of Records) Rules, 2005 the Reserve Bank of India being satisfied that it is necessary and expedient in the public interest to do so, hereby, issues the Directions. In line with the KYC Directions and amendments made thereon, the Bank felt necessity of framing revised KYC & AML Policy of the Bank. CHAPTER I PRELIMINARY 1.1 Short Title and commencement. (a) This Policy shall be called the KYC/AML & CFT Policy cum Guidelines, (b) The objective of this Policy is to prevent the Bank from being used, intentionally or unintentionally, by criminal elements for money laundering or terrorist financing activities. (c) KYC procedures will also enable the Bank to know/understand its customers and their financial dealings better which in turn help them manage their risks prudently. Page 8

9 1.2 Applicability (a) This policy shall be applied to all the Branches and Offices of Allahabad Bank (b) This Policy shall also apply to those branches and majority owned subsidiaries of the Allahabad Bank which are located abroad, to the extent they are not contradictory to the local laws in the host country, provided that :- i. where local applicable laws and regulations prohibit implementation of these guidelines, the same shall be brought to the notice of the Reserve Bank of India. ii. in case there is a variance in KYC/AML standards prescribed by the Reserve Bank of India and the host country regulators, branches/overseas subsidiaries of the Bank are required to adopt the more stringent regulation of the two. 1.3 Definitions: In this Policy, unless the context otherwise requires, the terms herein shall bear the meanings assigned to them below :(a) Terms bearing meaning assigned in terms of Prevention of Money-Laundering Act, 2002 and the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005 : SL. No. i. Terminology Act and Rules Definition Act and Rules means the Prevention of MoneyLaundering Act, 2002 and the Prevention of MoneyLaundering (Maintenance of Records) Rules, 2005, respectively and amendments thereto. ii. Beneficial Owner (BO): a. Where the customer is a company, owner is the beneficial the natural person(s), who, whether acting alone or together, or through one or more juridical person, has/have a controlling ownership interest or who exercise control through other means. Explanation- For the purpose of this sub-clause1. Controlling ownership interest means ownership of/entitlement to more than 25 per cent of the shares or capital or profits of the company. Page 9

10 2. Control shall include the right to appoint majority of the directors or to control policy decisions the including management by virtue of or their shareholding or management rights or shareholders agreements or voting agreements. b. Where the customer is a partnership firm, the beneficial owner is the natural person(s), who, whether acting alone or together, or through one or more juridical person, has/have ownership of/entitlement to more than 15 per cent of capital or profits of the partnership. c. Where the customer association or body is an unincorporated of individuals, the beneficial owner is the natural person(s), who, whether acting alone or together, or through one or more juridical person, has/have ownership of/entitlement to more than 15 per cent of the property or capital or profits of the unincorporated association or body of individuals. Explanation: Term body of individuals includes societies. Where no natural person under (a), owner is (b) or (c) above, is identified the beneficial the relevant natural person who holds the position of senior managing official. d. Where the customer is a trust, the identification of beneficial owner(s) shall include identification of the author of the trust, the trustee, the beneficiaries with 15% or more interest in the trust and any other natural person exercising ultimate effective control over the trust through a chain of control or ownership. iii. Central KYC Records Central KYC Records Registry (CKYCR) means an Registry (CKYCR) entity defined under Rule 2(1)(aa) of the Rules, to receive, store, safeguard and retrieve the KYC records in digital form of a customer. Page 10

11 iv. Designated Director Designated by the Director" Bank means a person designated to ensure overall compliance with the obligations imposed under chapter IV of the PML Act and the Rules and shall include :a. the Managing Director or a whole-time Director, duly authorized by the Board of Directors, if the RE is a company, b. the Managing Partner, if the RE is a partnership firm, c. the Proprietor, if the RE is a proprietorship concern, d. the Managing Trustee, if the RE is a trust, e. a person or individual, as the case may be, who controls and manages the affairs of the RE, if the RE is an unincorporated association or a body of individuals, and f. a person who holds the position of senior management or equivalent designated as a 'Designated Director in respect of Cooperative Banks and Regional Rural Banks. Bank is required to nominate a Director on their Boards as Designated Director, as per the provisions Prevention Records) of Money Rules, Laundering 2005 (Rules), to of (Maintenance ensure the of overall compliance with the obligations under the Act and Rules. The name, designation and address of the Designated Director is to be communicated to the Director, Financial Intelligence Unit - India (FIU-IND). Explanation:- For the purpose of this clause, the terms "Managing Director" and "Whole-time Director" shall have the meaning assigned to them in the Companies Act, v. Non-profit organizations Non-profit organizations (NPO) means any entity (NPO) or organization 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 8 of the Companies Act, Page 11

12 vi. Officially valid document Govt. of India has made amendment to the Prevention of (OVD) Money-laundering (Maintenance of Records) Rules, 2005 vide its Gazette Notification No. 439 dated 1st June, 2017, and has advised that Officially Valid Document (OVD) would mean(a) The passport, (b) The Driving License, (c) The Voter s Identity Card issued by Election Commission of India, (d) Job Card issued by NREGA duly signed by an officer of the State Government, (e) The letter issued by the National Population Register containing details of name, address (f) Any other document as notified by the Central Government in consultation with the Regulator Explanation: Customers, at their option, shall submit one of the six OVDs for proof of identity and proof of address. Provided that where simplified measures are applied for verifying the identity of the customers, i.e., for Low Risk Customers, the following documents shall be deemed to be OVD : a) Identity card with applicant s photograph issued by Central/ State Government Departments, Regulatory Authorities, Public Sector Scheduled Commercial Banks, Statutory/ Undertakings, and Public Financial Institutions; b) Letter issued by a Gazetted officer, with a duly attested photograph of the person. Provided further that where simplified measures are applied i.e., for Low Risk Customers, for verifying, for the Page 12

13 limited purpose of, proof of address the following additional documents are deemed to be OVDs : a) Utility bill, which is not more old, of any service provider than two months (electricity, telephone, post-paid mobile phone, piped gas, water bill); b) Property or Municipal Tax receipt; c) Bank account or Post Office savings bank account statement; d) Pension or family Pension Payment Orders (PPOs) issued to retired employees Departments or Public by Government Sector Undertakings, if they contain the address; e) Letter of allotment of accommodation from employer issued by State or Central Government departments, statutory or regulatory bodies, public sector undertakings, scheduled commercial banks, financial institutions and and listed companies. Similarly, lease license agreements with such employers allotting official accommodation; and f) Documents of issued by Government departments foreign jurisdictions or letter issued by Foreign Embassy or Mission in India. vii. Aadhaar number Aadhaar number means an identification number as defined under sub-section (a) of section 2 of the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, viii. Authentication Authentication means the process as defined under subsection (c) of section 2 of the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016, i.e., the process by which the Aadhaar number along with demographic information or biometric information of an individual is submitted to the Central Identities Data Page 13

14 Respiratory for its verification and such Repository verifies the correctness, or the lack thereof, on the basis of information available with it. ix. Resident Resident means an individual as defined under sub-section (v) of section 2 of the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016, i.e, an individual who has resided in India for a period or periods amounting in all to one hundred and eighty-two days or more in the twelve months immediately preceding the date of application for enrolment. x. Identity information Identity information means the information as defined in sub-section (n) of section 2 of the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016, i.e, in respect of an individual, it includes his Aadhaar number, his biometric information and his demographic information. xi. e-kyc authentication facility e-kyc authentication facility means an authentication facility as defined in Aadhaar (Authentication) Regulations, 2016, i.e., a type of authentication facility in which the biometric information and/or OTP and Aadhaar number securely submitted with the consent of the Aadhaar number holder through a requesting entity, is matched against the data available in the Central Identities Data Repository (CIDR), and the Authority returns a digitally signed response containing e-kyc data along with other technical details related to the authentication transaction. xii. Yes/No authentication Yes/No authentication facility means an authentication facility facility as defined in Aadhaar (Authentication) Regulations, 2016, i.e., a type of authentication facility in which the identity information and Aadhaar number securely submitted with the consent of the Aadhaar number holder through a requesting entity, is then matched against the data available in the CIDR, and the Authority responds with a digitally signed response Page 14

15 containing Yes or No, along with other technical details related to the authentication transaction, but no identity information. xiii. Person Person has the same meaning assigned in the Act and includes: a) An individual, b) A Hindu undivided family, c) A Company, d) A firm, e) An association of persons or a body of individuals, whether incorporated or not, f) Every artificial juridical person, not falling within any one of the above persons (a to e), and g) Any agency, office or branch owned or controlled by any of the above persons (a to f). xiv. Principal Officer Principal by the Officer means an officer nominated RE, responsible for furnishing information as per rule 8 of the Rules. Bank should appoint a senior management officer to be designated as Principal Officer. Bank should ensure that the Principal Officer is able to act independently and report directly to the senior management or to the Board of Directors. Principal Officer shall be located at the head/corporate office of the bank and shall be responsible for monitoring and reporting of all transactions and sharing of information as required under the law. He will maintain close liaison with enforcement agencies, banks and any other institution which are involved laundering and in the combating fight against financing of money terrorism Further, the role and responsibilities of the Principal Officer should include overseeing and ensuring overall compliance with regulatory guidelines KYC/AML/CFT issued from obligations under the time to Prevention time of on and Money Page 15

16 Laundering Act, 2002, rules and regulations made there under, as amended form time to time. The Principal Officer will also be responsible for timely submission of CTR, STR, CWTR and reporting of counterfeit currency notes and all transactions involving receipts by non-profit organisations of value more than Rupees Ten Lakh or its equivalent in foreign currency to FlU-IND. With a view to enabling the Principal Officer to discharge his responsibilities effectively, the Principal Officer and other appropriate staff should have timely access to customer identification data and other CDD information, transaction records and other relevant information. xv. Suspicious transaction Suspicious transaction means a transaction as defined below, including an attempted whether or not made transaction, in cash, which, to a person acting in good faith, : a) gives rise to a reasonable ground of suspicion that it may specified in involve proceeds the of Schedule to an offence the Act, regardless of the value involved; or b) appears to be made in circumstances of unusual or unjustified complexity; or c) appears to not have economic rationale or bona-fide purpose; or d) gives rise to a reasonable ground of suspicion that it may involve financing of the activities relating to terrorism. Explanation: activities Transaction relating to involving terrorism financing includes of the 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. Page 16

17 xvi. Small Account A Small Account means a savings account in which: a) the aggregate of all credits in a financial year does not exceed rupees one lakh; b) the aggregate of all withdrawals and transfers in a month does not exceed rupees ten thousand; and c) the balance at any point of time does not exceed rupees fifty thousand. xvii. Transaction Transaction means a purchase, sale, loan, pledge, gift, transfer, delivery or the arrangement thereof and includes: a) opening of an account; b) 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; c) the use of a safety deposit box or any other form of safe deposit; d) entering into any fiduciary relationship; e) any payment made or received, in whole or in part, for any contractual or other legal obligation; or f) establishing or creating a legal person or legal arrangement. (b) Terms bearing meaning assigned in the Directions, unless the context otherwise requires, shall bear the meanings assigned to them below: SL. NO. i. Terminology Common Reporting Standards (CRS) Definition Common Reporting Standards (CRS) means reporting standards set for implementation of multilateral agreement signed to automatically exchange information based on Article 6 of the Convention on Mutual Administrative Assistance in Tax Matters. Page 17

18 ii. Customer Customer means a person who is engaged in a financial transaction or activity with the Bank and includes a person on whose behalf the person who is engaged in the transaction or activity, is acting. iii. Walk-in Customer Walk-in Customer means a person who does not have an account based relationship with the Bank, but undertakes transactions with the Bank. iv. Customer (CDD) Due Diligence Customer Due Diligence (CDD) means identifying and verifying the customer and the beneficial owner using Officially Valid Documents as a proof of identity and a proof of address. v. Customer identification Customer identification means undertaking the process of CDD. vi. FATCA FATCA means Foreign Account Tax Compliance Act of the United States of America (USA) which, inter alia, requires foreign financial institutions to report about financial accounts held by U.S. Taxpayers or foreign entities in which U.S. Taxpayers hold a substantial ownership interest. vii. IGA IGA means Inter Governmental Agreement between the Governments of India and the USA to improve international tax compliance and to implement FATCA of the USA. viii. KYC Templates KYC Templates means templates facilitate collating prepared to and reporting the KYC data to the CKYCR, for individuals and legal entities. ix. Non-face-to-face customers Non-face-to-face customers mean customers who open accounts without visiting the branch/offices of the Bank or meeting the officials of Bank. Page 18

19 x. On-going Due Diligence On-going Due Diligence of means regular monitoring transactions in accounts to ensure that they are consistent with the customers profile and source of funds. xi. Periodic Updation Periodic Updation means steps taken to ensure that documents, data or information collected under the CDD process is kept up-to-date and relevant reviews of existing records at by undertaking periodicity prescribed by the Reserve Bank. xii. Politically Exposed Persons (PEPs) Politically Exposed Persons (PEPs) are individuals who are or have been entrusted with prominent public functions in a foreign country, States/Governments, e.g., Heads senior politicians, government/judicial/military officers, of state-owned corporations, of senior important senior executives political party officials, etc. xiii. Regulated Entities (REs) Regulated Entities (REs) means : a. All Scheduled Regional (LABs)/ Commercial Rural All Banks (SCBs)/ Banks (RRBs)/ Local Area Banks Primary (Urban) Co-operative Banks (UCBs)/State and Central Co-operative Banks (StCBs / CCBs) and any other entity which has been licenced under Section 22 of Banking Regulation Act, 1949, which as a group shall be referred as banks b. All India Financial Institutions (AIFIs) c. All Non-Banking Miscellaneous Finance Companies Non- Banking Companies (NBFC)s, (MNBCs) and Residuary Non-Banking Companies (RNBCs). d. All Payment System System Participants (SPs) Providers (PSPs)/ and Prepaid Payment Instrument Issuers (PPI Issuers) All authorised persons (APs) including those who are agents of Money Transfer Service Scheme (MTSS), regulated by the Regulator. Page 19

20 Simplified procedure xiv. Simplified procedure means the undertaking customer due diligence procedure for respect of in customers, who are rated as low risk by the RE and who do not possess any of the six officially valid documents, with the alternate under provisos the two documents prescribed of Section 3(a)(vi) of this Directions. Shell bank xv. Shell bank means a bank which is incorporated in a country where it has no physical presence and is unaffiliated to any regulated financial group. Shell Company xvi. A Shell Company is an entity that has no active business and usually exists only in name as a vehicle for another company s business operations (Black s Law Dictionary). In essence, shells are corporations that exist mainly on paper, have no physical presence, employ no one and produce nothing. xvii. Wire transfer Wire transfer means a transaction carried out, directly or through a chain of transfers, on behalf of an originator person (both natural electronic means and legal) through a bank by with a view to making an amount of money available to a beneficiary person at a bank. xviii. Domestic and cross-border wire transfer Domestic and cross-border wire transfer : When the originator bank and the beneficiary bank is the same person or different person located in the same country, such a transaction is a domestic wire transfer, and if the originator different bank countries or beneficiary such a bank is located transaction is in cross-border wire transfer. (c) All other expressions unless defined herein shall have the same meaning as have been assigned to them under the Banking Regulation Act or the Reserve Bank of India Act, or the Prevention of Money Laundering Act and Prevention of Money Laundering (Maintenance of Records) Rules, any statutory modification or re- enactment thereto or as used in commercial parlance, as the case may be. Page 20

21 CHAPTER II General 2.1 Some important guidelines: Branches are advised to note the following important guidelines for meticulous compliance, in view of the importance attached for adherence to the KYC & AML policy :a) Customer identification procedure & KYC updation (i) The identity of the proposed customer and the beneficial owner should be established to the satisfaction of the bank before permitting the opening of accounts. (ii) The identity of the existing customer also needs to be re-verified while activating dormant/in-operative accounts. (iii) The identification requirements in respect of walk-in-customers should be met and records to be preserved, wherever applicable. b) Verification of Genuineness of Permanent Account Number (PAN) Branches should verify genuineness of the Pan provided through NSDL site. Branches must not enter any Junk/ Invalid PAN as this situation is not only fraught with risk with facilitating the customer with less deduction of tax but also makes the branch Managers personally responsible. c) KYC for sale of Third party products When banks sell third party products as agents, the responsibility for ensuring compliance with KYC/AML/CFT regulations lies with the third party. However, to mitigate reputational risk to banks and to enable a holistic view of a customer s transactions, branches must follow the appended guidelines: (i) Even while selling of third party products as agents, banks should verify the identity and address of the walk-in-customer. (ii) Banks should also maintain transaction details with regard to sale of third party products and related records. (iii) Sale of third party products by banks as agents to customers, including walk-in Page 21

22 customers, for Rs.50,000 and above must be made (a) by debit to customers accounts or against cheques, and (b) obtention & verification of the PAN given by the account based as well as walk-in-customers. This instruction would also apply to sale of bank s own products, payment of dues of credit cards/sale and reloading of prepaid/travel cards and any other product for Rs. 50,000 and above. d) Risk Categorization of Accounts Risk categorization in respect of the accounts should be assigned ab initio at the time of opening of the accounts. Periodical reviews of all accounts regarding its risk categorization have to be carried out at the prescribed intervals. We have since introduced system-based risk categorization of the customers, through integration of AML software with B@ncs24, based on set domain parameters viz. occupation, line of business, entity type, country, resident status etc. e) Monitoring & Reporting of Transactions (i) The coverage and intensity of monitoring of transactions should be in commensurate with the risk categorization of the customers and should meet all the obligations of the bank under PMLA Moreover, monitoring of transactions of walk-in customers should also be subjected to the same rigour as that applicable to the bank s own customers for monitoring purposes. (ii) It is observed that some branches were using internal accounts as a parking account for own customers / walk-in customers cash transactions which involved purchase of DDs, sale of gold coin etc. for amounts above Rs.50,000. This is strictly prohibited under extant policy guidelines. In such cases, the transactions effected were not being captured for the purposes of monitoring and reporting under CTR/STR. It is, therefore, advised to put a stop to this practice forthwith, and in case any violation is found later on, personal accountability will be fixed on the erring officials. f) Issuing of Demand Draft/Banker s Cheque/Inter Office Instrument for Rs.50,000 and above: Branches must not accept cash for issuing of Demand Drafts(DD) / Banker s Cheque (BC) / Inter-Office-Instrument (IOI) of Rs.50,000 and above to customers / walk-in customers. g) Structuring of transactions with value just below threshold limits: Structured transactions involving multiple cash deposits, DD/IOI/Banker s Cheque purchases and sale of gold coins, with the individual transactions of values just below the Page 22

23 threshold limit of Rs.50,000 i.e. in the range of Rs.40,000 to Rs.49,999 (i.e. less than thresh hold limit of Rs.50,000) to the same purchaser (favouring same beneficiary) on a single day (aggregate of such drafts issued exceeds Rs.50,000), indicating accommodating them by splitting of amounts, is against the spirit of PMLA guidelines and must be avoided. h) Customer s transactions through BGL Accounts: Branches/offices must desist from initiating transactions on behalf of the customers through BGL accounts viz. sundry, suspense, internal accounts etc. in violation of extant guidelines. All the field functionaries should note that in case any such instance comes to notice, the concerned officials would be held personally responsible and would be subjected to Disciplinary Action. i) Transactions through NRE/NRO Accounts, Liberised Remittance Scheme and Import of gold under consignment basis: Branches must ensure strict adherence to the extant FEMA, 1999 regulations on permissible transactions and upper limits for transactions in NRE & NRO accounts considering the aspect of repatriation of funds through such accounts. It may also be ensured that the transactions within the extant ceilings prescribed under Liberalised Remittance Scheme are put through only in case of resident individuals meeting all other conditions specified in the extant guidelines/instructions. It is reiterated that the facility should not be extended to non-individuals. Banks should not take part with advance payments on import of gold under consignment basis. j) Acceptance of Cash Deposits in accounts: Branches are advised that there is no restriction regarding acceptance of cash deposits in the accounts of the customers provided PAN/Form 60/61 is obtained in case of deposits above Rs.50,000, and CTR reports are filed with FIU-IND for cash transactions above Rs.10,00,000 in aggregate during a month. However, attempts to structure transactions below the threshold limits of Rs.50,000 and/ or Rs.10,00,000 should attract the attention of the branches for further necessary action including reporting of such transactions under STRs to FIU-IND through their respective ZOs & HO. k) Management Overview and Compliance Culture: Lackadaisical approach in ensuring KYC compliance will be detrimental to the interests of the banks in the long run, not only in the domestic front, but in the international market as Page 23

24 well. A bank that knowingly / unknowingly participates in transactions intended to be used by customers to avoid regulatory or financial reporting requirements, evade tax liabilities or facilitate illegal conduct will be exposing itself to reputational risk. l) Internal Audit and Concurrent Audits: Bank s internal audit and compliance functions have an important role in evaluating and ensuring adherence to the KYC policies and procedures. Branches should take a proactive role to make optimum use of the management tools like internal audit and concurrent audit machinery by ensuring reporting of such cases of non-adherence to the KYC norms & AML measures. m) KYC Policy: Every Bank should have a Know Your Customer (KYC) policy duly approved by the Board of Directors the Bank or any committee of the Board to which power has been delegated. KYC policy incorporates the following four key parameters:a) Customer Acceptance Policy (CAP); b) Customer Identification Procedures (CIP); c) Monitoring of Transactions; and d) Risk Management. n) Compliance of KYC policy: The Bank shall ensure compliance with KYC Policy through: a) Specifying as to who constitute Senior Management for the purpose of KYC compliance. b) Allocation of responsibility for effective implementation of policies and procedures. c) Independent evaluation of the compliance functions of the Bank s policies and procedures, including legal and regulatory requirements. d) Concurrent/internal audit system to verify the compliance with KYC/AML policies and procedures. e) Submission of quarterly audit notes and compliance to the Audit Committee. Page 24

25 CHAPTER III Customer Acceptance Policy (CAP) 3. In order to establish relationship with the intending customer, comprehensive information regarding the new customer should be obtained at the initial stage. The prospective customer should be interviewed by the Branch Manager/ Officer to understand customer s intended relationship with the Bank. Branch heads/officials, in the process of establishing relationship with the customer and/or permitting opening of the account, should protect the bank from the risks of doing business with any individual or entity whose identity cannot be determined or who refuses to provide information, or who have provided information that contains significant inconsistencies which cannot be resolved after due investigation. The following guidelines should be taken into account while accepting a customer: (a) No account is opened in anonymous or fictitious/benami name. Opening of or keeping any anonymous account or accounts in fictitious name or account on behalf of other persons whose identity has not been disclosed or cannot be verified should not be allowed. (b) No account is opened where the Bank is unable to apply appropriate CDD measures, either due to non-cooperation of the customer or non-reliability of the documents/information furnished by the customer. The branch may also consider closing an existing account under similar circumstances. It is, however, necessary to have suitable built in safeguards to avoid harassment of the customer. For example, decision by the branch to close an account in such cases should be taken at Zonal Office level after giving due notice to the customer explaining the reasons for such a decision (c) No transaction or account based relationship is undertaken without following the CDD procedure. (d) The mandatory information to be sought for KYC purpose while opening an account and during the periodic updation, is specified. (e) Optional /additional information, is obtained with the explicit consent of the customer after the account is opened. (f) CDD Procedure is followed for all the joint account holders, while opening a joint account. (g) Circumstances, in which a customer is permitted to act on behalf of another person/entity, should be clearly spelt out in conformity with the established law and practice of banking as Page 25

26 there could be occasions when an account is operated by a mandate holder or where an account is opened by an intermediary in fiduciary capacity. (h) Suitable system is put in place to ensure that the identity of the customer does not match with any person or entity, whose name appears in the sanctions lists circulated by Reserve Bank of India. It is important to bear in mind that the adoption of Customer Acceptance Policy and its implementation shall not result in denial of banking/financial facility to members of the general public, especially those, who are financially or socially disadvantaged. Page 26

27 CHAPTER IV Risk Management The KYC guidelines go beyond merely establishing the identity of the person and satisfying about his/her credentials by obtaining an introductory reference from a known person. The due diligence expected under KYC involves a risk based approach going in to the purpose and reasons for opening the account, anticipated turnover in the account, source of wealth (net worth) of the person opening the account and sources of funds flowing into the account. Branches should maintain Customer Risk Profile both for new as well as existing customers based on the declaration/ information furnished by the customer during the course of interview so as to understand customer s intended relationship with the Bank. The profile would give an idea as to what type of transactions / activities are expected in the account. This information is valuable for monitoring the activities in the account. Based upon the information given by the customer and recorded in the Customer Profile regarding his/ her occupation/ activity/ source of funds etc., a threshold limit in each particular account is to be determined. Bank will capture the declared annual turnover of the customer for SB account, purpose for maintaining the account, last year s sales turnover for a current account of existing firm, projected sales turnover for current account of new firm in the CBS system and will device a formula correlating these factors to determine the Threshold Limit for each and every account. Very high turnover in the account inconsistent with the size of the balance maintained requires intensified monitoring. If transactions of very high amount in variance with the profile are noticed, the account holder should be contacted for further details to the satisfaction of the Branch Manager. On the basis of assessment, the account should be reviewed and the profile should be reclassified according to the risk perceived and the nature and extent of monitoring required in future is to be determined accordingly. Branches/Offices should exercise ongoing due diligence with respect to the business relationship with every client and closely examine the transactions in order to ensure that they are consistent with their knowledge about the clients, their business and risk profile and where necessary, the source of funds. 4.1 For Risk Management, the Bank shall devise a risk based approach which includes the following:- (a) Customers shall be categorised as Low, Medium and High risk category, based on the assessment and risk perception of the Bank. Page 27

28 A profile for each new customer should be prepared based on risk categorization taking the under noted points into consideration: Identity of the customer Social/financial status Nature of business activity and location Information about his clients location of business Volume of turnover Mode of payment, sources of fund The nature and extent of due diligence will depend on the risk perceived by the branch. However, while preparing customer profile care should be taken to seek only such information from the customer, which is relevant to the risk category and is not intrusive. The customer profile is a confidential document and details contained therein should not be divulged for cross selling or any other purposes. (b) Risk categorisation shall be undertaken based on parameters such as customer s identity, social/financial status, nature of business activity, information about the clients business and their location etc. While considering customer s identity, the ability to confirm identity documents through online or other services offered by issuing authorities may also be factored in. Explanation: FATF Public Statement, the reports and guidance notes on KYC/AML issued by the Indian Banks Association (IBA), guidance note circulated to all cooperative banks by the RBI etc., may also be used in risk assessment. (c) IBA has suggested some indicative parameters which can be used to determine the profile & risk category of a customer. The suggestion of IBA was as under(i) Customer Constitution: Individual, proprietorship, partnership, private limited, etc. (ii) Business Segment: Retail, Corporate, etc. (iii) Country of Residence/Nationality: Whether India or overseas location/indian or foreign national. (iv) Product Subscription: Salary Account, NRI products, etc. (v) Economic Profile: HNI, Public Limited Company etc. (vi) Account Status: Active, Inoperative, Dormant, etc. (vii) Account Vintage: Less than Six months old, etc. (viii) Presence in Regulatory Negative /PEP/Defaulter/Fraudster lists (ix) Suspicious Transaction Report (STR) filed for the customer Page 28

29 (x) AML alerts Further, IBA added that other parameters like source of funds, occupation, purpose of account opening, nature of business, mode of operation, credit rating, etc. can also be used in addition to the above parameters. IBA advised the Banks to adopt all or majority of these parameters based on availability of the data. These indicative parameters are taken into consideration while devising the Risk Categorization process by the Bank and has already adopted a system based Risk Categorization module in the AML system for identifying different customer risk categories based on the 8 parameters and integrated the same in the CBS system by introducing F9-Hot-Key where the Risk score along with Risk categorization has been made available to the field functionaries. F9 Hot-key, would exhibit the following details of the customers:a) HNI Status with either N (i.e. No) or Y (i.e. Yes) b) Risk Profile with Low, Medium or High c) Risk Score d) address e) Mobile No. f) Date of Birth g) Gender h) Aadhaar No. i) PAN j) PAN Status (Valid or not) k) Form 60 Number The use of F9 hot key has been made mandatory before proceeding for any type of banking operation of the customers in order to adherence due diligence. A Low-risk customer may be treated as Medium/ High risk if the transactions in the account in subsequent period does not conform to his declared income/ source of fund and raise suspicion. Accordingly, the profile of each customer account should be reclassified/ updated as and when situation arises. 4.2 Maintenance of Customers Risk Profile (a) Branches/Offices should prepare a profile for each new customer based on risk categorisation. The customer profile should contain information relating to customer s Page 29

30 identity, social/financial status, nature of business activity, information about the clients business and their location etc. The nature and extent of due diligence will depend on the risk perceived by the Bank. (b) Branches/Offices should categorize their customers into low, medium and high risk category based on their assessment and risk perception of the customers, identifying transactions that fall outside the regular pattern of activity and not merely based on any group or class they belong to. Broad guidelines on risk perception is given in AppendixIV. The branches/offices are advised to go with the guidelines given in AML & KYC Policy for risk categorisation and ensure that the same are meticulously complied with to effectively help in combating money laundering activities. The nature and extent of due diligence, may be based on the following principles: (i) Individuals (other than High Net Worth) and entities, whose identity and source of income, can be easily identified, and customers in whose accounts the transactions conform to the known profile, may be categorised as Illustrative examples include salaried employees low risk. and pensioners, people belonging to lower economic strata, government departments and government owned companies, regulators and statutory bodies, etc. Further, Non-Profit Organisations (NPOs)/ Non-Government Organisations (NGOs) promoted by the United Nations or its agencies, and such international/multilateral organizations of repute, may also be classified as low risk customers. (ii) Customers who are likely to pose a higher than average risk should be categorised as medium or high risk depending on the background, nature and location of activity, country of origin, sources of funds, customer profile, etc. Customers requiring very high level of monitoring, e.g., those involved in cash intensive business, Politically Exposed Persons (PEPs) of foreign origin, may, if considered necessary, be categorised as high risk. The above guidelines for risk categorisation are indicative and branches/offices may use their own judgment in arriving at the categorisation for each account based on their own assessment and risk perception of the customers and not merely based on any group or class they belong to. Further clarifications on risk based assessment are given hereunder. 4.3 Management of Customer Risk Profile As discussed in Point 4.2 branches/offices should maintain Customer Risk Profile both for new as well as existing customers. While full details about the customers can be available in the Page 30

31 respective account assessment of opening the interview/discussion money with the form, additional laundering customer. information risks Branch should commensurate with also be Manager/Officers obtained should be the through vigilant when customers conduct banking transactions and determine realistically the transactions that are unusual and potentially fraudulent. Necessary steps to be taken as and when there is a suspicion in any transaction. Branch should send a report to higher authority for the transactions that are of suspicious nature. Branch should apply Enhanced Due Diligence (EDD) measures based on the risk assessment, thereby requiring intensive due diligence for higher risk customers, especially those for whom the sources of funds are not clear. All customer accounts (both existing and new) should be categorized into three levels as per risk perceived, viz. i. Level - I (low risk), ii. Level - II (medium risk), iii. Level - III (high risk). (i) Level - I (Low risk) customers: For the purpose of risk categorization, individuals (other than high net worth) and entities whose identities and sources of wealth can be easily identified and transactions in whose accounts by and large conforms to the known profile, may be categorized as low risk accounts. Illustrative examples of Level - I (low risk) customers may include; Salaried employees whose salary structures are well defined Businessmen/Traders whose activities are well defined and transactions in the accounts commensurate with the business transactions. People belonging to lower economic strata of society and whose accounts show small balances and low turnover. Government departments & Government owned companies, regulators and statutory bodies etc. In such cases, only the basic requirements of verifying the identity and location (address) of the customers and introducers are to be met. Reserve Bank of India observed that of late, there has been an increase in instances of Page 31

32 fictitious offers, where fraudsters are using RBI s corporate logo/name in their messages and also sometimes include the photograph of the Governor to convince the victims of the authenticity of the purported messages conveying lottery/prize winnings. The fraudsters persuade victims into making initial payment into a specified bank account towards charges for claiming the prize money. The victims invariably complain to RBI after they have lost money in such transactions. It was also observed by RBI from the responses received from banks in this regard that these transactions generally take place in newly opened accounts of individuals/salary accounts, which are classified as low risk. In view of RBI directives, Bank has issued various advisories on website, warning public against falling prey to fictitious offers/ lottery winnings/ remittance of cheap funds in foreign currency from abroad by so-called foreign entities/individuals or to Indian residents acting as representatives of such entities/individuals. Field functionaries are advised to adopt the following measures as part of the monitoring exercise: a) Generally the fraudsters open and route transactions through salary/savings accounts categorized as low risk, by way of small deposits to evade detections. Branch should monitor operations in these low risk accounts for identifying atypical transaction. The abnormal patterns in the range of transactions, salary accounts, newly opened accounts etc should be identified. The transactions that are deviating from the threshold limit/outside the normal transaction region should be probed into and resolved quickly. b) Branches should closely monitor such accounts in the initial 3-6 months of their opening with threshold limit carefully calibrated to track transactions not in line with customer profile and ensure quick turnaround time in resolution of alerts. c) Branch officials should clarify queries from customers regarding such lottery winnings where they have been advised to deposit money in specified accounts. Branches should also display a notice within the premises that such facility is available. (ii) Level - II (Medium risk) customers: Customers those are likely to pose a higher than average risk should be classified as Level II (Medium risk). Customers particularly whose sources of fund are not clear and Page 32

33 transaction exceeds the disclosed source of fund. (iii) Level - III (High risk) customers: Customers that are likely to pose a higher than average risk should be categorized as Level - III (High risk) depending upon customer s back ground, nature and location of activity, country of origin, source of funds and his client s profile. Illustrative examples of Level - III (High risk) customers may include: In view of the risks involved in cash intensive business, accounts of bullion dealers (including sub-dealers) & jewelers should be categorized as High Risk. Those who are engaged in certain professions where money laundering possibilities are high e.g. Antique dealers (individuals and entities), Money Services Bureau (entities non employees of these entities) and dealers in arms etc. Non-resident customers. High Net-worth Individuals (HNI). Trust, Charities, N.G.Os and organizations receiving donations. However, NPOs/NGOs promoted by United Nations or its agencies may be classified as low risk customer Companies having close family share holding or beneficial ownership. Firms with sleeping partners. Funds coming from the list of countries/ centers which are known for money laundering. Non face to face customers, and Those with dubious reputation as per public information available etc. Politically exposed persons (PEPs) of foreign origin, customers who are close relatives of PEPs and accounts of which a PEP is the ultimate beneficial owner; The above examples are illustrative and not exhaustive. Field functionaries should select Customer Type, Nationality, Domicile/Country of Residence, Residential Status/Country of Incorporation, Occupation Code, Industry Classification Code, BSR Activity Code, CIS Org Code & Segment Code properly while creating or amending any CIF in the CBS in order to facilitate the system based default classification of the High Risk Customers. (Detailed procedure has been enumerated in HO IC No dated 31 st July, Indicative list of High/Medium risk customers and high/medium risk products & services enclosed in Appendix -IV ) The Branch officials of the concerned branch, where suspicious activity/transaction is noticed, should verify the transactions depending upon the nature and circumstances, satisfy Page 33

34 themselves whether the activity/ transactions in the account is to be reported as a suspicious nature or to be treated as a bonafide one. Accordingly, the account should be categorized as Level - I/ Level - II/ Level - III as deemed fit and be monitored suitably. Preparation of customer s profile should be a continuous exercise. Customer s profile should be reviewed periodically. The categorization of the bank has accounts already put in place a system-based risk with periodical review, i.e. once in six months (on February & August end). Page 34

35 CHAPTER - V Customer Identification Procedure (CIP) 5.1 Procedure to be adopted in Customer Identification: Customer identification means undertaking client due diligence measures while commencing an account-based relationship including identifying and verifying the customer and the beneficial owner on the basis of one of the Officially Valid Documents (OVDs). a) Branches shall undertake identification of customers in the following cases:- (i) Commencement of an account-based relationship with the customer. (ii) Carrying out any international money transfer operations for a person who is not an account holder of the bank. (iii) When there is a doubt about the authenticity or adequacy of the customer identification data it has obtained. (iv) Selling third party products as agents, selling their own products, payment of dues of credit cards/sale and reloading of prepaid/travel cards and any other product for more than Rs. 50,000/-. (v) Carrying out transactions for a non-account based customer, that is a walk-in customer, where the amount involved is equal to or exceeds Rs. Rs. 50,000/-, whether conducted as a single transaction or several transactions that appear to be connected. (vi) When a RE has reason to believe that a customer (account- based or walk-in) is intentionally structuring a transaction into a series of transactions below the threshold of Rs. 50,000/-. b) For the purpose of verifying the identity of customers at the time of commencement of an account-based relationship, Branches, shall at their option, rely on customer due diligence done by a third party, subject to the following conditions :- (i) Necessary information of such customers due diligence carried out by the third party is immediately obtained by Branches. (ii) Adequate steps are taken by the Branches to satisfy themselves that copies of identification data and other relevant documentation relating to the customer due diligence requirements shall be made available from the third party upon request without delay. Page 35

36 (iii) The third party is regulated, supervised or monitored for, and has measures in place for, compliance with customer due diligence and record-keeping requirements in line with the requirements and obligations under the PML Act. (iv) The third party shall not be based in a country or jurisdiction assessed as high risk. (v) The ultimate responsibility for customer due diligence and undertaking enhanced due diligence measures, as applicable, will be with the Branches. While undertaking customer identification, Branches shall ensure that:a) Decision-making functions of determining compliance with KYC norms shall not be outsourced. b) Introduction shall not be sought while opening accounts. c) The customers shall not be required to furnish an additional OVD, if the OVD submitted by the customer for KYC contains both proof of identity and proof of address. d) A customer shall not be required to furnish separate proof of current address, if it is different from the address recorded in the OVD. In such cases, the RE shall merely obtain a declaration from the customer indicating the address to which all correspondence will be made by the RE. e) The local address for correspondence, for which their proof of address is not available, be verified through positive confirmation such shall as acknowledgment of receipt of letter, cheque books, ATM cards, telephonic conversation, visits to the place, or the like. f) In case it is observed that the address mentioned as per proof of address has undergone a change, Branches shall ensure that fresh proof of address is obtained within a period of six months. An indicative list of Customer Identification Procedure, Features to be verified and documents that may be obtained from customers is provided in Appendix-I Page 36

37 CHAPTER - VI Customer Due Diligence (CDD) Procedure Part I - CDD Procedure in case of Individuals Branches shall obtain the following documents from an individual while establishing an account based relationship :Any individual who is eligible to be enrolled for an Aadhaar number, would be required to submit the following documents to the bank at the time of establishment of account based relationship Aadhaar number issued by the Unique Identification Authority of India; and The Permanent Account Number (PAN) or Form No.60 as defined in Income Tax Rules, 1962 one recent photograph; and such other documents pertaining to the nature of business or financial status specified by the Bank in the KYC policy. Where an Aadhaar number has not been assigned to a customer, he/she would be required to furnish proof of application of enrolment for Aadhaar and in case the PAN is not submitted, one certified copy of an OVD shall be required to be submitted along with Form 60. If the customer is not eligible to be enrolled for an Aadhaar number, he shall submit PAN or Form No. 60 as defined in the IT Rules, But if PAN is not submitted, the customer shall submit one certified copy of an OVD containing details of his identity and address, one recent photograph. Branches, at the time of receipt of the Aadhaar number under provisions of this rule, shall carry out authentication using e-kyc authentication facility or Yes/No authentication facility provided by UIDAIprovided by UIDAI. In case if customers is NRI or is a resident in the States of Jammu and Kashmir, Assam or Meghalaya and does not submit the PAN, he would be required to submit one certified copy of OVD containing details of his identity and address and one recent photograph along with Form 60. For all the customers who are eligible to be enrolled for Aadhaar and for obtaining a PAN do not submit the same, would be required to submit it within 6 (six) months from the date of opening of the account. Page 37

38 In case the customer fails to submit the Aadhaar number and PAN within the aforesaid six months period, the said account shall cease to be operational till the time the Aadhaar and PAN is submitted. Customers having account based relationship prior to 1st June, 2017, would be required to submit Aadhaar and PAN within 31st December, In case of existing customer having an account prior to 1st June, 2017, fails to submit the Aadhaar number and PAN by 31st December, 2017, the said account shall cease to be operational till the time the Aadhaar and PAN are submitted. Provided that information collected from customers for the purpose of opening of account shall be treated as confidential and details thereof shall not be divulged for the purpose of cross selling, or for any other purpose without the express permission of the customer The e-kyc service of Unique Identification Authority of India (UIDAI) shall be accepted as a valid process for KYC verification under the PML Rules, as (a) the information containing demographic details and photographs made available from UIDAI as a result of e-kyc process is treated as an Officially Valid Document, and (b) transfer of KYC data, electronically to the RE from UIDAI, is accepted as valid process for KYC verification. Provided Branches/Business Correspondents (BCs)/Business Facilitators (BFs) shall obtain authorisation from the individual user authorising UIDAI by way of explicit consent to release his/her identity/address through biometric authentication to the Bank. Provided further that a Bank may provide an option for One Time Pin (OTP) based e-kyc process for on-boarding of customers. Accounts opened in terms of this proviso i.e., using OTP based e-kyc, are subject to the following conditions : There must be a specific consent from the customer for authentication through OTP The aggregate balance of all the deposit accounts of the customer shall not exceed rupees one lakh. The aggregate of all credits in a financial year, in all the deposit taken together, shall not exceed rupees two lakh. Page 38

39 As regards borrowal accounts, only term loans shall be sanctioned. The aggregate amount of term loans sanctioned shall not exceed rupees sixty thousand in a year. Accounts, both deposit and borrowal, opened using OTP based e-kyc shall not be allowed for more than one year within which Customer Due Diligence (CDD) procedure as provided in section 16 or as per the first proviso of Section 17 of the Principal Direction is to be completed. If the CDD procedure is not completed within a year, in respect of deposit accounts, the same shall be closed immediately. In respect of borrowal accounts no further debits shall be allowed. A declaration shall be obtained from the customer to the effect that no other account has been opened nor will be opened using OTP based KYC either with the same RE or with any other RE. Further, while uploading KYC information to CKYCR, REs shall clearly indicate that such accounts are opened using OTP based e-kyc and other REs shall not open accounts based on the KYC information of accounts opened with OTP based e-kyc procedure. REs shall have strict monitoring procedures including systems to generate alerts in case of any non-compliance/violation, to ensure compliance with the above mentioned conditions. In view of the aforesaid RBI guidelines and recent Direct Benefit Transfer (DBT) initiative of the Government of India, all branches are advised to use e-kyc (Biometric authentication) process for opening of bank accounts to ensure that the bank account can be automatically linked to Aadhaar A copy of the marriage certificate issued by the State Government or Gazette notification indicating change in name together with a certified copy of the officially valid document in the existing name of the person shall be obtained for proof of address and identity, while establishing an account based relationship or while undertaking periodic updation exercise in cases of persons who change their names on account of marriage or otherwise In case the person who proposes to open an account does not have an OVD as proof of address, such person shall provide OVD of the relative as provided at sub-section 77 of Section 2 of the Companies Act, 2013, read with Rule 4 of Companies (Specification of definitions details) Rules, 2014, with whom the person is staying, as the proof of address. Explanation: A declaration from the relative that the said person is a relative and is staying with him/her shall be obtained. Page 39

40 6.1.5 In cases where a customer categorised as low risk, expresses inability to complete the documentation requirements on account of any reason that the Branches consider to be genuine, and where it is essential not to interrupt the normal conduct of business, Branches shall, at their option, complete the verification of identity of the customer within a period of six months from the date of establishment of the relationship In respect of customers who are categorised as low risk and are not able to produce any of the OVDs mentioned at Section 3(a)(vi) of Chapter I and where simplified procedure is applied, REs shall, accept any one document from each of the two additional sets of documents listed under the two provisos of sub-rule 2(1)(d). Explanation: During the periodic review, if the low risk category customer for whom simplified procedure is applied, is re-categorised as moderate or high risk category, then REs shall obtain one of the six OVDs listed at Section 3(a)( vi) of these Directions for proof of identity and proof of address immediately. In the event such a customer fails to submit such an OVD, REs shall initiate action as envisaged in Section 39 of these Directions In case an individual customer who does not possess either any of the OVDs or the documents applicable in respect of simplified procedure (as detailed at Section 22 above) and desires to open a bank account, banks shall open a Small Account, subject to the following: a) The bank shall obtain a self-attested photograph from the customer. b) The designated officer of the bank certifies under his signature that the person opening the account has affixed his signature or thumb impression in his presence. c) Such accounts are opened only at Core Banking Solution (CBS) linked branches or in a branch where it is possible to manually monitor and ensure that foreign remittances are not credited to the account. d) Banks shall ensure that the stipulated monthly and annual limits on aggregate of transactions and balance requirements in such accounts are not breached, before a transaction is allowed to take place. e) The account shall be monitored and when there is suspicion of money laundering or financing of terrorism activities or other high risk scenarios, the identity of the customer shall be established through the production of officially valid documents. f) Foreign remittance shall not be allowed to be credited into the account unless the identity of the customer is fully established through the production of officially valid documents. Page 40

41 g) The account remains operational initially for a period of twelve months which can be extended for a further period of twelve months, provided the account holder applies and furnishes evidence of having applied for any of the OVDs during the first twelve months of the opening of the said account. h) The entire relaxation provisions shall be reviewed after twenty four months Proof of Address: In case the identity information relating to the Aadhaar number or PAN submitted by the customer doesn t have current address of the customer, he/she shall be required to submit an OVD (as defined in point no. 1.3 (vi)) to the Bank. This address, however, should be verified by the bank through positive confirmation such as acknowledgment of receipt of letter, cheque books, ATM cards; telephonic conversation; visits to the place; etc. In the event of any change in this address due to relocation or any other reason, customers should intimate the new address for correspondence to the bank within two weeks of such a change. In case the address mentioned as per proof of address undergoes a change, fresh proof of address is to be submitted to the bank/fi within a period of six months In case of close relatives, e.g. husband, wife, son, daughter and parents, etc. who live with their wife, husband, father/mother, daughter and son, who do not have officially valid document for address verification, then, in such cases, branches should obtain OVD for proof of address and identity of the relative with whom the prospective customer is living together with a declaration from the relative that the said person (prospective customer) proposing to open an account is a relative and is staying with her/him. Branches can use any supplementary evidence such as a letter received through post for further verification of the address. It should be kept in mind the spirit of instructions issued by the Reserve Bank and avoid undue hardships to individuals who are, otherwise, classified as low risk customers Shifting of bank accounts to another centre - Proof of address : Banks are not required to obtain fresh documents of customers when customers approach them for transferring their account from one branch of the bank to another branch of the same bank. Banks are advised that KYC verification once done by one branch of the bank should be valid for transfer of the account within the bank if full KYC verification has been done for the concerned account and is not due for periodic updation. The customers should be allowed to transfer their accounts from one branch to another branch without restrictions, without insisting on fresh proof of address and/or identity and on the basis of a self-declaration from the account holder about his/her current address. Further, if an existing KYC compliant customer of a bank desires to open another account in the same bank, there should be no need for Page 41

42 submission of fresh proof of identity and/or address. However, in such case procedure should be followed to obtain the local address or the address where the customer is currently residing, in line with the guidelines issued in point No. 6.8 above If an existing KYC compliant customer of the Bank desires to open another account with the same Bank, there shall be no need for a fresh CDD exercise KYC verification once done by one branch/office of the Bank shall be valid for transfer of the account to any other branch/office of the same Bank, provided full KYC verification has already been done for the concerned account and the same is not due for periodic updation and a self-declaration from the account holder about his/her current address is obtained in such cases. Part II - CDD Measures for Sole Proprietary firms For opening an account in the name of a sole proprietary firm, a certified copy of an OVD as mentioned at Section 3(a) (vi) of Chapter I, containing details of identity and address of the individual (proprietor) shall be obtained. In addition to the above, any two of the following documents as a proof of business/ activity in the name of the proprietary firm shall also be obtained :(a) Registration certificate (b) Certificate/license issued by the municipal authorities under Shop and Establishment Act. (c) Sales and income tax returns. (d) CST/VAT certificate. (e) Certificate/registration document issued by Sales Tax/Service Tax/Professional Tax authorities. (f) IEC (Importer Exporter Code) issued to the proprietary concern by the office of DGFT/License/certificate of practice issued in the name of the proprietary concern by any professional body incorporated under a statute. (g) Complete Income Tax Return (not just the acknowledgement) in the name of the sole proprietor where the firm's income is reflected, duly authenticated/ acknowledged by the Income Tax authorities. Page 42

43 (h) Utility bills such as electricity, water, and landline telephone bills. In cases where the Branches are satisfied that it is not possible to furnish two such documents, Branches may, at their discretion, accept only one of those documents as proof of business/activity. Provided Branches undertake contact point verification and collect such other information and clarification as would be required to establish the existence of such firm, and shall confirm and satisfy itself that the business activity has been verified from the address of the proprietary concern. Part III- CDD Measures for Legal Entities For opening an account of a company, one certified copy of each of the following documents shall be obtained : Certificate of incorporation. Memorandum and Articles of Association. A resolution from the Board of Directors and power of attorney granted to its managers, officers or employees to transact on its behalf. (a) Aadhaar numbers; and (b) PAN or Form 60 as defined in the Income-tax Rules, 1962, issued to managers, officers or employees holding an attorney to transact on the company s behalf or where an Aadhaar number has not been assigned, proof of application towards enrolment for Aadhaar and in case PAN is not submitted, an Officially Valid Document shall be submitted along with Form 60. Provided that for the purpose of this clause if the managers, officers or employees holding an attorney to transact on the compnay s behalf are not eligible to be enrolled for Aadhaar number and do not submit the PAN, certified copy of an OVD shall be submitted along with Form 60. RBI letter no. DBR.AML.NO.8595/ / dated addressed to IBA and subsequent IBA Circular no. RB/CIR/CS/2025 dated advised under following lines to comply with the KYC requirements for opening of account of a company with the banks:- Bank branches should not seek the Common Seal in their account opening form, since it is not a mandatory requirement. Even in those cases, where the Memorandum of Association and Articles of Association of the company require affixing a Common Seal, the company shall be allowed to provide the same voluntarily and the account opening form of the banks shall not have any such requirement for providing the company seal. Page 43

44 6.3.2 For opening an account of a partnership firm, one certified copy of each of the following documents shall be obtained: Registration certificate. Partnership deed. (a) Aadhaar numbers; and (b) PAN or Form 60 as defined in the Income-tax Rules, 1962 issued to the person holding an attorney to transact on the company s behalf or where an Aadhaar number has not been assigned, proof of application towards enrolment for Aadhaar and in case PAN is not submitted, an Officially Valid Document shall be submitted along with Form 60. Provided that for the purpose of this clause if the person holding an attorney to transact on the compnay s behalf are not eligible to be enrolled for Aadhaar number and do not submit the PAN, certified copy of an OVD shall be submitted along with Form For opening an account of a trust, one certified copy of each of the following documents shall be obtained: Registration certificate. Trust deed. (a) Aadhaar numbers; and (b) PAN or Form 60 as defined in the Income-tax Rules, 1962 issued to the person holding an attorney to transact on its behalf or where an Aadhaar number has not been assigned, proof of application towards enrolment for Aadhaar and in case PAN is not submitted, an Officially Valid Document shall be submitted along with Form 60. Provided that for the purpose of this clause if the managers, officers or employees holding an attorney to transact on the company s behalf are not eligible to be enrolled for Aadhaar number and do not submit the PAN, certified copy of an OVD shall be submitted along with Form For opening an account of an unincorporated association or a body individuals, one certified copy of each of the following documents shall be obtained : resolution of the managing body of such association or body of individuals; power of attorney granted to transact on its behalf; (a) Aadhaar numbers; and of (b) PAN or Form 60 as defined in the Income-tax Rules, 1962 issued to the person holding Page 44

45 an attorney to transact on its behalf or where Aadhaar number has not been assigned, proof of application towards enrolment for Aadhaar and in case PAN is not submitted, an Officially Valid Document shall be submitted along with Form 60. (c) such information as may be required by the RE to collectively establish the legal existence of such an association or body of individuals. Provided that for the purpose of this clause if the managers, officers or employees holding an attorney to transact on the company s behalf are not eligible to be enrolled for Aadhaar number and do not submit the PAN, certified copy of an OVD shall be submitted along with Form 60. Explanation: Unregistered trusts/partnership unincorporated association. firms shall be included under the term For opening accounts of juridical persons not specifically covered in the earlier part, Explanation: Term body of individuals includes societies such as Government or its Departments, societies, universities and local bodies like village panchayats, a certified copy of the following documents shall be obtained: Document showing name of the person authorised to act on behalf of the entity; Officially valid documents for proof of identity and address in respect of the person holding a power of attorney to transact on its behalf and Such documents as may be required by the Bank to establish the legal existence of such an entity/juridical person Part IV - Identification of Beneficial Owner For opening an account of a Legal Person who is not a natural person, the beneficial owner(s) shall be identified and all reasonable steps in terms of Rule 9(3) of the Rules to verify his/her identity shall be undertaken keeping in view the following: a) Where the customer or the owner of the controlling interest is a company listed on a stock exchange, or is a subsidiary of such a company, it is not necessary to identify and verify the identity of any shareholder or beneficial owner of such companies. b) In cases of trust/nominee or fiduciary accounts whether the customer is acting on behalf of another person as trustee/nominee or any other intermediary is determined. In Page 45

46 such cases, satisfactory evidence of the identity of the intermediaries and of the persons on whose behalf they are acting, as also details of the nature of the trust or other arrangements in place shall be obtained. Part V - On-going Due Diligence Branches shall undertake on-going due diligence of customers to ensure that their transactions are consistent with their knowledge about the customers, customers business and risk profile; and the source of funds. Without prejudice to the generality of factors that call for close monitoring following types of transactions shall necessarily be monitored: a) Large and complex transactions including RTGS transactions, and those with unusual patterns, inconsistent with the normal and expected activity of the customer, which have no apparent economic rationale or legitimate purpose. b) Transactions which exceed the thresholds prescribed for specific categories of accounts. c) High account turnover inconsistent with the size of the balance maintained. d) Deposit of third party cheques, drafts, etc. in the existing and newly opened accounts followed by cash withdrawals for large amounts. The extent of monitoring shall be aligned with the risk category of the customer. Explanation: High risk accounts have to be subjected to more intensified monitoring. a) A system of periodic review of risk categorisation of accounts, with such periodicity being at least once in six months, and the need for applying enhanced due diligence measures shall be put in place. b) The transactions in accounts of marketing firms, especially accounts of Multi- level Marketing (MLM) Companies shall be closely monitored. Explanation: Cases where a large number of cheque books are sought by the company and/or account multiple and/or small deposits where a large (generally number in cash) of across cheques the country in one bank are issued bearing similar amounts/dates, shall be immediately reported to Reserve Bank of India and other appropriate authorities such as FIU-IND. Page 46

47 6.5.1 Periodic Updation : Periodic updation shall be carried out at least once in every two years for high risk customers, once in every eight years for medium risk customers and once in every ten years for low risk customers subject to the following conditions :- a) Fresh proofs of identity and address shall not be sought at the time of periodic updation, from customers who are categorised as low risk, when there is no change in status with respect to their identities and addresses and a self- certification to that effect is obtained. b) A certified copy of the proof of address forwarded by low risk customers through mail/post, etc., in case of change of address shall be acceptable. c) Physical presence of low risk customer at the time of periodic updation shall not be insisted upon. d) The time limits prescribed above would apply from the date of opening of the account/ last verification of KYC. e) Fresh photographs shall be obtained from customer for whom account was opened when they were minor, on their becoming a major. f) e-kyc process using OTP based authentication, for the purpose of periodic updation is allowed, provided, while on-boarding, the customer was subjected to KYC process as specified in above in Point No Partial freezing and closure of accounts : a) Prevention of Money-laundering (Maintenance of Records) Second Amendment Rules, 2017 published vide extraordinary official gazette Notification No. 439 dated June 01, 2017i) For all the customers who are eligible to be enrolled for Aadhaar and for obtaining a PAN do not submit the same, would be required to submit it within 6 (six) months from the date of opening of the account. In case the customer fails to submit the Aadhaar number and PAN within the aforesaid six months period, the said account shall cease to be operational till the time the Aadhaar and PAN is submitted. ii) Customers having account based relationship prior to 1st June, 2017, would be Page 47

48 required to submit Aadhaar and PAN within 31st December, In case of existing customer having an account prior to 1st June, 2017, fails to submit the Aadhaar number and PAN by 31st December, 2017, the said account shall cease to be operational till the time the Aadhaar and PAN are submitted. b) Where Branches are unable to comply with the CDD requirements mentioned at Part I to V above, they shall not open accounts, commence business relations or perform transactions. In case of existing business relationship which is not KYC compliant, banks shall ordinarily take step to terminate the existing business relationship after giving due notice. (c) As an exception to the Rule, banks shall have an option to choose not to terminate business relationship straight away and instead opt for a phased closure of operations in this account as explained below :i. The option of partial freezing shall be exercised after giving due notice of three months to the customers to comply with KYC requirements. ii. A reminder giving a further period of three months shall also be given. iii. Thereafter, partial freezing shall be imposed by allowing all credits and disallowing all debits with the freedom to close the accounts in case of the account being KYC non-compliant after six months of issuing first notice. iv. All debits and credits from/ to the accounts shall be disallowed, in case of the account being KYC non-compliant after six months of imposing partial freezing, v. The account holders shall have the option, to revive their accounts by submitting the KYC documents. (d) When an account is closed whether without partial freezing or after partial freezing, the reason for that shall be communicated to account holder. In the circumstances when the branch believes that it would no longer be satisfied about the true identity of the account holder, the branch should send details of the account and the customer stating specific reasons to Head Office AML & KYC Cell through their respective Zonal Offices, recommending to file a Suspicious Transaction Report (STR) with Financial Intelligence Unit India (FIU-IND) under Department of Revenue, Ministry of Finance, Government of India. Page 48

49 Part VI - Enhanced and Simplified Due Diligence Procedure Enhanced Due Diligence : The branches/offices are required to apply Enhanced Due Diligence (EDD) measures in case of higher risk perception on a customer. An indicative list of EDD measures to be taken for High Risk customers is as under: (i) Fresh KYC obtained along with additional documents. (ii) Personal visit made to the address provided by the customer (iii) Discrete enquiry made to the address provided by the customer (iv) Verification of the nature of business and financial status as provided by the customer (v) Additional documents to verify the source of funds as legitimate. (vi) Stringent ongoing monitoring done to ensure transactions are consistent according to the business activity of the customer. (vii) Any other measure to establish identity, address, source of fund and line of activity of the customer which may be deemed to be appropriate or advised by the regulators from time to time. Accordingly, Bank has developed a system based, menu driven solution to capture EDD measure/s taken by the Branch and KYC renew date. (Detailed procedure has been enumerated in HO IC No dated 11 st September, 2017.) Observance of Enhanced Due Diligence to be carried out in all the High Risk customers including the undernoted casesi. Accounts of non-face-to-face customers : With the introduction of phone and electronic banking, increasingly accounts are being opened by banks for customers without the need for the customer to visit the bank branch. In the case of non-face-to-face customers, apart from applying the usual customer identification procedures, there must be specific and adequate procedures to mitigate the higher risk involved. Certification of all documents the presented should be insisted upon and, if necessary, additional documents may be called for. In such cases, branches may also require the first payment to be effected through the customer's account with another bank which, in turn, adheres to similar KYC standards. In the case of cross-border customers, there is the additional difficulty of matching the customer with the documentation and the bank may have to rely on third party certification/introduction. In such cases, it must be ensured that the third party is a regulated and supervised entity and has adequate KYC systems in place. Page 49

50 II. Accounts of Politically Exposed Persons (PEPs): Politically exposed persons are individuals who are or have been entrusted with prominent public functions in a foreign country, e.g., Heads government/judicial/military of States officers, or of Governments, senior executives of senior politicians, state-owned senior corporations, important political party officials, etc. a) Bank shall have the option of establishing a relationship with PEPs provided that :i. sufficient information including information about the sources of funds accounts of family members and close relatives is gathered on the PEP; ii. the identity of the person shall have been verified before accepting the PEP as a customer; iii. the decision to open an account for a PEP is taken at a senior level [ not less than the Zonal Head ] in accordance with the Bank s Customer Acceptance Policy; iv. all such accounts are subjected to enhanced monitoring on an on-going basis; v. in the event of an existing customer or the beneficial owner of an existing account subsequently becoming a PEP, branches should obtain Zonal Head s approval to continue the business relationship and subject the account to the CDD measures as applicable to the customers of PEP category including enhanced monitoring on an ongoing basis. These instructions are also applicable to accounts where PEP is the ultimate beneficial owner. vi. the CDD measures as applicable to PEPs including enhanced monitoring on an ongoing basis are applicable. b) These instructions shall also be applicable to accounts where a PEP is the beneficial owner III. Accounts of High Net-worth Individual (HNI) Customers: While mobilizing sizable business, it has been felt that there is a need to increase the penetration level to reach high valued accounts so that we can cross sell our products efficiently, promote e-products and make their connections useful for mobilizing additional business. Further, there is an imperative need to monitor transactions in these accounts. In this background, it was felt necessary to define High Net-worth Individuals (HNIs) so that whenever the account is opened, the system will flag the operations staff to notice the type of customer and accordingly render prompt and effective customer service and also monitor the transactions in these accounts. Page 50

51 Thus, the customers satisfying all or any one of the undernoted characteristics will be defined as HNI Individuals having average monthly balance of more than Rs.10 lac in SB and Rs.25 lacs in CA account. Individuals enjoying borrowing facilities of more than Rs.5 crores. Individuals having Term Deposits (aggregate in single or joint names) of more than Rs.50 lacs. Turnover in any individual account in excess of Rs.1 crore per annum. Individuals having annual income more than Rs.20 lacs. The HNI customers are poised to High Risk and require close monitoring Simplified Due Diligence: I. Simplified norms for Self Help Groups (SHGs): a) KYC verification of all the members of SHG shall not be required while opening the savings bank account of the SHG b) KYC verification of all the office bearers shall suffice. c) No separate KYC verification of the members or office bearers shall be necessary at the time of credit linking of SHGs. II. Procedure to be followed by banks while opening accounts of foreign students: A foreign student studying in India would be considered a Person Resident in India as defined in Section 2 (v) of FEMA Act, 1999 and is eligible to open bank account without prior permission of RBI. Branches/ Offices can open accounts of foreign students studying in India after observing the normal KYC procedure. Closure of such accounts and repatriation of proceeds are also allowed as per FEMA notification No. 13/2000 dated 3rd May,2000 and amendments thereon from time to time. Detail of documents based on which Bank can open an account, in the name of a foreign students studying in India, are as below : Passport - as the document for proof of identity Valid Visa - a visa with photograph in it can also serve as an identity proof Proof of admission - usually a letter from the university or college Address proof - a letter from the college or hostel, certificate from embassy of the country Page 51

52 of origin or any appropriate legal authority, certified local address in India/rent agreement / certification of registration issued by Foreigner Registration Regional Office (FRRO) It is observed that foreign student arriving in India are facing difficulties in complying with KYC norms while opening a bank account due to non-availability of any proof of local address. In view of the above, RBI has given guidelines on the following lines for opening accounts of foreign students who are not able to provide an immediate address proof while approaching for opening bank account :- (a) Banks shall, at their option, open a Non Resident Ordinary (NRO) bank account of a foreign student on the basis of his/her passport (with visa & immigration endorsement) bearing the proof of identity and address in the home country together with a photograph and a letter offering admission from the educational institution in India. i) Provided that a declaration about the local address shall be obtained within a period of 30 days of opening the account and the said local address is verified. ii) Provided further that pending the verification of address, the account shall be operated with a condition of allowing foreign remittances not exceeding USD 1,000 or equivalent into the account and a cap of rupees fifty thousand on aggregate in the same, during the 30-day period. (b) The account shall be treated as a normal NRO account, and shall be operated in terms of Reserve Bank of India s instructions on Non-Resident Ordinary Rupee (NRO) Account, and the provisions of FEMA (c) Students with Pakistani and Bangladesh the Reserve Bank for opening the account. nationality shall require prior approval of III. Simplified KYC norms for Foreign Portfolio Investors (FPIs): Accounts of FPIs which are eligible/ registered as per SEBI guidelines, for the purpose of investment under Portfolio Investment Scheme (PIS), shall be opened by accepting KYC documents as detailed in Appendix II, subject to Income Tax (FATCA/CRS) Rules. FPIs have been categorized by SEBI based on their perceived risk profile as detailed in Appendix-III. In terms of Rule 9 (14)(i) of the Rules, simplified norms have been prescribed for those FPIs have been duly registered in accordance with SEBI guidelines and have undergone the required KYC due diligence/verification prescribed by SEBI through a Custodian/Intermediary regulated by SEBI. Such eligible/registered FPIs may approach the branch for opening a bank account for the purpose of Page 52

53 investment under Portfolio Investment Scheme (PIS) for which KYC documents prescribed by the Reserve Bank would be required. For this purpose, branches may rely on the KYC verification done by the third party (i.e. the Custodian/SEBI Regulated Intermediary) subject to the conditions laid down in Rule 9 (2) [(a) to (e)] of the Rules. In this regard, Custodians/Intermediaries regulated by SEBI will share the relevant KYC documents with the banks concerned based on written authorization from the FPIs. Accordingly, a set of hard copies of the relevant KYC documents furnished by the FPIs to the Custodians/Regulated Intermediaries will be transferred to the concerned bank through their authorised representative. While transferring such documents, the custodian/regulated Intermediary shall certify that the documents have been duly verified with the original or Notarised documents have been obtained, where applicable. In this regard, a proper record of transfer of documents, both at the level of the Custodian/Regulated Intermediary as well as at the bank, under signatures of the officials of the transferor and transferee entities, may be kept. While opening bank accounts for FPIs in terms of the above procedure, branches may bear in mind that they are ultimately responsible for the customer due diligence done by the third party (i.e. the Custodian/Regulated Intermediary) and may need to take enhanced due diligence measures, as applicable, if required. Further, branches are required to obtain undertaking from FPIs or a Global Custodian acting on behalf of the FPI to the effect that as and when required, the exempted documents as detailed in Annex II will be submitted. It is further advised that to facilitate secondary market transactions, the branch may share the KYC documents received from the FPI or certified copies received from a Custodian/Regulated Intermediary with other banks/regulated market intermediaries based on written authorization from the FPI. The provisions of this circular are applicable for both new and existing FPI clients. These provisions are applicable only for PIS by FPIs. In case the FPIs intend to use the bank account opened under the above procedure for any other approved activities (i.e. other than PIS), they would have to undergo KYC drill in terms of extant guidelines. Page 53

54 CHAPTER VII Record Management & Reporting Obligation 7.1 Record Management: The following steps shall be taken regarding maintenance, preservation and reporting of customer account information, with reference to provisions of PML Act and Rules Branches shall, a) maintain all necessary records of transactions between the RE and the customer, both domestic and international, for at least five years from the date of transaction; [ Our Bank has constituted a policy to maintain the records of transactions for at least TEN years from the date of transaction between the Bank and the client ] b) preserve the records pertaining to the identification of the customers and their addresses obtained while opening the account and during the course of business relationship, for at least five years after the business relationship is ended; [ Our Bank has constituted a policy to maintain the records of transactions for at least TEN years from the date of transaction between the Bank and the client ] c) make available the identification records and transaction data to the competent authorities upon request; d) introduce a system of maintaining proper record of transactions prescribed under Rule 3 of Prevention of Money Laundering (Maintenance of Records) Rules, 2005 (PML Rules, 2005) e) maintain all necessary information in respect of transactions prescribed under PML Rule 3 so as to permit reconstruction of individual transaction, including the following :i. the nature of transactions; ii. the amount of transaction and the currency in which it was denominated; iii. the date on which the transaction was conducted; and iv. the parties to the transaction. [Our Bank has constituted a policy to maintain the records of transactions for at least TEN years from the date of transaction between the Bank and the client ] f) evolve a system for proper maintenance and preservation of account information in a manner that allows data to be retrieved easily and quickly whenever required or when requested by the competent authorities; g) maintain records of the identity and address of their customer, and records in respect of transactions referred to in Rule 3 in hard or soft format. Page 54

55 7.2 Reporting Requirements to Financial Intelligence Unit India: In terms of the Rule 3 of the PML (Maintenance of Records) Rules, 2005, banks are required to furnish information relating to cash transactions, cash transactions integrally connected to each other, and all transactions involving receipts by non-profit organizations [NPO means any entity or organization that is registered as a trust or society under the Societies Registration Act, 1860 or any similar State legislation or a company registered (erstwhile Section 25 of Companies Act, 1956) under Section 8 of the Companies Act, 2013], cash transactions where forged or counterfeit currency notes or bank notes have been used as genuine, cross border wire transfer etc. to the Director, Financial Intelligence Unit-India (FIU-IND) at the following address : Director, FIU-IND Financial Intelligence Unit-India 6th Floor, Hotel Samrat Chanakyapuri New Delhi Website - It should be carefully noted that the reporting to FIU-IND will be made by the Principal Officer only from Head Office. In no case the branches/ zonal offices should submit the Suspicious Transaction Report (STR) to FIU-IND directly. Branches should submit the STR to their respective zonal offices, who in turn will compile the position and submit the consolidated report covering all the branches under the zone along with the reports (STR) of each branch to Head Office in confidence. The reporting formats and comprehensive reporting format guide, prescribed/ released by FIUIND and Report Generation Utility and Report Validation Utility developed to assist reporting entities in the preparation of prescribed reports shall be taken note of. The editable electronic utilities to file electronic Cash Transaction Reports (CTR) / Suspicious Transaction Reports (STR) which FIU-IND has placed on its website shall be made use of by REs which are yet to install/adopt suitable technological data. The Principal Officers tools for extracting of those REs, whose CTR/STR from their live transaction all branches are not fully computerized, shall have suitable arrangement to cull out the transaction details from branches which are not yet computerized and to feed the data into an electronic file with the help of the editable electronic utilities of CTR/STR as have been made available by FIU-IND on its website While furnishing information to the Director, FIU-IND, delay of each day in not reporting a Page 55

56 transaction or delay of each day in rectifying a mis-represented transaction beyond the time limit as specified in the Rule shall be constituted as a separate violation. Bank shall not put any restriction on operations in the accounts where an STR has been filed. Bank shall keep the fact of furnishing of STR strictly confidential. It shall be ensured that there is no tipping off to the customer at any level. Robust software, throwing alerts when the transactions are inconsistent with risk categorization and updated profile of the customers shall be put in to use as a part of effective identification and reporting of suspicious transactions. 7.3 Bank s Policy towards Reporting Obligation under AML Compliance: In terms of the Rules notified under Prevention of Money Laundering Act, 2002 (PMLA) certain obligations were cast on banking companies with regard to reporting of certain transactions. The RBI has issued circular No DBOD.NO.AML.BC.63 / / dated February 15, 2006 and DBOD.AML.BC. No. 85/ / dated May 22, 2008, detailing the obligation of banks in terms of the Rules notified under PMLA. According to it, every banking company, financial institution and intermediary shall Nomination of Designated Director: Designated Director" means a person designated by the reporting entity (bank, financial institution etc.) to ensure overall compliance with the obligations imposed under chapter IV of the Act and the Rules and includes :i) the Managing Director or a whole-time Director duly authorized by the Board of Directors if the reporting entity is a company, ii) the managing partner if the reporting entity is a partnership firm, iii) the proprietor if the reporting entity is a proprietorship concern, iv) the managing trustee if the reporting entity is a trust, v) a person or individual, as the case may be, who controls and manages the affairs of the reporting entity if the reporting entity is an unincorporated association or a body of individuals, and vi) such other person or class of persons as may be notified by the Government if the reporting entity does not fall in any of the categories above. Explanation - For the purpose of this clause, the terms "Managing Director" and "Whole-time Director" shall have the meaning assigned to them in the Companies Act, 1956 (1 of 1956). Page 56

57 In addition, it shall be the duty of every reporting entity, its Designated Director, officers and employees to observe the procedure and manner of furnishing and reporting information on transactions referred to in Rule 3 of the Prevention of Money-laundering (Maintenance of Records) Rules, 2005, through submission of CTR, NTR, CWTR, CCR & STR to FIU-IND. Accordingly, Board of Directors of our Bank has decided to nominate one of the Executive Director, looking after the functional portfolio as Designated Director of our Bank and the same would be communicated to Director, FIU-IND Appointment of Principal Officer: As directed in PMLA, Bank should appoint a senior management officer to be designated as Principal Officer. Bank should ensure that the Principal Officer is able to act independently and report directly to the senior management or to the Board of Directors. Principal Officer shall be located at the head/corporate office of the bank and shall be responsible for monitoring and reporting of all transactions and sharing of information as required under the law. He will maintain close liaison with enforcement agencies, banks and any other institution which are involved in the fight against money laundering and combating financing of terrorism Further, the role and responsibilities of the Principal Officer should include overseeing and ensuring overall compliance with regulatory guidelines on KYC/AML/CFT issued from time to time and obligations under the Prevention of Money Laundering Act, 2002, rules and regulations made there under, as amended form time to time. The Principal Officer will also be responsible for timely submission of CTR, STR and reporting of counterfeit notes and all transactions involving receipts by non-profit organisations of value more than Rupees Ten Lakh or its equivalent in foreign currency to FlU-IND. With a view to enabling the Principal Officer to discharge his responsibilities effectively, the Principal Officer and other appropriate staff should have timely access to customer identification data and other CDD information, transaction records and other relevant information. Accordingly, the Bank has decided to appoint the Functional Head of Planning & Development of Head Office to be appointed as Principal Officer who would be from the minimum rank of General Manager Statutory Reporting to FIU-IND: To comply with the reporting obligations further, Bank shall Maintain a record of all transactions, the nature and value of which may be prescribed Page 57

58 Such transactions may comprise of a single transaction or a series of transactions integrally connected to each other, and where such series of transactions take place within a month Furnish information of transactions referred to in clause (a), i.e., Transactions of suspicious nature to the Director, FIU-IND Verify and maintain the records of the identity of all its clients Accordingly, Banks are required to make the following reports to the FIU-IND: Cash Transaction Reporting (CTR) Counterfeit Currency Reporting (CCR) Non-Profit Organization Transaction Report (NTR) Suspicious Transaction Reporting (STR) With the amendments to Prevention of Money Laundering (PML) Rules, notified by the Government of India vide Notification no. 12 of 2013 dated 27th August, 2013 and in terms of amended Rule 3, every reporting entity is now required to maintain the records of all transactions including the records of all cross border wire transfers of more than Rs.5 lakh or its equivalent in foreign currency, where either the origin or destination of the fund is in India, in addition to the reports mentioned above. The report is named as Cross border Wire Transfer Report (CWTR) Hence Bank is required to ensure timely submission of the following statutory reports within the stipulated time frame to comply with the Bank s obligation under PMLA: Sl. No. Name of the Report Short Name Frequency of submission 1. Cash Transaction Reporting CTR 15th of the succeeding month 2. Counterfeit Currency Reporting CCR 15th of the succeeding month 3. Non-Profit Organization Transaction Report NTR 15th of the succeeding month 4. Suspicious Transaction Reporting STR Within 7 days of arriving at a conclusion that any transaction, is of suspicious nature. Page 58

59 5. Cross border Wire Transfer Report CWTR 15th of the succeeding month To comply with the Reporting Obligations, our Bank has established AML & KYC Cell at Head Office level to monitor and evaluate the transactions taking place in the CBS system centrally. Accordingly, Bank has introduced AML software named TCS BαNCS software (Vendor: M/S TCS) in the year 2008 for monitoring of transactions and generation of alerts. The STR alerts generation has since been centralized at Head Office AML & KYC Cell, by delinking the Zonal Office users with effect from with the introduction of new version of TCS BαNCS software. Besides generating STR alerts, AML software also takes care the system based generation of CTR, NTR and CWTR at central level. The process involved in generation and submission of the statutory reports has been structured as under:- Name of The Report Cash Transaction Reporting (CTR) Definition As per the PMLA rules, Bank is required to submit the details of: All cash transactions of the value of more than rupees ten lakh or its equivalent in foreign currency. All series of cash transactions integrally connected to each other, which have been valued below rupees ten lakh or its equivalent in foreign currency, where such series of transactions have taken place within a month and the aggregate value of such transactions exceeds rupees ten lakh. The format for reporting of the above-mentioned cash transactions, known as Cash Transaction Report (CTR) has been provided by the RBI vide its circular dated February 15, This report is required to be filed on a monthly basis by 15th of the succeeding month. RBI vide circular dated May 22, 2008 has clarified that Cash transaction reporting by branches to their controlling offices should be submitted on monthly basis and not on fortnightly basis. While the circular provides both manual as well as electronic formats for submission of CTR, banks have been advised to initiate urgent steps to ensure electronic filing of CTR. Page 59

60 Data Structure The FIU-IND has provided an excel based utility at its website for generation of CTR in electronic form. After following the steps instructed by FIU-IND therein, the said utility automatically generates a set of 6 files for onward reporting to FIUIND. Banks are required to incorporate the BSR code in the Branch file of the CTR and this is also necessary as part of the format to be incorporated in the CBAACC, CBAINP and CBALPE for crossreferencing. In case BSR is not available in case of new branches, banks may use a unique code other than BSR for the branch so that it is possible to identify records across the CTR files. Source of Bank has put a system in place in which CTR files are generated by Tracking/capturing of our AML software within the 10th of the succeeding month, submit it data to the Head Office AML & KYC Cell who in turn will upload it in the FINNET portal within 15th of the succeeding month. Reporting The report files generated by our AML system are submitted to Head Office AML & KYC Cell for onward submission to FIU-IND through FINNET portal. Stipulated Time-frame for reporting 15th of the succeeding Month Name of The Report Counterfeit Currency Reporting (CCR) Definition The PMLA Rule 3(1)(C) read with rule 8 requires the reporting of all cash transactions where forged or counterfeit Indian currency notes have been used as genuine. The RBI vide circular dated May 22, 2008 provided the format in which the CCR needs to be reported to the FIU-IND. The said report is required to be filed not later than seven working days from the date of occurrence of such Page 60

61 transactions. Data Structure Bank is required to enter data centrally on counterfeit currency into a separate utility provided by FIU-IND for same. This utility is available on FIU-IND website. After following steps instructed by FIU-IND therein, this utility automatically generates a set of 3 files for onward reporting to FIU-IND. Source of For enabling CCR reporting bank have put in place a mechanism Tracking/capturing of such that information on counterfeit currency flows to Head Office data AML & KYC Cell from currency chest, branches, zones, FGMs and Head Office Security Department who looks after the Currency chests operation for onward submission to FIU-IND in FINNET portal through the principal officer. In order to submit the Counterfeit Currency Report (CCR) by the bank within specified time period to FIU-IND, the Branches/Currency Chests should submit the statement of such transaction immediately through fax ( ) / (ho.kyc@allahabadbank.in) directly to Head Office, AML & KYC cell on the date of occurrence itself. Reporting The report files generated by our Head Office AML & KYC Cell submitted/uploaded to FIU-IND through FINNET portal. Stipulated Time-frame for reporting 15th of the succeeding Month Name of The Report Non-Profit Organization Transaction Report (NTR) Page 61

62 Definition The report of all transactions, whether cash or transfer, involving receipts by non-profit organizations of value more than Rs.10 lakhs or its equivalent in foreign currency should be submitted every month to the Director, FIU-IND by 15th of the succeeding month in the prescribed format. Explanation : Government of India Notification dated November 12, Rule 2 sub-rule (1) clause (ca) defines Non-Profit Organization (NPO). NPO means 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, Data Structure The FIU-IND has provided an excel based utility at its website for generation of NTR in electronic form. After following the steps instructed by FIU-IND therein, the said utility automatically generates a set of 6 files for onward reporting to FIUIND. Source Tracking/capturing data Reporting of Bank has put a system in place in which NTR files are generated by of our AML software within the 10th of the succeeding month; submit it to the Head Office AML & KYC Cell who in turn will upload it in the FINNET portal within 15th of the succeeding month. The report files generated by our AML system are submitted to Head Office AML & KYC Cell for onward submission to FIU-IND through FINNET portal. Stipulated Time-frame 15th of the succeeding Month for reporting Name of The Report Cross-border Wire Transfer Report (CWTR) Definition With the amendments to Prevention of Money Laundering (PML) Rules, notified by the Government of India vide Notification no. 12 of 2013 dated 27th August, 2013 and in terms of amended Rule Page 62

63 3, every reporting entity is now required to maintain the records of all transactions including the records of all cross border wire transfers of more than Rs.5 lakh or its equivalent in foreign currency, where either the origin or destination of the fund is in India, in addition to the reports submitted currently. In view of the above notification, Reserve Bank of India vide its communication dated March 28, 2014 has advised all the banks to submit report on Cross-border Wire Transfers to the FIU-India through FINnet Gateway by 15th of the succeeding month. FIU-IND has clarified the nature of transactions to be included in the CBWT report, brief of which are appended: All transactions whether these are for Trade, Non trade or merchant are to be reported if it involves cross border transfers and exceeds the threshold of rupees five lakh or its equivalent in foreign currency. Fund settlement transactions between banks via SWIFT message are also to be included under cross border wire transfers report. Bank has to follow the first-in/last-out principle for the obligations regarding the reporting. The first bank which receives the inward remittance, whether for its own customer or acting as intermediary for the customer of other bank, has to file the report. Similarly the last bank which sends out the remittance whether for its own customer or acting as intermediary for the customer of other bank has to file the report. If the values of each transaction for use of Credit cards / Debit cards / Pre-paid cards/ Travel cards in foreign country / foreign currency are more than Rupees five lakh or its equivalent in foreign currency where either the origin or destination is in India, then it will form part of the report. In case bank receives a single inward remittance of more than Rs.5 lakh where the credit needs to be applied to multiple beneficiaries, the same needs to be reported and the details of all the recipients should be mentioned in the receiver part of the report. Foreign currency purchased and sold through a branch is not to be included in the report Page 63

64 Data Structure The FIU-IND has provided an excel based utility at its website for generation of CWTR in electronic form. After following the steps instructed by FIU-IND therein, the said utility automatically generates a set of 6 files for onward reporting to FIU-IND. Source of Bank has put in place a system for generation of system based Tracking/capturing of data CWTR report in our CBSO Mumbai. Reporting The report files generated by our CBSO are submitted to Head Office AML & KYC Cell for onward submission to FIU-IND through FINNET portal. Stipulated Time-frame for 15th of the succeeding Month reporting Name of The Report Suspicious Transaction Report (STR) Definition The PMLA Rule 3(1)(D) read with rule 8 requires the reporting of all suspicious transactions whether or not made in cash. RBI circular No. RBI/ /301 DBOD.NO.AML.BC.63/ / , dated February 15, 2006 requires that the Suspicious Transaction Report (STR) should be furnished within 7 days of arriving at a conclusion that any transaction, is of suspicious nature. The Principal Officer should record his reasons for treating any transaction or a series of transactions as suspicious. It should be ensured that there is no undue delay in arriving at such a conclusion once a suspicious transaction report is received from a branch or any other office. The said circular also provides the format of the STR. Data Structure FIU-IND has provided a utility at its website for generation of Page 64

65 STRs in electronic formats. On following the steps as instructed by FIU-IND therein, the said utility automatically generates a set of files for onward reporting to FIU-IND. Source of Tracking/capturing of Bank is using different scenarios to identify Suspicious data Online Transaction Monitoring: Transaction for reporting to Financial Intelligence Unit, Government of India (FIU-IND). FIU-IND suggested commonly used 58 alert indicators for detection of suspicious transactions. These alert indicators are likely to be related to the following sources:watch list (WL) The customer details matched with watch lists (eg. UN list, Interpol list etc) Transaction monitoring (TM) Transaction monitoring alert (e.g. unusually large transactions, increase in transaction volumes etc.) Typology (TY) Common typologies of money laundering, financing of terrorism or other crimes (e.g. Structuring of cash deposits etc.) Risk Management System (RM) Risk management system based alert (e.g. high risk customer, country, location, source of funds, transaction type etc.) Based on these 58 indicators, the AML software generates STR alerts on daily basis for the transactions that trigger these scenarios. The alerts are pushed to the user ids of officers in AML & KYC Cell, Head Office as per the allotment of zones amongst them for further screening. They, in turn go through the alerts, screen them and arrive at a conclusion whether to file the STR or to close the alert. Page 65

66 Offline Transaction Monitoring: RBI circular No DBOD.AML.BC. No. 85/ / dated May 22, 2008 has advised banks that in case a transaction is abandoned/ aborted by customers on being asked to give some details or provide documents, it should report all attempted transactions in STRs even if not completed by customers irrespective of the amount of transaction. The identification of such suspicious transactions is more likely to be related with following sources. Indicative List of circumstances for reporting of Off-line STRs as Attempted Transactions is provided in Appendix-V Customer verification (CV): Detected during customer acceptance, identification or verification (eg. Use of forged id, wrong address etc.) Law Enforcement Agency Query (LQ): Query or letter received from law enforcement agency (LEA) or intelligence agency (e.g. Blocking order received, transaction details sought etc.) Media Reports (MR): Adverse media reports about customer. (e.g. newspaper reports) Employee Initiated (EI): Employee raised alert (e.g. behavioral indicators such as customer had no information about transaction, attempted transaction etc.) Public Complaint (PC): Complaint received from public (e.g. abuse of account for committing fraud etc.) Business Associates (BA): Information received from other institutions, subsidiaries or business associates (e.g. crossborder referral, alert raised by agent etc.) The list of 27 commonly used off-line alert indicators for detection of suspicious transactions at branches/offices is given in Appendix VII. In order to fulfill obligations under PMLA, Page 66

67 2002, Bank has to report these suspicious transactions to FIUIND. Branches / Controlling Offices would report such identified/attempted transactions to Head Office, AML & KYC Cell, by providing detail of the incident through to ho.kyc@allahabadbank.in to review the case for reporting under STR. In addition to that, reporting by Law Enforcement Agencies (LEAs), adverse reporting in the news paper etc. may also be considered for filing STR to FIU-IND. Verification All the KYC documents of the suspicious accounts are called for from the concerned Branch for verification of KYC compliance before reporting to FIU-IND Reporting Online Alerts in AML system: All the alerts generated based on the scenarios defined in the AML system would be screened centrally at Head Office AML & KYC Cell and if found suspicious would be reported as STR in desirable cases to FIUIND after obtaining confirmation from Principal Officer. Offline Alerts/Information: Offline alerts or information from the field should be reported to Head Office AML/KYC Cell through respective Zonal Offices/FGMOs. The information so obtained would be taken up by the Head Office AML & KYC Cell and would be submitted as STR in desirable cases to FIUIND after obtaining confirmation from Principal Officer. There are cases where information are received from the Regulators or the Law Enforcing Agencies. All these reportings would be similarly taken up by the Head Office AML & KYC Cell and would be reported as STRs in desirable cases after obtaining confirmation from the Principal Officer. Stipulated Time-frame for Suspicious Transaction Report (STR) should be furnished reporting within 7 days of arriving at a conclusion that any transaction, is of suspicious nature. Page 67

68 Some important While determining suspicious transactions, branches/offices guidelines on submission should be guided by the definition of suspicious transaction as of STR contained in PMLA Rules as amended from time to time. It is likely that in some cases transactions are abandoned/aborted by customers on being asked to give some details or to provide documents. It is clarified that branches/offices should report all such attempted transactions in STRs through their respective ZOs, even if not completed by the customers, irrespective of the amount of the transaction. Branches/Offices should make STRs if they have reasonable ground to believe that the transaction involves proceeds of crime irrespective of the amount of the transaction and/or the threshold limit envisaged for predicate offences in part B of Schedule of PMLA, The same principle should be followed at HO level while scrutinizing the STR alerts generated through AML system centrally. The Suspicious Transaction Report (STR) is required to be furnished to FIU-IND by the Principal Officer of the Bank within 7 days of arriving at a conclusion that any transaction, whether cash or non-cash, or a series of transactions integrally connected are of suspicious nature. The Principal Officer should record his reasons for treating any transaction or a series of transactions as suspicious. It should be ensured that there is no undue delay in arriving at such a conclusion once a suspicious transaction report is received from a branch or any other office. Such report should be made available to the competent authorities on request. However, it should be carefully noted that Branches should not put any restrictions on operations in the accounts where an STR has been made. Moreover, branches should keep the fact of furnishing of STR strictly confidential, as required under PML Rules. It should also be ensured that there is no tipping off to the customer at any level. *An indicative list of Reasons/Examples transactions is provided in Appendix-VIII of suspicious Page 68

69 7.3.4 Trade Based Money Laundering (TBML)-Observance of High Customer Due Diligence through Red Flag Indicators (RFI) : Trade Based Money Laundering (TBML) has been recognized as one of the main methods by which proceeds of crime and unaccounted money may be moved cross-border by criminal organizations and terrorist financiers for disguising its origin and integrating into formal economy. Global Financial Integrity, in its report of December 2014, has observed that trade misinvoicing has accounted for 77.8% of the illicit financial flows. Trade mis-invoicing is an offence under Section 135 of the Customs Act, 1963 and a predictive offence for money laundering under Prevention of Money Laundering Act In TBML, inter-country movement of fund happens through trade mis-invoicing, the techniques of which may be broadly classified as under : Simple Techniques: i) Over invoicing ii) Under invoicing iii) Multiple invoicing iv) Over/under shipments or no shipment v) Manipulation of description of goods Complex Techniques: Combinations of several simple techniques With a view to recognizing indicators which may help in identifying non-genuine trade transactions out of billions of the trade transactions without affecting the free flow of trade, FIUIND has constituted a Working Group of senior bankers, and based on their recommendations certain Red-Flags have been identified. These Red Flag Indicators (RFIs), given in Appendix-VII, should be used at transaction level for identifying suspicious transactions related to TBML. Branches are advised to undertake enhanced measures for Customers Due Diligence (CDD) in order to put a check on such money laundering. 7.4 Screening of Cash Withdrawals and Deposits for the Purpose of CTR: Subsequent to migration of all branches to CBS, the Cash Transaction Reports (CTRs) Page 69

70 covering all transactions of the value of more than Rs.10 lakhs or its equivalent in foreign currency and all series of cash transactions integrally connected to each other which have been valued below Rs.10 lakhs or its equivalent in foreign currency where such series of transactions have taken place within a month and the monthly aggregate value of such transactions exceeds Rs.10 lakhs or its equivalent value in foreign currency, is being generated centrally by CBS, Project Office for submission of monthly CTR to FIU-IND. However, the copy of monthly CTR submitted by the Bank pertaining to the concerned branch is being placed on the reports folder every month. The following action points are to be adhered by the branches and Zonal Offices in this regard. i. Action points for Branches : The copy of the monthly CTR report should be perused carefully to suspicion in the accounts. If any transaction appears suspicious reported immediately to the Zonal Office for onward reporting to CTRs thus reported in branch folder must be scrutinized at the alerts. find any abnormality or the same should be Head Office. Thus, all branch level for STR It should also be ensured that the monthly CTR report available in the branch should be produced before auditors/inspectors when asked for. Branches are also advised to meticulously follow the instruction on Maintenance of records of transactions; Information to be preserved and Maintenance and Preservation of records. ii. Action points for Zonal Offices : Zonal Offices will closely monitor the high value transactions in the branches and guide the branches in reporting suspicious transactions to Head Office. Zonal Offices will scrutinize the reports received from the branches and investigate abnormality or suspicious transaction, if any, by deputing officials. Zonal Offices will specially monitor the cash transactions reported in CTR for Rs.1 crore and above, lists of which are provided to ZOs in every month from HO AML & KYC Cell, to ensure verification of the genuineness of those transactions with regard to the business activities of the concerned customers to have a re-look over the submission of any Suspicious Transaction Report (STR), if needed. The KYC particulars should also be thoroughly verified for those accounts to ensure proper due diligence. Zonal Heads, during their periodical branch visits, will verify such high value transaction accounts in discussion with the Branch Heads. Page 70

71 7.5 Requirements/obligations under International Agreements Communications from International Agencies/Combating Financing of Terrorism (CFT): Bank shall ensure that in terms of Section 51A of the Unlawful Activities (Prevention) (UAPA) Act, 1967, they do not have any account in the name of individuals/entities appearing in the lists of individuals and entities, suspected of having terrorist links, which are approved by and periodically circulated by the United Nations Security Council (UNSC). Lists of terrorist entities notified by Government of India as received through Reserve Bank of India are circulated to the Branches / Offices by Head Office, to exercise caution if any transaction is detected with such entities. The Instruction Circulars issued pertaining to the list of banned/ terrorist organization should be properly preserved by the Branches. In case the name of any banned organization appears as payee/endorsee/applicant, reporting of such transactions as and when detected is to be done by the Branch to Head Office through respective Zonal Office. Head Office in turn will report the matter to RBI/appropriate authority designated by Govt. In terms of Prevention of Money Laundering Act, 2002, suspicious transaction should include, inter-alia, transactions which give rise to a reasonable ground of suspicion that these may involve financing of the activities relating to terrorism. As and when list of terrorist individuals and entities, approved by Security Council Committees established pursuant to various United Nations Security Council Resolutions (UNSCRs) are received from RBI, the same is circulated to the branches/offices which should ensure to update the consolidated list of such individuals and entities. The UN Security Council has adopted Resolutions 1988 (2011) and 1989 (2011) which have resulted in splitting of the 1267 Committee's Consolidated List into two separate lists, namely: (b) The ISIL (Da esh) & Al-Qaida Sanctions List, which includes names of individuals and entities associated with the Al-Qaida. The updated ISIL & Al- Qaida Sanctions List is available at (c) The 1988 Sanctions List, consisting of individuals (Section A of the consolidated list) and entities (Section B) associated with the Taliban which is available at Details of accounts resembling any of the individuals/entities in the lists shall be reported to FIU-IND apart from advising Ministry of Home Affairs as required under UAPA notification dated August 27, Bank has implemented the functionality of Real-time scanning of UNSCR list while creating or amending CIF in the CBS system. Page 71

72 Some of the key points to be noted in such process are appended for meticulous compliance: While opening or amendment of any CIF, in case the name matches with that of the Caution List, the system will prevent for opening/amendment of such CIF. In such cases user has to go through Preverification process for further verification of other identification details. User should take prudent decision whether to accept or reject based on the identification details provided by the customer vis-à-vis the details displayed in the screen on pre-verification process. Particularly, verification of details must be ensured in case of acceptance and subsequent supervisory override. However, branches/ offices are advised to ensure enhanced due diligence while establishing any banking relationship with any customer having resemblance with the names of the UNSCR lists. In case of matching of all details, opening/amendment should not be made and the case must be reported forthwith to the respective zonal offices under copy to Head Office, AML & KYC Cell ( ho.kyc@allahabadbank.in) In this connection, Ho IC No /AML&KYC/ /05 dated issued by Head Office AML & KYC Cell may be referred for detail workflow of the functionality and the process to be adopted by the Branches. In addition to the above, other UNSCRs circulated by the Reserve Bank in respect of any other jurisdictions/ entities from time to time shall also be taken note of. Freezing of Assets under Section 51A of Unlawful Activities (Prevention) Act, 1967: The procedure laid down in the UAPA Order dated August 27, 2009 (Annex I) of this Policy cum guidelines shall be strictly followed and meticulous compliance with the Order issued by the Government shall be ensured. 7.6 Jurisdictions that Recommendations: do not or insufficiently apply the FATF (a) FATF Statements circulated by Reserve Bank of India from time to time, and publicly available information, for identifying countries, which do not or insufficiently apply the FATF Recommendations, shall be considered. Risks arising from the deficiencies in AML/CFT regime of the jurisdictions included in the FATF Statement shall be taken into account. (b) Special attention shall be given to business relationships and transactions with persons (including legal persons and other financial institutions) from or in countries that do not or insufficiently apply the FATF Recommendations and jurisdictions included in FATF Statements. Explanation: The process referred to in Section 55 a & b do not preclude REs from having legitimate trade and business transactions with the countries and jurisdictions mentioned in the FATF statement. Page 72

73 (c) The background and purpose of transactions with persons (including legal persons and other financial institutions) from jurisdictions included in FATF Statements and countries that do not or insufficiently apply the FATF Recommendations shall be examined, and written findings together with all documents shall be retained and shall be made available to Reserve Bank/other relevant authorities, on request. Financial Action Task Force (FATF) has updated its Public Statement and document Improving Global AML/CFT Compliance: on-going process on October 23, The statement and document can be accessed from the following URL also: statement-october-2015.html and Adherence to Foreign Contribution Regulation Act (FCRA), 1976: The provisions of the Foreign Contribution (Regulation) Act, 1976 regulates the receipt of foreign contribution in the country. While accepting such contributions, Branches may open accounts or collect cheques only in favour of associations, which are registered under the Foreign Contribution Regulation Act ibid. by Government of India. A certificate to the effect that the associations registered with the Government of India should be obtained from the concerned associations at the time of opening of the account or collection of cheques. While granting registration or prior permission, the Ministry of Home Affairs, Government of India invariably endorses a copy thereof to the concerned branch. Branches should desist from opening accounts in the name of banned organisations and those without requisite registration. Branches / Offices may access the website of Government of India ( which contains the names of associations registered with them u/s 6(1)(a) of FCRA, List of banned organisations as circulated by Head Office from time to time should be properly preserved and referred as and when required. The Branches / Offices should strictly comply with the requisite legal requirements. Failure to comply would have serious implications. Branches / Offices should also comply with and follow at all times the procedures which apply in each of the day to day operations which broadly include: Identifying customers thoroughly when opening accounts moving money around between accounts recording transactions Page 73

74 reporting suspicious transactions The Branches maintaining accounts under the purview of FCRA, 1976 should ensure that mandatory annual statements statutory under the Act are submitted by the account holders to the appropriate Govt. department. Failing compliance by the customer, credit against FC remittances may be withheld under advice to the customer/ beneficiary. Branches should submit details of the foreign contributions credited to the accounts of Association / Organisation, if any, on a half-yearly (March / September) basis to the Zonal Office within 15 days from the closure of half-year in the prescribed format. Zonal Offices in turn should submit the consolidated position to Foreign Department, Head Office within one month from the closure of the half-year. 7.8 Anti-Money Laundering Focus: Money laundering is the process by which criminals attempt to hide and disguise the true origin and ownership of the proceeds of criminal activities, thereby avoiding prosecution, conviction and confiscation of criminal funds. Generally, the money laundering process involves three stages: Placement: Physically disposing of cash derived from illegal activity. One way to accomplish this is by placing criminal proceeds into traditional financial institutions or non-traditional financial institutions such as currency exchanges, casinos or check cashing services. Layering: Separating the proceeds of criminal activity from their source through the use of layers of financial transactions. These layers are designed to hamper the audit trail, disguise the origin of funds and provide the anonymity. Some examples of services that may be used during this phase are: i. Early surrender of an annuity with regard to penalties, ii. Fraudulent letter of credit transactions; and iii. Illicit use of bearer shares. Integration: Placing the laundered proceeds back into the economy in such a way that they reenter the financial system as apparently legitimate funds. An illustrative check-list for covering Money Laundering activities is provided in Appendix XIII 7.9 Implementation of UNSCR 2140(2014) and 2216(2015) pertaining to Yemen: Reserve Bank of India issued notification No. RBI/ /243 DBR.AML.No.6912/ / dated November 20, 2015 on the Order issued by Ministry of External Affairs dated September 21, 2015, published in the Gazette of India dated , on implementation of United Nations Security Council Resolution 2140 (2014) and 2216 (2015) on Yemen. Page 74

75 In exercise of the powers conferred by Section 2 of the United Nations (Security Council) Act, 1947, the Central Govt. of India has passed the order based on the United Nations Security Council Resolution 2140(2014) and 2216(2015) which reads inter-alia as under :(a) immediately freeze all funds, other financial assets and economic resources which are on its territories and which are owned or controlled, directly or indirectly, by the designated individuals or entities, or by individuals or entities acting on their behalf or at their direction, or by entities owned or controlled by them; (b) prevent any funds, financial assets or economic resources being made available by Indian nationals or by any individuals or entities within its territories, to or for the benefit of the designated individuals or entities with the provision to exempt; (i) funds and basic expenses; (ii) extraordinary expenses; and (iii) expenses related to judicial, administrative or arbitral lien or judgment, subject to the procedures specified in sub-paragraph (a), (b) or (c) of paragraph 12 of the Resolution 2140 (2014) as may be applicable in the instant case (c) prevent the entry into or transit through its territories of designated individuals with the provision to exempt travel or entry or transit; (i) justified on the grounds of humanitarian needs, including religious obligation as determined by the Committee on a case by case basis; (ii) for the fulfillment of a judicial process; (iii) to further the objectives of peace and national reconciliation in Yemen as determined by the Committee on a case to case basis; (iv) to advance peace and stability as may be determined on a case to case basis, subject to the procedures specified in sub-paragraphs (a), (b), (c) and (d) of paragraph 16 of the Resolution 2140 (2014), as may be applicable in the instant case (d) prevent the direct or indirect supply, sale or transfer to, or for the benefit of Al Abdullah Saleh, Abdullah Yahya al Hakim, Abd al-khaliq al-huthi and the individuals or entities designated by the Committee, established pursuant to paragraph 19 of the Resolution 2140 (2014), pursuant to sub-paragraph (d) of paragraph 20 of the Resolution 2216 (2015), the individuals and entities listed in the annex to the resolution 2216 (2015), and those acting on their behalf or at their direction in Yemen, from or through Indian territories or by Indian nationals, or using Indian flag vessels or aircraft, of arms and related materiel of all types, including weapons and ammunition, military vehicles and equipment, paramilitary Page 75

76 equipment, and spare parts for the aforementioned, and technical assistance, training, financial or other assistance, related to military activities or the provision, maintenance or use of any arms and related materiel, including the provision of armed mercenary personnel whether or not originating in Indian territories. The excerpt of the List established and maintained by the 2140 Committee is enclosed (Appendix-X) Page 76

77 CHAPTER - VIII Other Instructions 8.1 Secrecy Obligations and Sharing of Information: a) Banks shall maintain secrecy regarding the customer information which arises out of the contractual relationship between the banker and customer. b) While considering the requests for data/information from Government and other agencies, banks shall satisfy themselves that the information being sought is not of such a nature as will violate the provisions of the laws relating to secrecy in the banking transactions. c) The exceptions to the said rule shall be as under :i. Where there is a duty to the public to disclose, ii. The interest of bank requires disclosure and iii. Where the disclosure is made with the express or implied consent of the customer. d) NBFCs shall maintain confidentiality of information as provided in Section 45NB of RBI Act Due Diligence for detecting Suspicious Transactions related to Shell Companies: A shell company is an entity that has no active business and usually exists only in name as a vehicle for another company s business operations (Black s Law Dictionary).In essence, shells are corporations that exist mainly on paper, have no physical presence, employ no one and produce nothing. For a fee, company formation agents- in India mainly Chartered Accountants- assist individuals with forming shell companies by filing required documents on their behalf. Third- party agents and nominee incorporation services make it hard for Law Enforcement Agencies (LEAs) to trace illegal activity to the original creator of the shell. Normally shell companies are floated worldwide by persons broadly for undernoted activities/objectives : a) Rotation, misappropriation and siphoning off funds. b) Creation of equity in their name. c) Holding real estate properties / trading in Capital Market / market manipulation. d) Converting unaccounted money through placement, layering and round tripping. e) Tax evasion. As the name suggests the shell companies are hollow i.e they have no physical presence other than a mailing address, no active or actual business operations, no significant assets or no sizeable workforce. Page 77

78 Generally there would be multiple companies located at a single address, sharing a common registered address. Such a company is incorporated for serving as a conduit for fictitious business transactions, leaving no trace about the actual beneficiary. Further, shell companies have certain common features and attributes: 1) Nominal paid up capital vis-a-vis authorized capital, 2) Huge balances in share premium A/c - share application money account, 3) No / nominal statutory payments like VAT, Service Tax, Income Tax, GST, 4) Stock in trade is minimum or zero, 5) Low operating earnings or expenses, 6) No / Minimum Fixed Assets which remains the same year after year, 7) Huge investments in shares / unsecured loans in (i) Private Limited Companies, (ii) Unlisted Public Limited Companies, (High debtors and creditors without any immovable assets), 8) Huge Cash in hand / Cash at Bank, 9) Number of Companies registered at same address, 10) Frequent change in Directors/Common Directors, 11) Generally Trading Companies with one of the object being investment in securities 12) Change in Company name / Registered Office, 13) Shareholding pattern- majority shareholders are Private Ltd Co / Unlisted Public Ltd. Co. In view of the above, it is advised that the field functionaries should be more vigilant and should restrict themselves while dealing with the companies approaching for establishing new banking relationship based on the above mentioned characteristics. Further, branches should refer to these characteristics while dealing with the existing accounts of companies and for reporting of STRs through their respective ZOs/FGMOs to Head Office in line with the direction issued vide HOIC no dated 15th March, CDD Procedure and sharing KYC information with Central KYC Records Registry (CKYCR): Branches shall capture the KYC information for sharing with the CKYCR in the manner mentioned in the Rules, as required by the revised KYC templates prepared for individuals and Legal Entities as the case may be. Government of India has authorised the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI), to act as, and to perform the functions of the CKYCR vide Gazette Notification No. S.O. 3183(E) dated November 26, In terms of earlier direction, the Bank was required to start the live run of the CKYCR would with effect from July 15, 2016 in phased manner beginning with new individual accounts. Now, in terms of the revised guidelines, Bank will take the following steps in this respect :- Page 78

79 i. Bank shall invariably upload the KYC data pertaining to all new individual accounts opened on or after January 1,2017 with CERSAI in terms of the provisions of the Prevention of Money Laundering (Maintenance of Records) Rules, SCBs are, however, allowed time upto February 1, 2017 for uploading date in respect of accounts opened during January ii. Operational Guidelines (version 1.1) for uploading the KYC data have been released CERSAI. by Further, Test Environment has also been made available by CERSAI for the use of Bank. In order to comply with the aforesaid requirement, our Bank has already taken following steps: New CIF and Account Opening Form (Refer HOIC dated 02/01/2017) have been introduced by Bank based on CKYC requirement vis-à-vis Data Gaps in CBS. CIF Creation & Amendment Screen has been redesigned in CBS which is already available to Branches/Offices in their Menu under CBS Application. The redesigned screen contains some additional fields required for CKYC besides realignment of existing fields under single menu for CIF Creation/Amendment which were earlier available through different menu/navigation. An additional menu has been provided in CBS Application to upload Customer s scanned KYC Document (POI &POA)/ Photograph & Signature by the Branches so that the same may be centrally available for uploading on CERSAI Portal along with CKYC data. Field functionaries may be guided by HO IC No. HO/DIT/CBS/15175 dated 1st August, Reporting requirement under Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standards (CRS): Under FATCA and CRS, REs shall adhere to the provisions of Income Tax Rules 114F, 114G and 114H and determine whether they are a Reporting Financial Institution as defined in Income Tax Rule 114F and if so, shall take following steps for complying with the reporting requirements :a) Register on the related e-filling portal of Income Tax Department as Reporting Financial Institutions at the link post login My Account --> Register as Reporting Financial Institution, b) Submit online reports by using the digital signature of the Designated Director by either uploading the Form 61B or NIL report, for which, the schema prepared by Central Board of Direct Taxes (CBDT) shall be referred to. Explanation: REs shall refer to the spot reference rates published by Foreign Exchange Dealers Association of India (FEDAI) on their website at Page 79

80 for carrying out the due diligence procedure for the purposes of identifying reportable accounts in terms of Rule 114H. c) Develop Information Technology (IT) framework for carrying out due diligence procedure and for recording and maintaining the same, as provided in Rule 114H. d) Develop a system of audit for the IT framework and compliance with Rules 114F, 114G and 114H of Income Tax Rules. e) Constitute a High Level Monitoring Committee under the Designated Director or any other equivalent functionary to ensure compliance. f) Ensure compliance with updated instructions/ rules/ guidance notes/ Press releases/ issued on the subject by Central Board of Direct Taxes (CBDT) from time to time and available on the web site REs may take note of the following : i. updated Guidance Note on FATCA and CRS ii. a press release on Closure of Financial Accounts under Rule 114H (8). 8.5 Period for presenting payment instruments: Payment of cheques/drafts/pay orders/banker s cheques, if they are presented beyond the period of three months from the date of such instruments, shall not be made. 8.6 White-listing of Accounts for AML System: Accounts eligible for white-listing are those of Government department/ undertaking, Schedule Bank, RBB, Co-Operative Bank, various funds managed/regulated by the Government/ Quasi-Government bodies where the scope of suspicious transaction is negligible. The accounts for white-listing should be screened by the controlling offices in consultation with the branch keeping records at the Zonal Office for future reference. All such selected accounts are to be reported by the Zonal Head under his/her signature to Head Office (AML & KYC Cell) for white listing giving proper reason in each case maintaining top secrecy. White-listing of accounts is not applicable for impersonal accounts like Sundry Creditors etc. which are prone to operational risk through fraudulent means. Therefore, field level functionaries should monitor those accounts to avoid unnecessary routing of transactions through it. Page 80

81 8.7 Operation of Bank Accounts & Money Mules: The instructions on opening of accounts and monitoring of transactions shall be strictly adhered to, in order to minimise the operations of Money Mules which are used to launder the proceeds of fraud schemes (e.g., phishing and identity theft) by criminals who gain illegal access to deposit accounts by recruiting third parties which act as money mules. If it is established that an account opened and operated is that of a Money Mule, it shall be deemed that the bank has not complied with these directions. 8.8 Collection of Account Payee Cheques: Account payee cheques for any person other than the payee constituent shall not be collected. Banks shall, at their option, collect account payee cheques drawn for an amount not exceeding rupees fifty thousand to the account of their customers who are co-operative credit societies, provided the payees of such cheques are the constituents of such co-operative credit societies. 8.9 Unique Customer Identification Code (UCIC): (a) A Unique Customer Identification Code (UCIC) shall be allotted while entering into new relationships with individual customers as also the existing customers by banks and NBFCs. (b) The banks/ NBFCs shall, at their option, not issue UCIC to all walk- in/occasional customers such as buyers of pre-paid instruments/purchasers of third party products provided it is ensured that there is adequate mechanism to identify such walk-in customers who have frequent transactions with them and ensure that they are allotted UCIC Introduction of New Technologies Credit Cards/ Debit Cards/ Smart Cards/ Gift Cards/ Mobile Wallet/ Net Banking/ Mobil e Banking/ RTGS/ NEFT/ ECS/ IMPS etc. Adequate attention shall be paid by REs to any money-laundering and financing of terrorism threats that may arise from new or developing technologies and it shall be ensured that appropriate KYC procedures issued from products/services/technologies. time to time are duly applied before introducing new Agents used for marketing of credit cards shall also be subjected to due diligence and KYC measures Correspondent Banks: Banks shall have a policy approved by their Boards, or by a committee headed by the Chairman/CEO/MD to lay down parameters for approving correspondent banking relationships subject to the following conditions :(a) Sufficient information in relation to the nature of business of the bank including Page 81

82 information on management, major business activities, level of AML/CFT compliance, purpose of opening the account, identity of any third party entities that will use the correspondent banking services, and regulatory/supervisory framework in the bank s home country shall be gathered. (b) Post facto approval of the Board at its next meeting shall be obtained for the proposals approved by the Committee. (c) The responsibilities of each bank with whom correspondent banking relationship is established shall be clearly documented. (d) In the case of payable-through-accounts, the correspondent bank shall be satisfied that the respondent bank has verified the identity of the customers having direct access to the accounts and is undertaking on-going 'due diligence' on them. (e) The correspondent bank shall ensure that the respondent bank is able to provide the relevant customer identification data immediately on request. (f) Correspondent relationship shall not be entered into with a shell bank. (g) It shall be ensured that the correspondent banks do not permit their accounts to be used by shell banks. (h) Banks shall be cautious with correspondent banks located in jurisdictions which have strategic deficiencies or have not made sufficient progress in implementation of FATF Recommendations. (i) Banks shall ensure that respondent banks have KYC/AML policies and procedures in place and apply enhanced 'due diligence' procedures for transactions carried out through the correspondent accounts Wire transfer: Wire transfers are being used as an expeditious method for transferring funds between bank accounts. Wire transfers include transactions occurring within the national boundaries of a country or from one country to another. As wire transfers do not involve actual movement of currency, they are considered as a rapid and secure method for transferring value from one location to another. Bank shall ensure the following while effecting wire transfer:a) All cross-border wire transfers including transactions using credit or debit card shall be accompanied by accurate and meaningful originator information such as name, address and account number or a unique reference number, as prevalent in the country concerned in the absence of account. Exception: Interbank transfers and settlements where both the originator and beneficiary are banks or financial institutions shall be exempt from the above requirements. b) Domestic wire transfers of rupees fifty thousand and above shall be accompanied Page 82

83 by originator information such as name, address and account number. c) Customer Identification shall be made if a customer is intentionally structuring wire transfer below rupees fifty thousand to avoid reporting or monitoring. In case of noncooperation from the customer, efforts shall be made to establish his identity and STR shall be made to FIU-IND. d) Complete originator information relating to qualifying wire transfers shall be preserved at least for a period of five years by the ordering bank. e) A bank processing as an intermediary element of a chain of wire transfers shall ensure that all originator information accompanying a wire transfer is retained with the transfer. f) The receiving intermediary bank shall transfer full originator information accompanying a cross-border wire transfer and preserve the same for at least five years if the same cannot be sent with a related domestic wire transfer, due to technical limitations. g) All the information on the originator of wire transfers shall be immediately made available to appropriate law enforcement and/or prosecutorial authorities on receiving such requests. h) Effective risk-based procedures to identify wire transfers lacking complete originator information shall be in place at a beneficiary bank. i. Beneficiary bank shall report transaction lacking complete originator information to FIU-IND as a suspicious transaction. ii. The beneficiary bank shall seek detailed information of the fund remitter with the ordering bank and if the ordering bank fails to furnish information beneficiary shall consider restricting or on the remitter, the terminating its business relationship with the ordering bank. 8.13Issue and Payment of Demand Drafts, etc.: Any remittance of funds by way of demand draft, mail/telegraphic transfer/neft/imps or any other mode and issue of travellers cheques for value of rupees fifty thousand and above shall be effected by debit to the customer s account or against cheques and not against cash payment. 8.14Quoting of PAN: Permanent account number (PAN) of customers shall be obtained and verified while undertaking transactions as per the provisions of Income Tax Rule 114B applicable to banks, as amended from time to time. Form 60 shall be obtained from persons who do not have PAN. Page 83

84 Further, Reserve Bank of India vide Notification No. RBI/ /183 DBR.AML.BC.48/ / dated December 15, 2016 has advised to refer the following provisions of the Master Direction on Know Your Customer (KYC) while reviewing the compliance of the directions :(i) Section 8(d) and (e), wherein it is mentioned that concurrent/internal audit system of the Regulated Entities (REs) has to verify the compliance with KYC/AML policies and procedures and submit quarterly audit notes and compliance to the Audit Committee, (ii) Section 23, wherein instructions on operation of Small Accounts are given, and (iii) Section 67, wherein it is advised that the Permanent account number (PAN) of customers shall be obtained and verified while undertaking transactions as per the provisions of Income Tax (I.T.) Rule 114B applicable to banks, as amended from time to time. Form 60 shall be obtained from persons who do not have PAN. It is clarified that in terms of I.T.Rule 114 B, transactions include opening of accounts with the Bank. In order to ensure strict compliance with the above provisions, the Bank has been advised by RBI as under(i) Bank should strictly comply with the extant instructions stipulated at Section 8(d) and (e) of the Master Direction; (ii) In respect of Small Accounts, the prescribed limits/conditions shall not be breached and compliance therewith shall be strictly monitored. If any customer desires to have operations beyond the stipulated limits, the same shall be allowed only after complying with requirements for opening a normal account including completion of CDD/KYC procedures detailed in Sections 16/17 and provisions of Section 67 of the Master Direction which include quoting of PAN/Form 60 while opening an account with the bank. If any account is rendered ineligible for being classified as a small account due to credits/balance in the account exceeding the permissible limits, withdrawals may be allowed within the limit prescribed for small accounts where the limits thereof have not been breached. (iii) BSBD Accounts (PMJDY accounts are akin to BSBDAs), which are not KYC compliant accounts are to be treated as Small Accounts and are subjected to the limitations applicable to such accounts. Hence, for allowing normal operations in such accounts, the procedures explained at (ii) above are to be complied with. If any account is rendered ineligible for being classified as a small account due to credits/balance in the account exceeding the permissible limits, withdrawals may be allowed within the limit prescribed for small accounts where the limits thereof havenot been breached. (iv) In respect of KYC compliant accounts where the required CDD procedure has been complied with, branches/offices shall ensure compliance regarding quoting of PAN/obtaining of Form 60 for Page 84

85 all transactions in terms of I.T.Rule 114 B which includes opening of accounts with the bank. No debit transaction, transfer or otherwise shall be allowed in accounts which do not comply with the above mentioned requirements. To begin with, this rule shall be strictly applied in accounts where both the thresholds listed below are reached:a) balance of rupees five lakh or more; and b) the total deposits (including credits by electronic or other means) made after November 9, 2016, exceed rupees two lakh. It is clarified that provisions of Section 67 of the Master Direction are subject to the exemptions granted to Government, Consular office etc., as provided in Income Tax Rule 114B. 8.15Selling Third party products: Bank acting as agents while selling third party products as per regulations in force from time to time shall comply with the following aspects for the purpose of these directions :(a) the identity and address of the walk-in customer shall be verified for transactions above rupees fifty thousand as required under Section 13(e) of this Directions. (b) transaction details of sale of third party products and related records shall be maintained as prescribed in Chapter VII Section 46. (c) AML software capable of capturing, generating and analysing alerts for the purpose of filing CTR/STR in respect of transactions relating to third party products with customers including walk-in customers shall be available. (d) transactions involving rupees fifty thousand and above shall be undertaken only by debit to customers account or against cheques; and obtaining and verifying the PAN given by the account based as well as walk-in customers. (e) Instruction at d above shall also apply to sale of Bank s own products, payment of dues of credit cards/sale and reloading of prepaid/travel cards and any other product for rupees fifty thousand and above. 8.16At-par cheque facility availed by co-operative banks: (a) The at par cheque facility offered by commercial banks to co-operative banks shall be monitored and such arrangements be reviewed to assess the risks including credit risk and reputational risk arising there from. (b) The right to verify the records maintained by the customer cooperative banks/ societies for Page 85

86 compliance with the extant instructions on KYC and AML under such arrangements shall be retained by banks. (c) Cooperative Banks shall: i. ensure that the at par cheque facility is utilized only: a. for their own use, b. for their account-holders who are KYC complaint, provided that all transactions of rupees fifty thousand or more are strictly by debit to the customers accounts, c. for walk-in customers against cash for less than rupees fifty thousand per individual. ii. maintain the following: a. records pertaining to issuance of at par cheques covering, inter alia, applicant s name and account number, beneficiary s details and date of issuance of the at par cheque, b. sufficient balances/drawing arrangements with the commercial bank extending such facility for purpose of honouring such instruments. iii. ensure that At par cheques issued are crossed account payee irrespective of the amount involved. 8.17Issuance of Prepaid Payment Instruments (PPIs): PPI issuers shall ensure that the instructions issued by Department of Payment and Settlement System of Reserve Bank of India through their Master Direction are strictly adhered to. 8.18Hiring of Employees and Employee training: a) Adequate screening mechanism as an integral part of their personnel recruitment/hiring process shall be put in place. b) On-going employee training programme shall be put in place so that the members of staff are adequately trained in AML/CFT policy. The focus of the training shall be different for frontline staff, compliance staff and staff dealing with new customers. The front desk staff shall be specially trained to handle issues arising from lack of customer education. Proper staffing of the audit function with persons adequately trained and well-versed in AML/CFT policies of the RE, regulation and related issues shall be ensured. 8.19Adherence to Know Your Customer (KYC) guidelines by BFCs/RNBCs and persons authorised by NBFCs/RNBCs including brokers/agents etc.: (a) Persons authorised by NBFCs/ RNBCs for collecting the deposits and their brokers/agents Page 86

87 or the like, shall be fully compliant with the KYC guidelines applicable to NBFCs/RNBCs. (b) All information shall be made available to the Reserve Bank of India to verify the compliance with the KYC guidelines and accept full consequences of any violation by the persons authorised by NBFCs/RNBCs including brokers/agents etc. who are operating on their behalf. (c) The books of accounts of persons authorised by NBFCs/RNBCs including brokers/agents or the like, so far as they relate to brokerage functions of the company, shall be made available for audit and inspection whenever required. CHAPTER - IX General Guidelines Our bank has established an effective KYC programme by approving appropriate systems and procedures. It covers proper management oversight, systems and controls, segregation of duties, training and other related matters. Responsibility is explicitly allocated within the bank for ensuring that the bank's policies and procedures are implemented effectively. Bank has devised procedures for creating risk profiles of existing and new customers (to be visible with hotkey F9 ), assess risk in dealing with various countries, geographical areas and also the risk of various products, services, transactions, delivery channels, etc. Bank s policies are in place for effectively managing and mitigating risks adopting a risk-based approach. Internal audit and compliance functions have an important role in evaluating and ensuring adherence to the KYC policies and procedures. As a general rule, the compliance function should provide an independent evaluation of the bank s own policies and procedures. Concurrent/Internal Auditors should specifically check and verify the application of KYC procedures at the branches and comment on the lapses observed in this regard. The compliance in this regard is put up before the Audit Committee of the Board on quarterly intervals. 9.1 Roles & responsibilities of bank s officers & staff: Bank officers/employees will conduct themselves in accordance with the highest ethical standards and in accordance with the extant regulatory requirements and laws. They should not knowingly provide advice or other assistance to individuals who are indulging in laundering activities. Bank officers/employees who suspect any sort of money-laundering activities in course of banking business should refer the matter to appropriate authority immediately. Bank officers/employees should not indulge in unnecessary dialogue or provide unwanted guidance to the customers / intended customers to avoid dispute of any kind in future. Page 87

88 Failure to adhere to KYC / Money Laundering policies / procedures may subject bank employees to appropriate disciplinary action or such penal actions and penalties that may be stipulated under any law or regulatory directive. In general terms there are FIVE golden rules to be followed: 1. You MUST NOT assist anyone whom you know or suspect to be laundering money that has been derived from any crime. 2. You MUST report any transaction which you suspect might be related to drugs, terrorism or other serious crimes. 3. You MUST NOT reveal in any way to anyone that a customer is being investigated or that they have been the subject of a report except to your Branch Manager and controlling authorities. 4. You MUST NOT go overboard in seeking information for KYC compliance and thereby invading into client s privacy, to avoid intrusion. 5. You MUST NOT divulge customer information for cross selling or any other like purposes. 9.2 Duties/ responsibilities of officers/staff: The following duties/responsibilities arising to the officers/ staff out of the KYC guidelines. Staff/Officer/Branch Manager vested with the authority to open new accounts To interview the potential customers intending to open account. To verify the introductory reference/ customer profile. To arrive at threshold limit for each account and to exercise due diligence in identifying suspicious transactions. To ensure not to open account in the names of terrorist/banned organisations. To adhere with the provisions of Foreign Contribution Regulation Act (FCRA), To comply with the guidelines issued by the Bank from time to time in respect of opening and conduct of account. Branch Manager To scrutinize and satisfy himself the information furnished in the Account opening form/ customer Profile/ threshold limit are in strict compliance with KYC Guidelines before authorizing Opening of account. Page 88

89 To ensure that Customer Due Diligence (CDD)/Enhanced Due Diligence (EDD) has been carried out while opening of account. To ensure reporting of STRs based on off-line alert parameters in deserving cases. Zonal Office/FGM Office/Head Office Prompt reporting of information regarding suspicious transactions to concerned law enforcing Authority in consultation with Head Office. Nodal Officers Every FGM Office and Zonal office will identify and nominate a Nodal Officer (not less than the rank of a Chief Manager) for implementation of KYC norms & AML measures including monitoring of suspicious transaction. The Nodal Officer so identified should have sufficient experience in operational banking and working computer knowledge. The indicative roles and responsibilities of the Nodal Officers are appended: To co-ordinate all operational issues related to AML & KYC. To keep functioning as a liaison officer in between the branches and the controlling offices, and to ensure implementation of KYC norms & AML measures To keep field functionaries apprise of AML & KYC matters like off-line alert monitoring for picking up suspicious transactions for reporting under STR, proper marking of each account with occupation and activity code. To arrange for submission of KYC particulars as and when demanded by higher office. To ensure that no account exists with junk/ invalid PAN. To verify all cash transactions of Rs.1.00 crore and above occurred during a month (furnished by Head Office regularly) to ascertain genuineness of transactions regarding business activities of the customers and decide as to whether any suspicious transaction report needs to be submitted for these accounts. To follow-up concurrent audit report (Annexure-SR2) for 100% rectification of KYC irregularities to ensure no carryover of same account in the next concurrent audit report. To monitor newly opened account for at least 2 quarters giving emphasis in high volume & high value transactions. Any other issues related to AML & KYC norms. Page 89

90 Concurrent auditors wherever posted To verify and record comments on the Effectiveness of measures taken by Branches/level of implementation of KYC guidelines and to point out the shortcomings. Inspecting Officer of the Bank The Inspecting Officers while inspecting the branches should check the status of compliance on KYC & AML Norms and arrange for rectification of deficiencies/shortcomings, if any. 9.3 Evaluation of KYC Guidelines by Internal Audit and Inspection System: The Concurrent Auditor of the branches and Inspecting Officials while conducting audit / inspection of the branches / offices should verify compliance of the KYC guidelines and prevention of money laundering at branches and report the cases of deviations, if any, in the report. 9.4 Training to officers/ staff: Bank is having an ongoing employee training programme so that the members of officers/ staff are adequately trained in AML/CFT policy. Since training system plays a crucial role in manifestation of policy guidelines, training inputs on implementation of KYC policies should form an integral part of structured training modules/ syllabus so that officers/ staff are adequately trained for their role and responsibilities as appropriate to their hierarchical level. The training programme should have different focus on frontline officials, compliance officials and officials dealing with new customers. The front desk official needs to be specially trained to handle issues arising from lack of customer education. All concerned officers/ staff members should fully understand the rationale behind the KYC policies and implement them consistently. 9.5 Confidentiality of customer information: Information collected from customers for the purpose of opening of account should be treated as confidential and details thereof should not be divulged for the purpose of cross selling, etc. Information sought from the customer should be relevant to the perceived risk and be nonintrusive. Branches/ offices should, therefore, ensure that information sought from the customer is relevant to the perceived risk, is not intrusive, and is in conformity with the guidelines issued in this regard. Any other information that is sought from the customer should be called for separately only after the account has been opened, with his/her express consent and in a different form, distinctly separate from the application form. It should be indicated clearly to the customer that providing such information is optional. Page 90

91 9.6 Avoiding hardship to customers: While issuing operational instructions to branches, it should be kept in mind that the spirit of the instructions issued by the Reserve Bank/ other regulatory authorities so as to avoid undue hardships to individuals who are otherwise classified as low risk customers. 9.7 Sensitizing the customers: Implementation of AML/CFT policy may require certain information from customers of a personal nature or which had not been called for earlier. The purpose of collecting such information could be questioned by the customer and may often lead to avoidable complaints and litigation. Branches/ offices should, therefore, get themselves prepared with specific literature/pamphlets, etc., to educate the customer regarding the objectives of the AML/CFT requirements for which their cooperation is solicited. The front desk officials should be specially trained to handle such situations while dealing with the customers. 9.8 KYC for the Existing Accounts: While the revised KYC guidelines will apply to all new customers, the same will also be applied to all existing customer accounts on the basis of materiality and risk. Transactions in existing accounts should be continuously monitored and any unusual pattern in the operation of the account should be reviewed on customer due diligence measures. Term/ recurring deposit accounts or accounts of similar nature will be treated as new accounts at the time of renewal and revised KYC procedures should be applied meticulously. Where the branches were unable to apply KYC measures due to non-furnishing of information / noncooperation by the customers, their accounts will remain blocked / frozen after issuing due notice to the customers explaining the reasons for taking such a decision and when such customers approach bank for transaction etc., then KYC norms be complied with. However, prior approval must be taken from zonal office before closure of the account. 9.9 Applicability to Branches and Subsidiaries outside India: The revised KYC guidelines shall also apply to the branches and majority owned subsidiaries located abroad, especially, in countries, which do not or insufficiently apply the FATF Recommendations, to the extent local laws in the host country permit. When local applicable laws and regulations prohibit implementation of these guidelines, the same should be brought to the notice of Head Office and in turn to Reserve Bank of India. In case there is a variance in KYC/AML standards prescribed by the Reserve Bank and the host country regulators, branches/overseas subsidiaries of the bank are required to adopt the more stringent regulation of the two. 9.10Technology requirements: The AML software in use at banks/fis needs to be comprehensive and robust enough to capture all cash and other transactions, including those relating to walk-in customers, sale of gold/silver/platinum, payment of dues of credit cards/reloading of prepaid/travel cards, third party products, and transactions involving internal accounts of the bank. Page 91

92 9.11 Penalty for Non-Adherence to KYC norms: Amendment has been made on Section 13(2) of PMLA 2002 vide Govt. of India Notification dated , which confers power to the Director, FIU-IND on the following lines: If the Director, in course of any inquiry, finds that a reporting entity or its designated director on the Board or any of its employees has failed to comply with the obligations under this Chapter, then, without prejudice to any other action that may be taken under any other provisions of this Act, he may a) issue a warning in writing; or b) direct such reporting entity or its designated director on the Board or any of its employees, to comply with specific instructions; or c) direct such reporting entity or its designated director on the Board or any of its employees, to send reports at such interval as may be prescribed on the measures it is taking; or d) by an order, impose a monetary penalty on such reporting entity or its designated director on the Board or any of its employees, which shall not be less than ten thousand rupees but may extend to one lakh rupees for each failure. Under the circumstances, any violation of essential safeguards and laid down procedures in opening and operations of deposit accounts and non-compliance of KYC norms by the branch staff / officials and for lapses or connivance in perpetrating irregularities/fraudulent operations in accounts would attract punitive action against them. Zonal Heads while visiting the branches should invariably check as to whether the KYC guidelines are strictly followed by the Branches. In case of deviation, all requisite steps should be taken to rectify the shortcomings under close monitoring. Page 92

93 Appendix-I Customer Identification Procedure Features to be verified and documents that may be obtained from customers Features Documents Accounts of individuals (i) Passport (ii) Permanent Account Number (PAN) card (iii) - Proof of Identity Voter s Identity Card issued by Election Commission of India - Proof of Address (iv) Driving License (v) Job Card issued by NREGA duly signed by an officer of the State Govt. (vi) The letter issued by the Unique Identification Authority of India (UIDAI) containing details of name, address and Aadhaar number (vii) Any other document as notified by the Central Government in consultation of regulator. [The discretion given to banks earlier stands withdrawn] * [Accept NREGA Job Card as an officially valid document for opening of bank accounts without the limitations applicable to Small Accounts ] Where simplified measures are applied for verifying the identity of customers the following documents shall be deemed to be the 'Officially Valid Documents (OVD) : Identity card with applicant's Photograph issued by Central/State Government Departments, Statutory/ Regulatory Authorities, Public Sector Undertakings, Scheduled Commercial Banks, and Public Financial Institutions; Letter issued by a Gazetted Officer, with a duly attested photograph of the person. Where simplified measures are applied for verifying for the limited purpose of proof of address the following additional documents are deemed to be OVDs : Utility bill which is not more than two months old of any service provider (electricity, telephone, postpaid mobile phone, piped gas, water bill); Property or Municipal Tax Receipt Bank account statement; Pension or family pension payment orders (PPOs) issued to retired employees by Government Departments or Public Sector Undertakings, if they contain the address; or Post Office savings bank account Page 93

94 Features Documents Letter of allotment of accommodation from employer issued by State or Central Government departments, statutory or regulatory bodies, public sector undertakings, scheduled commercial banks, financial institutions and listed companies. Similarly, leave and license agreements with such employers allotting official accommodation; and Documents issued by Government departments of foreign jurisdictions and letter issued by Foreign Embassy or Mission in India. Accounts of companies - Name of the company - Principal place of business - Mailing address of the company - Telephone/Fax Number a) Certificate of incorporation; b) Memorandum and Articles of Association; c) A resolution from the Board of Directors and power of attorney granted to its managers, officers or employees to transact on its behalf; and d) An officially valid document in respect of managers, officers or employees holding an attorney to transact on its behalf, as noted in Point No. 1.3, Chapter - 1 above Accounts of partnership firms - Legal name - Address - Names of all partners and their addresses - Telephone numbers of the firm and partners a) Registration certificate; b) Partnership deed; and c) An officially valid document in respect of the person holding an attorney to transact on its behalf. Accounts of trusts & foundations - Names of trustees, settlers, a) Registration certificate; b) Trust deed; and c) An Officially valid document in respect of the person holding an attorney to transact on its behalf, as noted in Point No. 1.3, Chapter - 1 above beneficiaries and signatories - Names and addresses of the founder, the managers/ directors and the beneficiaries - Telephone/fax numbers Page 94

95 Features Documents Accounts of Un-incorporated a) Resolution of the managing Association or Body of Individuals or body of individuals; body of such association b) Power of attorney granted to him to transact on its behalf; c) An officially holding an valid attorney document to in transact respect on of the person its behalf, as noted in Point No. 1.3, Chapter - 1 above; and d) Such information as may be required by the bank Juridical Person Accounts of Proprietorship concerns - Proof of the name, address and activity of the concern It should be verified that any person purporting to act on to collectively theauthorized legal existence of such behalf of suchestablish client is so and verify the an identity of that person association or body of individuals. Registration certificate (in the case of a registered concern) Certificate/license issued by the Municipal authorities under Shop & Establishment Act, Sales and income tax returns CST/VAT certificate Certificate/registration document issued by Sales Tax/Service Tax/Professional Tax authorities License/certificate of practice issued in the name of the proprietary concern by any professional body incorporated under a statute. The complete Income Tax return (not just the acknowledgement) in the name of the sole proprietor where the firm's income is reflected, duly authenticated/ acknowledged by the Income Tax Authorities. (These documents should be in the name of the proprietary concern.) In cases where the banks are satisfied that it is not possible to furnish two such documents, they would have the discretion to accept only one of those documents as activity proof. In such cases, the banks, however, would have to undertake contact point verification, collect such information as would be required to establish the existence of such firm, confirm, clarify and satisfy themselves that the business activity has been verified from the address of the proprietary concern. Apart from the above documents, the Officially Valid Documents, as noted in Point No. 1.3(a) vi, Chapter - 1 above must be obtained Page 95

96 The Branches should ask their customers to establish their identity (true name, residential and mailing address). This may be done with the help of certain official documents in original. The verifying official, at the time of opening the account must scrutinize the documents submitted with their original and certify the KYC documents through seal as Verified from original and put his signature, name & PF number below his official signature. No photocopies of Driving License/ Passport etc. should be relied upon Page 96

97 Appendix-II KYC documents for eligible Foreign Portfolio Investors (FPIs) under Portfolio Investment Scheme (PIS) FPI Type Document Type Category-I Category-II Category-III Entity Level Constitutive Documents (Memorandum and Articles of Association, Certificate of Incorporation etc.) Mandatory Mandatory Mandatory Proof of Address Mandatory (Power of Attorney {PoA} mentioning the address is acceptable as address Mandatory proof) Exempted * Mandatory (Power of Attorney {PoA} mentioning the address is acceptable as address proof) Mandatory other than Power of Attorney Mandatory Mandatory Exempted * Mandatory SEBI Registration Certificate Board List Proof of Identity Mandatory Mandatory Mandatory Exempted * Mandatory Mandatory Mandatory Exempted * Mandatory Exempted * Proof of Address Exempted * Exempted * Photographs Exempted Exempted Mandatory Entity declares* on letter head full name, nationality, date of birth or submits photo identity proof Declaration on Letter Head * Exempted * PAN Card Financial Data Senior Manageme nt (Whole Time Directors/ Partners/ Trustees / etc.) Authorized Signatories List and Signatures Mandatory - list Mandatory - list of of Global Global Custodian Custodian signatories can be signatories can given in case of PoA be given in to Global Custodian case of PoA to Global Custodian Mandatory Page 97

98 Proof of Identity Exempted * Exempted * Mandatory Proof of Address Exempted * Exempted * Photographs Exempted Exempted Declaration on Letter Head * Exempted * Document Type Category-I Category-II Category-III Ultimate Beneficial Owner (UBO) Proof of Identity Proof of Address Exempted * Exempted * Exempted * Exempted * Photographs Exempted Exempted Mandatory Declaration on Letter Head * Exempted * *Not required while opening the bank account. However, FPIs concerned may submit an undertaking that upon demand by Regulators/Law Enforcement Agencies the relative document/s would be submitted to the FPIs from certain jurisdictions where the practice of passing Board Resolution for the purpose of opening bank accounts etc. is not in vogue may submit Power of Attorney granted to Global Custodian/ Local Custodian in lieu of Board Resolution. Category I. Eligible Foreign Investors Government and Government related foreign investors such as Foreign Central Banks, Governmental Agencies, Sovereign Wealth Funds, International/ Multilateral Organizations/ Agencies. II. a) Appropriately regulated broad based funds such as Mutual Trusts, Funds, Investment Insurance /Reinsurance Companies, Other Broad Based Funds etc. b) Appropriately regulated entities such as Banks, Asset Management Companies, Investment Managers/Advisors, Portfolio Managers etc. c) Broad based funds whose investment manager is appropriately regulated. d) University Funds and Pension Funds. e) University related Endowments already registered with SEBI as FII/Sub Account. III. All other eligible foreign investors investing in India under PIS route not eligible under Category I and II such as Endowments, Charitable Societies/Trust, Foundations, Corporate Bodies, Trusts, Individuals, Family Offices, etc Page 98

99 Appendix-III Foreign Portfolio Investors (FPIs) categorized by SEBI Category Eligible Foreign Investors I. Government and Government related foreign investors such as Foreign Central Banks, Governmental Agencies, Sovereign Wealth Funds, International/ Multilateral Organizations/ Agencies. II. a) b) c) d) e) III. Appropriately regulated broad based funds such as Mutual Funds, Investment Trusts, Insurance /Reinsurance Companies, Other Broad Based Funds etc. Appropriately regulated entities such as Banks, Asset Management Companies, Investment Managers/ Advisors, Portfolio Managers etc. Broad based funds whose investment manager is appropriately regulated. University Funds and Pension Funds. University related Endowments already registered with SEBI as Fll/Sub Account. All other eligible foreign investors investing in India under PIS route not eligible under Category I and II such as Endowments, Charitable Societies/Trust, Foundations, Corporate Bodies, Trusts, Individuals, Family Offices, etc. Page 99

100 Appendix-IV Indicative list of High/Medium Risk Customers Characteristics of High Risk Customers: 1. Individuals and entities listed (UNSCRs) such as UN 1267 etc. in various United Nations Security Council Resolutions 2. Individuals or entities listed in the schedule to the order under section 51A of the Unlawful Activities (Prevention) Act, 1967 relating to the purposes of prevention of, and for coping with terrorist activities. 3. Individuals or entities in watch lists issued by Interpol and other similar international organizations. 4. Customers with dubious reputation as per public information available or commercially available watch lists. 5. Individuals and entities specifically identified by regulators, FIU and other competent authorities as high risk. 6. Customers conducting their business relationship or transactions in unusual circumstances such as significant and unexplained geographic distance between the institution and the location of the customer, frequent and unexplained movement of accounts to different institutions, frequent and unexplained movement of funds between institutions in various geographic locations etc. 7. Customers based in high risk countries / jurisdictions or locations 8. Politically exposed persons (PEPs) of foreign origin, customers who are close relatives of PEPs and accounts of which a PEP is the ultimate beneficial owner. 9. Non-resident customers and foreign nationals. 10. Embassies/consulates 11. Off-shore (foreign) corporation/business 12. Non face-to-face customers 13. High net worth individuals 14. Firms with Sleeping partners 15. Companies having close family shareholding or beneficial ownership Page 100

101 16. Complex business ownership structures, which can make it easier to conceal underlying beneficiaries, where there is no legitimate commercial rationale. 17. Shell companies which have no physical presence in the country in which it is incorporated. The existence simply of a local agent or low level staff does not constitute physical presence. 18. Investment Management/ Money Management Company/ Personal Investment Company 19. Accounts for gatekeepers such as accountants, lawyers or other professionals for their clients where the identity of the underlying client is not disclosed to the financial institution. 20. Client Accounts managed by professional service providers such as law firms, accountants, agents, brokers, fund managers, trustees, custodians etc. 21. Trusts, charities, NGOs/Non- Profit Organisations (NPOs) (Especially those operating on a crossborder basis) unregulated clubs and organizations receiving donations (excluding NPOs/NGOs promoted by United Nations or its agencies) 22. Money Service Business: including seller of : Money Orders/ Travelers Checks/ Money Transmission/ Check Cashing/ Currency Dealing or Exchange 23. Business accepting third party cheques (except Super markets or retail stores that accept payroll cheques/ cash payroll cheques) 24. Gambling/ Gaming including Junket Operators arranging gambling tours. 25. Dealers in high value or precious goods (e.g. Jewel, gem and precious metals dealers, art and antique dealers and auction houses, estate agents and real estate brokers) 26. Customers engaged in business which is associated with higher levels of corruption (e.g. arms manufacturers, dealers and intermediaries.) 27. Customers engaged in industries that might relate to nuclear proliferation activities or explosives. 28. Customers that may appear to be Multi level marketing companies etc. Characteristics of Medium Risk Customers 1. Non-Bank Financial Institution 2. Stock brokerage 3. Import/Export 4. Gas Station 5. Car/Boat/ Plane dealership Page 101

102 6. Electronics (wholesale) 7. Travel Agency 8. Used Car sales 9. Telemarketers 10. Providers of telecommunications service, internet café, IDD call service, phone cards, phone center 11. Dot-com company or internet business 12. Pawn shops 13. Auctioneers 14. Cash intensive business such as restaurants, retail shops, parking garages, fast food stores, movie theaters etc. 15. Sole Practitioners or Law Firms (small, little known) 16. Notaries (small, little known) 17. Secretarial Firms (small, little known) 18. Accountants (small, little known firms) 19. Venture Capital companies Indicative List of High/Medium risk Products & Services 1. Electronic funds payment services such as Electronic cash (e.g. stored value and payroll cards) Fund transfers (domestic and international) etc. 2. Electronic banking 3. Private banking (domestic and international) 4. Trust and asset management services 5. Monetary instruments such as Travelers Cheque 6. Foreign Correspondent accounts 7. Trade Finance (such as letter of credit) 8. Special use of concentration accounts 9. Lending activities, particularly loans secured by cash collateral and marketable securities 10. Transactions undertaken for non-account holders (occasional customrs) 11. Provision of safe custody and safety deposit boxed 12. Currency Exchange transactions Page 102

103 13. Project financing of sensitive industries in high risk jurisdictions 14. Trade Finance services and transactions involving high risk jurisdictions 15. Services offering anonymity or involving third parties 16. Services involving banknote and precious metal trading and delivery 17. Services offering cash, monetary or bearer instruments; cross-border transactions, etc. Indicative List of High/Medium risk Geographies Countries/Jurisdictions 1. Countries subject to sanctions, embargoes or similar measures in the United Nations Security Council Resolutions (UNSCR) 2. Jurisdictions identified in FATF public statement as having substantial money laundering and terrorist financing (ML/TF) risks ( 3. Jurisdictions identified ( in FATF public statement with strategic AML/CFT deficiencies 4. Tax havens or countries that are known for highly secretive banking and corporate law practices 5. Counties identified by credible sources as lacking appropriate AML/CFT laws, regulations and other measures. 6. Countries identified by credible sources as providing funding or support for terrorist activities that have designated terrorist organizations operating within them 7. Countries identified by credible sources as having significant levels of criminal activity 8. Countries identifies by the bank as high risk because of its prior experiences, transaction history or other factors (e.g. legal considerations, or allegations of official corruption) Locations 1. Locations within the country known as high risk for terrorist incidents or terrorist financing activities ( e.g. sensitive locations/ cities and affected districts) 2. Locations identified by credible sources as having significant levels of criminal, terrorist, terrorist financing activity. 3. Locations identified by the bank as high risk because of its prior experiences, transaction history or other factors. Page 103

104 Appendix-V Circumstances for reporting of Off-line STRs as Attempted Transactions : 1. Any person who left without opening account after unnecessary dialogue flouting KYC & AML norms 2. Any person who did not complete the transaction on being enquired about source of funds etc. 3. Any person who acts on behalf of a third party having vague knowledge about the source of funds etc. 4. Any person who is nervous or over cautious in initial conversation 5. Any person who wants to avoid reporting 6. Any person who approaches with an intention to violate extant AML guidelines Page 104

105 Appendix-VI OFFLINE ALERT INDICATORS PROVIDED BY IBA STUDY FOR DETECTION OF SUSPICIOUS TRANSACTIONS AT BRANCHES Sl. No. Alert Indicator 1 CV1.1-Customer left without opening account 2 CV2.1- Customer offered false or forged identification documents 3 WL2.2- Identity documents are not verifiable 4 CV3.1- Address found to be non existent 5 CV3.2- Address found to be wrong 6 CV4.2- Difficult to identify beneficial owner 7 LQ1.1Customer is being investigated for criminal offences 8 LQ2.1- Customer is being investigated TF offences MR1.1- Adverse media report about criminal activities of customer MR2.1- Adverse media report about TF or terrorist activities of customer EI 1.1- Customer did not complete transaction Indicative Rule / Scenario Customer did not open account after being informed about KYC requirement Customer gives false identification documents or documents that appear to be counterfeited, altered or inaccurate. Identity documents presented are not verifiable, i.e. foreign documents etc. Address provided by the customer is found to be nonexistent. Customer not staying at address provided during account opening Customer uses complex legal structures or where it is difficult to identify the beneficial owner. Customer has been the subject of enquiry from any law enforcement agency relating to criminal offences. Customer has been the subject of enquiry from any law enforcement agency relating to TF or terrorist activities. Match the customer details with persons reported in local media / open source for criminal offences. Match the customer details with persons reported in local media / open source for terrorism or terrorist financing related activities. Customer did not complete transaction after queries such as source of funds etc. 12 EI 2.1- Customer is nervous Customer is hurried or nervous 13 EI 2.2- Customer is over cautious Customer over cautious in explaining genuineness of the transaction. 14 EI 2.3- Customer provides inconsistent information Customer changes the information provided after more detailed information is required. Customer provides information that seems minimal, possibly false or inconsistent. Page 105

106 Sl. No. 15 Alert Indicator Indicative Rule / Scenario EI 3.1- Customer acting on behalf Customer has vague knowledge about amount of money of a third party involved in the transaction. Customer taking instructions for conducting transactions. 16 EI 3.2- Multiple customers working Multiple customers arrive together but pretend to ignore each as a group other 17 EI 4.1- Customer avoiding nearer Customer travels branches transactions. 18 EI 4.2- Customer offers different Customer offers different identifications on different identifications on different occasions with an apparent attempt to avoid linkage of occasions multiple transactions. 19 EI 4.3- Customer wants to avoid Customer makes enquiries or tries to convince staff to avoid reporting reporting. 20 EI 4.4- Customer could not explain Customer could not explain source of funds satisfactorily. source of funds 21 EI 5.1Transaction unnecessarily complex 22 EI 5.2- Transaction economic rationale 23 EI 5.3- Transaction inconsistent Transaction involving movement of which is inconsistent with with business the customer s business. 24 EI 6.1Unapproved remittance in NPO 25 PC1.1- Complaint received from Complaint received from public for abuse of account for public committing fraud etc. 26 BA1.1- Alert raised by agent 27 BA1.2Alert raised by other Alert raised by other institutions, subsidiaries or business institution associates including cross-border referrals. unexplained distances to conduct is Transaction is unnecessarily complex for its stated purpose. has no The amount or frequency or the stated reason of the transaction does not make sense for the particular customer. inward Foreign remittance received by NPO not approved by FCRA. Alert raised by agents about suspicion. Page 106

107 Appendix-VII Red Flag Indicators to be used for identifying suspicious transactions related to TBML Sl. No. 1 Red Flag Stage Inward remittance followed by immediate withdrawal/transfer to other accounts Wash sales or round trip sales - Accounts debited and then immediately credited or vice versa for related purchase/sale Account 3 Client is involved in high risk or cash intensive business such as money remitting Account 4 Sudden increase in cash deposits of clients involved in high risk business Use of multiple accounts by customer; or accounts operated for very short period and used for advance remittances only Little or no withdrawal from account for business purposes/ no recurrent business expenses Account 7 Multiple cash deposits in one country followed by immediate ATM withdrawal in another country Account 8 Wire transfer accounts opened and closed within a very short period of time Funds received but goods not exported - advance for exports Account Funds sent out but good not imported advance for imports Advance for supply of goods is a major part/percentage of the total value of goods Amount of advance is not in line with normal international trade for the kind of goods Advance Advance Goods not supplied within reasonable timeframe Consignment size is unreasonable compared to customer profile/capacity/size of business Underlying goods involved in the trade transaction are of sensitive nature; trade of similar items by a group of firms from the same overseas supplier (many to one) or vice-versa Underlying goods or services not in line with customer's profile and declared business Advance Consignment 17 Transaction not in-line with normal international trade for the given kind of goods & parties involved Consignment 18 Transactions related to acquisition or sale of intangibles like PIN, e-codes, specialised Consignment software, etc. General trading company making payments for purchase of Consignment goods that it does not usually purchase/sell/trade in High proportion of high seas sales/merchanting trades Account Account Account Advance Advance Consignment Consignment Consignment Page 107

108 Sl. No. 21 Red Flag Stage Transactions involving third parties which may not be contract parties (consignee and remitter are different) Payments/fund transfers made through economic/exchange centres even when account is held with financial institutions Related party transactions including transfer pricing Unknown counterparties to a trade transaction Non-resident's payments to companies/natural persons who have accounts with offshore Banks Trade activity done from port which is far from the importer/exporter s base location. Example importer is in Surat and goods imported through a remote port in Assam Description of goods provided is vague Prima facie the documents submitted look suspicious Substantial inconsistencies between the information originally supplied and discrepancies that contained inbetween the documents Suspected description of goods on transport document vis-à-vis invoice/other documents Counterparties 31 Unnecessarily complex transactions that lack economic sense Documentation 32 Over/under/multiple invoicing, apparently suspect (apparently fraudulent/fake) Documentation documents Export/import documents are not submitted and account behaviour of the Documentation customer appears to be suspicious Counterparties Counterparties Counterparties Counterparties Location Documentation Documentation Documentation Documentation 34 Import payments being made against old bills after lapse of considerable period Documentation of time from import of goods, without appropriate justification and documentation 35 Remittances to or from high risk jurisdictions Jurisdiction 36 Goods transhipped through high risk jurisdictions for no apparent reason Jurisdiction 37 Circuitous route of shipment/shipment of goods inconsistent with normal geographic Jurisdiction trade Amounts of money transfer carried out by natural persons and legal entities Payment are multiples of 100/1,000/10,000/100,000 USD/EUR/National currency Originator's bank uses cover payment when wiring funds to beneficiary's bank Payment 40 Originator of transfer not able to provide documents on source of the money Payment 41 Structuring of transactions to avoid threshold reporting Payment 42 Structuring of transactions to avoid submission of BOE (Remittance amounts Payment kept just below the threshold of USD 100,000 equivalent value) Customeror selling items on a commercial website and receiving money via internet Payment payment service provider Originator/beneficiary information missing in wire transfers Payment Page 108

109 Sl. No Red Flag Stage Foreign currency exchange transactions by non-residents over a short period of time Payment where transfers are affected through non- banking remittance systems Use of repeatedly amended or frequently extended letters of credit without Payment reasonable justification or for reasons like changes of beneficiary or location 47 Accounts funded by negotiable instruments (such as travelers cheques, cashier s Account cheques, etc.) in round denominations 48 Counterparties 52 Importer of goods not from the same country from where wire (payment for import) originated Foreign based importing entity with accounts in exporting country receiving payments from locations outside the area of Packing inconsistent it s customer base with the commodity or shipping method Carousel transactions repeated importation and exportation of same high-value commodity Service locations or description of services that are inconsistent with the letter of credit 53 Booking of ticket abroad and subsequent cancelling and payment made to third party. Services 54 Hiring of services which are not in accordance with company requirement. Services 55 Forex for medical treatment as per prescribed limit but availed multiple times from Services multiple ADs. Value and/or total quantity of goods is not easily ascertainable Valuation Counterparties Consignment Consignment Services 57 Significant discrepancies appear between the value of goods or services reported on Valuation the invoice and fair market value 58 A customer deviates significantly from its historical pattern of trade activity (i.e. in terms Account of markets, monetary value, frequency of transactions, volume, or merchandise type) Transacting parties appear to be affiliated, conduct business out of a residential Customer address, or provide only a registered agent s address The LC contains non-standard clauses or phrases or has unusual characteristics Documentation 61 LC contains non-standard clauses or phrases or has unusual characteristics Payment 62 Payment terms or tenor are inconsistent with the type of goods Documentation 63 Frequent change in payment instruction at the last minute Payment Page 109

110 Appendix-VIII Reasons / Examples of suspicious transactions Identity of client False identification documents. Identification documents which could not be verified within reasonable time. Accounts opened with names very close to other established business identities. Background of client Suspicious background or links with known criminals. Multiple accounts Large number of accounts having a common account holder, introducer or authorized signatory with no rationale. Activity in accounts Unexplained transfers between multiple accounts with no rationale. Unusual activity compared with past transactions. Sudden activity in dormant accounts. Exercise caution while allowing operation in dormant/inoperative accounts. Activity inconsistent with what would be expected from declared business. Nature of transactions Unusual or unjustified complexity. No economic rationale or bonafide purpose. Frequent purchases of drafts or other negotiable instruments with cash. Nature of transactions inconsistent with what would be expected from declared business. Value of transactions Value just under the reporting threshold amount (above rupees ten lakh) in an apparent attempt to avoid reporting. Value inconsistent with the client s apparent financial standing. Page 110

111 Appendix-IX Government Order on Procedure for Implementation of Section 51A of The Unlawful Activities (Prevention) Act, 1967 File No.17015/10/2002-IS-VI Government of India Ministry of Home Affairs Internal Security - I Division New Delhi, Dated 27th August, 2009 To, Governor, Reserve Bank of India, Mumbai Chairman, Securities & Exchange Board of India, Mumbai Chairman, Insurance Regulatory and Development Authority, Hyderabad Foreign Secretary, Ministry of External Affairs, New Delhi Finance Secretary, Ministry of Finance, New Delhi Revenue Secretary, Department of Revenue, Ministry of Finance, New Delhi Director, Intelligence Bureau, New Delhi Additional Secretary, Department of Financial Services, Ministry of Finance, New Delhi 9. Chief Secretaries of all States / Union Territories Order Procedure for Implementation of Section 51A of The Unlawful Activities (Prevention) Act, 1967 The Unlawful Activities (Prevention) Act, 1967 (UAPA) was amended and notified on , which, interalia, inserted Section 51A to the Act. Section 51A reads as under: "51A. For the prevention of, and for coping with terrorist activities, the Central Government shall have power to (a) 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 engaged in terrorism; (b) 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 to the Order or any other person engaged in or suspected to be engaged in terrorism; Page 111

112 (c) prevent the entry into or the transit through India of individuals Listed in the Schedule to the Order or any other person engaged in or suspected to be engaged in terrorism", The Unlawful Activities (Prevention) Act define "Order" as under: "Order" means the Prevention and Suppression of Terrorism (Implementation of Security Council Resolutions) Order, 2007, as may be amended from time to time. In order to expeditiously and effectively implement the provisions of Section 51A, the following procedures shall be followed :Appointment and Communication of Details of UAPA Nodal Officers 2. As regards appointment and communication of details of UAPA nodal officers (i) The UAPA nodal officer for IS-I division would be the Joint Secretary (IS.I), Ministry of Home Affairs. His contact details are (Tel), (Fax) and ( id). (ii) The Ministry of External affairs, Department of Economic affairs, Foreigners Division of MHA, FIU-IND; and RBI, SEBI, IRDA (hereinafter referred to as Regulators) shall appoint a UAPA nodal officer and communicate the name and contact details to the IS-I Division in MHA. (iii) The States and UTs should appoint a UAPA nodal officer preferably of the rank of the Principal Secretary / Secretary, Home Department and communicate the name and contact details to the IS-I Division in MHA. (iv) The IS-I Division in MHA would maintain the consolidated list of all UAPA nodal officers and forward the list to all other UAPA nodal officers. (v) The RBI, SEBI, IRDA should forward the consolidated list of UAPA nodal officers to the Banks, stock exchanges / depositories, intermediaries regulated by SEBI and insurance companies respectively (vi) The consolidated list of the UAPA nodal officers should be circulated to the nodal officer of IS-I Division of MHA in July every year and on every change. Joint Secretary (IS-I), being the nodal officer of IS-I Division of MHA, shall cause the amended list of UAPA nodal officers to be circulated to the nodal officers of Ministry of External Affairs, Department of Economic affairs, Foreigners Division of MHA, RBI, SEBI, IRDA and FIUIND. Page 112

113 Communication of the List of Designated Individuals / Entities 3. As regards communication of the list of designated individuals / entities (i) The Ministry of External Affairs shall update the list of individuals and entities subject to UN sanction measures on a regular basis. On any revision, the Ministry of External Affairs would electronically forward this list to the Nodal officers in Regulators, FIU-IND, IS-I Division and Foreigners' Division in MHA. (ii) The Regulators would forward the list mentioned in (i) above (referred to as designated lists) to the banks, stock exchanges / depositories, intermediaries regulated by SEBI and insurance companies respectively. (iii) The IS-I Division of MHA would forward the designated lists to the UAPA nodal officer of all States and UTs. (iv) The Foreigners Division of MHA would forward the designated lists to the immigration authorities and security agencies. Regarding Funds, Financial Assets or Economic Resources or related Services held in the Form of Bank Accounts, Stocks or Insurance Policies etc. 4. As regards funds, financial assets or economic resources or related services held in the form of bank accounts, stocks or Insurance policies etc., the Regulators would forward the designated lists to the banks, stock exchanges / depositories, intermediaries regulated by SEBI and insurance companies respectively. The RBI, SEBI and IRDA would issue necessary guidelines to banks, stock exchanges / depositories, intermediaries regulated by SEBI and insurance companies requiring them to (i) Maintain updated designated lists in electronic form and run a check on the given parameters on a regular basis to verify whether individuals or entities listed in the schedule to the Order, herein after, referred to as designated individuals / entities are holding any funds, financial assets or economic resources or related services held in the form of bank accounts, stocks or Insurance policies etc., with them. (ii) In case, the particulars of any of their customers match with the particulars of designated individuals / entities, the banks, stock exchanges / depositories, intermediaries regulated by SEBI and insurance companies shall immediately, not later than 24 hours from the time of finding out such customer, inform full particulars of the funds, financial assets or economic resources or related services held in the form of bank accounts, stocks or Insurance policies etc., held by such customer on their books to the Joint Secretary (IS.I), Ministry of Home Affairs, at Fax No and also convey over telephone on The particulars apart from being sent by post should necessarily be conveyed on id :jsis@nic.in (iii) The banks, stock exchanges / depositories, intermediaries regulated by SEBI and insurance Page 113

114 companies shall also send a copy of the communication mentioned in (ii) above to the UAPA nodal officer of the state / UT where the account is held and Regulators and FIUIND, as the case may be. (iv) In case, the match of any of the customers with the particulars of designated individuals / entities is beyond doubt, the banks, stock exchanges / depositories, intermediaries regulated by SEBI and insurance companies would prevent designated persons from conducting financial transactions, under intimation to the Joint Secretary (ls.i), Ministry of Home Affairs, at Fax No and also convey over telephone on The particulars apart from being sent by post should necessarily be conveyed on id :jsis@nic.in (v) The Banks, stock exchanges / depositories, intermediaries regulated by SEBI and insurance companies, shall file a Suspicious Transaction Report (STR) with FIU-IND covering all transactions in the accounts covered by paragraph (ii) above, carried through or attempted as per the prescribed format. 5. On receipt of the particulars referred to in paragraph 3 (ii) above, IS-I Division of MHA would cause a verification to be conducted by the State Police and / or the Central Agencies so as to ensure that the individuals / entities identified by the Banks, stock exchanges / depositories, intermediaries regulated by SEBI and Insurance Companies are the ones listed as designated individuals / entities and the funds, financial assets or economic resources or related services, reported by banks, stock exchanges / depositories, intermediaries regulated by SEBI and insurance companies are held by the designated individuals / entities. This verification would be completed within a period not exceeding 5 working days from the date of receipt of such particulars. 6. In case, the results of the verification indicate that the properties are owned by or are held for the benefit of the designated individuals / entities, an order to freeze these assets under section 51A of the UAPA would be issued within 24 hours of such verification and conveyed electronically to the concerned bank branch, depository, branch of insurance company branch under intimation to respective Regulators and FlU-IND. The UAPA nodal officer of IS-I Division of MHA shall also forward a copy thereof to all the Principal Secretary / Secretary, Home Department of the States or UTs, so that any individual or entity may be prohibited from making any funds, financial assets or economic resources or related services available for the benefit of the designated individuals / entities or any other person engaged in or suspected to be engaged in terrorism. The UAPA nodal officer of IS-I Division of MHA shall also forward a copy of the order under section 51A, to all Directors General of Police / Commissioners of Police of all states / UTs for initiating action under the provisions of Unlawful Activities (Prevention) Act. The order shall take place without prior notice to the designated individuals/ entities. Regarding Financial Assets or Economic Resources of the Nature of Immovable Properties 7. IS-I Division of MHA would electronically forward the designated lists to the UAPA nodal officer of all States and UTs with the request to have the names of the designated individuals / entities, on the given parameters, verified from the records of the office of the Registrar performing the work of registration of immovable properties in their respective jurisdiction. Page 114

115 8. In case, the designated individuals / entities are holding financial assets or economic resources of the nature of immovable property and if any match with the designated individuals / entities is found, the UAPA nodal officer of the state/ut would cause communication of the complete particulars of such individual / entity along with complete details of the financial assets or economic resources of the nature of immovable property to Joint Secretary (IS.I), Ministry of Home Affairs, immediately within 24 hours at Fax No and also convey over telephone on The particulars apart from being sent by post would necessarily be conveyed on id :jsis@nic.in. 9. The UAPA nodal officer of the state / UT may cause such inquiry to be conducted by the State Police so as to ensure that the particulars sent by the Registrar performing the work of registering immovable properties are indeed of these designated individuals / entities. This verification would be completed within a maximum of 5 working days and should be conveyed within 24 hours of the verification, if it matches with the particulars of the designated individual / entity to Joint Secretary (IS-I), Ministry of Home Affairs at the Fax, telephone numbers and also on the id given below. 10. A copy of this reference should be sent to Joint Secretary (IS.I), Ministry of Home Affairs, at Fax No and also convey over telephone on The particulars apart from being sent by post would necessarily be conveyed on id :jsis@nic.in. MHA may have the verification also conducted by the Central Agencies. This verification would be completed within a maximum of 5 working days. 11. In case, the results of the verification indicate that the particulars match with those of designated individuals / entities, an order under section 51A of the UAPA would be issued within 24 hours, by the nodal officer of IS-I Division of MHA and conveyed to the concerned Registrar performing the work of registering immovable properties and to FIU-IND under intimation to the concerned UAPA nodal officer of the state / UT. The order shall take place without prior notice, to the designated individuals/entities. 12. Further, the UAPA nodal officer of the state / UT shall cause to monitor the transactions /accounts of the designated individual / entity so as to 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 to the Order or any other person engaged in or suspected to be engaged in terrorism. The UAPA nodal officer of the state / UT shall upon coming to his notice, transactions and attempts by third party immediately bring to the notice of the DGP / Commissioner of Police of the State / UT for also initiating action under the provisions of Unlawful Activities (Prevention) Act. Implementation of Requests Received from Foreign Countries under U.N. Security Council Resolution 1373 of U.N. Security Council Resolution 1373 obligates countries to freeze without delay the funds or other assets of persons who commit, or attempt to commit, terrorist acts or participate in or facilitate the commission of terrorist acts; of entities owned or controlled directly or indirectly Page 115

116 by such persons; and of persons and entities acting on behalf of, or at the direction of such persons and entities, including funds or other assets derived or generated from property owned or controlled, directly or indirectly, by such persons and associated persons and entities. Each individual country has the authority to designate the persons and entities that should have their funds or other assets frozen. Additionally, to ensure that effective cooperation is developed among countries, countries should examine and give effect to, if appropriate, the actions initiated under the freezing mechanisms of other countries. 14. To give effect to the requests of foreign countries under U.N. Security Council Resolution 1373, the Ministry of External Affairs shall examine the requests made by the foreign countries and forward it electronically, with their comments, to the UAPA nodal officer for IS-I Division for freezing of funds or other assets. 15. The UAPA nodal officer of IS-I Division of MHA, shall cause the request to be examined, within 5 working days, so as to satisfy itself that on the basis of applicable legal principles, the requested designation is supported by reasonable grounds, or a reasonable basis, to suspect or believe that the proposed designee is a terrorist, one who finances terrorism or a terrorist organization, and upon his satisfaction, request would be electronically forwarded to the nodal officers in Regulators, FIU-IND and to the nodal officers of the States / UTs. The proposed designee, as mentioned above would be treated as designated individuals / entities. 16. Upon receipt of the requests by these nodal officers from the UAPA nodal officer of IS-I Division, the procedure as enumerated at paragraphs 4 to 12 above shall be followed. The freezing orders shall take place without prior notice to the designated persons involved Procedure for Unfreezing of Funds, Financial Assets or Economic Resources or related Services of Individuals / Entities Inadvertently affected by the Freezing Mechanism upon Verification that the Person or Entity is not a Designated Person 17. Any individual or entity, if it has evidence to prove that the freezing of funds, financial assets or economic resources or related services, owned / held by them has been inadvertently frozen, they shall move an application giving the requisite evidence, in writing, to the concerned bank, stock exchanges / depositories, intermediaries regulated by SEBI, insurance companies, Registrar of Immovable Properties and the State / UT nodal officers. 18. The banks, stock exchanges / depositories, intermediaries regulated by SEBI, insurance companies, Registrar of Immovable Properties and the State / UT nodal officers shall inform and forward a copy of the application together with full details of the asset frozen given by any individual or entity informing of the funds, financial assets or economic resources or related services have been frozen inadvertently, to the nodal officer of IS-I Division of MHA as per the contact details given in paragraph 4 (ii) above, within two working days. 19.The Joint Secretary (IS-I), MHA, being the nodal officer for IS-I Division of MHA shall cause such verification as may be required on the basis of the evidence furnished by the individual / entity Page 116

117 and if he is satisfied, he shall pass an order, within 15 working days, unfreezing the funds, financial assets or economic resources or related services, owned / held by such applicant, under intimation to the concerned bank, stock exchanges / depositories, intermediaries regulated by SEBI, insurance company and the nodal officers of States / UTs. However, if it is not possible for any reason to pass an Order unfreezing the assets within 15 working days, the nodal officer of IS-I Division shall inform the applicant. Communication of Orders under Section 51A of Unlawful Activities (Prevention) Act 20. All Orders under section 51A of Unlawful Activities (Prevention) Act, relating to funds, financial assets or economic resources or related services, would be communicated to all the banks, depositories / stock exchanges, intermediaries regulated by SEBI, insurance companies through respective Regulators, and to all the Registrars performing the work of registering immovable properties, through the state / UT nodal officer by IS-I Division of MHA.Regarding Prevention of Entry into or Transit through India 21. As regards prevention of entry into or transit through India of the designated individuals, the Foreigners Division of MHA, shall forward the designated lists to the immigration authorities and security agencies with a request to prevent the entry into or the transit through India. The order shall take place without prior notice to the designated individuals / entities. 22. The immigration authorities shall ensure strict compliance of the Orders and also communicate the details of entry or transit through India of the designated individuals as prevented by them to the Foreigners' Division of MHA. Procedure for Communication of Compliance of Action taken under Section 51A 23. The nodal officers of IS-I Division and Foreigners Division of MHA shall furnish the details of funds, financial assets or economic resources or related services of designated individuals / entities frozen by an order, and details of the individuals whose entry into India or transit through India was prevented, respectively, to the Ministry of External Affairs for onward communication to the United Nations. 24. All concerned are requested to ensure strict compliance of this order. Sd/- (D. Diptivilasa) Joint Secretary to Government of India Page 117

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