Anti Money Laundering Policy and KYC Norms Version No. 5 Effective Date:

Transcription

1 Anti Mney Laundering Plicy and KYC Nrms Versin N. 5 Cntents Cntents Backgrund Definitin Imprtant prvisins under PMLA Knw Yur Custmer (KYC) Standards CDD Prcedure and sharing KYC infrmatin with Central KYC Recrds Registry (CKYCR) Reprting f infrmatin with the FIU-IND Recent mdificatins... 11

2 Anti Mney Laundering Plicy and KYC Nrms Versin N Backgrund The Preventin f Mney Laundering Act (PMLA) 2002 came int effect frm 1 July 2005 thrugh a Gazette f India ntificatin f even date. As per the PMLA 2002 read with Preventin f Mney-Laundering (Maintenance f Recrds) Rules, 2005 including any amendment theref (PMLR 2005) (PMLA 2002 and PMLR 2005 will tgether referred t as PMLA), the ffence f Mney Laundering is defined as: Whsever directly r indirectly attempts t indulge r knwingly assists r knwingly is a party r is actually invlved in any prcess r activity cnnected with the prceeds f crime and prjecting it as untainted prperty shall be guilty f ffence f mney-laundering. "Prceeds f crime" means any prperty derived r btained, directly r indirectly, by any persn as a result f criminal activity relating t scheduled ffence r the value f any such prperty. Reserve Bank f India (hereinafter RBI ), ne f the regulatry agencies entrusted with the respnsibility f driving the anti-mney laundering initiatives advised NBFCs t fllw certain custmer identificatin prcedure fr pening f accunts and mnitring transactins f a suspicius nature fr the purpse f reprting it t apprpriate authrity. RBI revisited these guidelines frm time t time keeping in view the recmmendatins f Financial Actin Task Frce (FATF) n Anti Mney Laundering (AML) standards and n Cmbating Financing f Terrrism (CFT). RBI came up with detailed guidelines based n the abve and the instructins issued n Custmer Due Diligence (CDD) fr Nn-banking Financial Cmpanies by the Basel Cmmittee n Banking Supervisin. RBI advised NBFCs t ensure that a prper plicy framewrk n Knw Yur Custmer and Anti-Mney Laundering measures with the apprval f the Bard is frmulated and put in place. Accrdingly, Magma has in place Bard apprved Anti Mney Laundering Plicy and KYC Nrms (the Plicy). Based n the experience gained ver the past years, the Plicy is prpsed t be reviewed and imprved keeping in view the Master Circular n the subject issued by RBI n 1 July 2014, the revised guidelines vide circular n RBI/ /330 DNBR (PD).CC. N. 005 / / dated 1 Dec 2014 and Knw Yur Custmer (KYC) Directin, 2016 which is t be read alng with the extant Directins issued by the RBI in this regard r any ther applicable law in frce. 2. Definitin i. Beneficial Owner ( BO ) in relatin t a custmer is a persn r an entity wh is t be cnsidered a beneficiary f the financial transactin entered in t with the Cmpany by the custmer. A list f persns wh are t be cnsidered as such BOs in relatin t a custmer is given belw:

3 Anti Mney Laundering Plicy and KYC Nrms Versin N. 5 Type f Custmer Public / Private Limited Cmpanies Persns t be cnsidered Beneficial Owners (BOs) a) A natural persn having, whether alne r tgether, r thrugh ne r mre juridical persn, wnership f r entitlement t mre than twenty-five percent f shares r capital r prfits f the cmpany; r b) A natural persn having, whether alne r tgether, r thrugh ne r mre juridical persn, right t appint majrity f the directrs r t cntrl the management r plicy decisins including by virtue f their sharehlding r management rights r sharehlders agreements r vting agreements; r Partnership Firm Unincrprated assciatin f persns r bdy f individuals Trust/ Fundatin c) Where nne f the abve is been identified a natural persn wh hlds the psitin f senir managing fficial. a) A natural persn having, whether alne r tgether, r thrugh ne r mre juridical persn, wnership f/ entitlement t mre than fifteen percent f capital r prfits f the partnership; r b) Where the abve is nt been identified a natural persn wh hlds the psitin f senir managing fficial a) A natural persn having, whether alne r tgether, r thrugh ne r mre juridical persn, wnership f/ entitlement t mre than fifteen percent f prperty r capital r prfits f such assciatin r bdy f individuals; r b) Where the abve is nt been identified a natural persn wh hlds the psitin f senir managing fficial a) The Authr f the trust; r b) The Trustees f the trust; r c) The Beneficiaries f the trust with fifteen percent r mre interest in the trust; r d) A natural persn exercising ultimate effective cntrl ver the trust thrugh a chain f cntrl r wnership Where the custmer r the wner f the cntrlling interest is a cmpany listed n a stck exchange, r is a subsidiary f such a cmpany, it is nt necessary t identify and verify the identity f any sharehlder r Beneficial Owner f such cmpanies. ii. Custmer fr the purpse f this Plicy wuld have the same meaning as assigned t it under the RBI s Guidelines n Knw Yur Custmer and Anti-Mney Laundering Measures, as amended frm time t time.

4 Anti Mney Laundering Plicy and KYC Nrms Versin N. 5 iii. Custmer Due Diligence (CDD) means identifying and verifying the custmer and the Beneficial Owner using Officially Valid Dcuments as a prf f identity and a prf f address in the manner prvided under this Plicy read alng with the manner prescribed under the RBI s Guidelines n Knw Yur Custmer and Anti-Mney Laundering Measures, as amended frm time t time. iv. Central KYC Recrds Registry (CKYCR) means the Cmpany, t receive, stre, safeguard and retrieve the KYC recrds in digital frm f a custmer. v. Reprting Entity fr the purpse f this Plicy wuld mean the Cmpany, Magma Fincrp Limited. vi. KYC Templates means templates prepared t facilitate cllating and reprting the KYC data t the CKYCR, fr individuals and legal entities. vii. Suspicius transactin means a transactin as defined belw, including an attempted transactin, whether r nt made in cash, which, t a persn acting in gd faith: gives rise t a reasnable grund f suspicin that it may invlve prceeds f an ffence specified in the Schedule t the Act, regardless f the value invlved; r appears t be made in circumstances f unusual r unjustified cmplexity; r appears t nt have ecnmic ratinale r bna-fide purpse; r gives rise t a reasnable grund f suspicin that it may invlve financing f the activities relating t terrrism. 3. Imprtant prvisins under PMLA The ffense f mney laundering is defined as Whsever directly r indirectly attempts t indulge r knwingly assists r knwingly is a party r is actually invlved in any prcess r activity cnnected with the prceeds f crime and prjecting it as untainted prperty shall be guilty f ffence f mney-laundering Punishment fr Mney Laundering is laid dwn as whever cmmits the ffense f mney laundering shall be punishable with rigrus imprisnment fr a term which shall nt be less than three years but may extend t seven years and shall als be liable t fine which may extend t five lakh rupees. Every banking cmpany r financial institutin and intermediary r a persn carrying n designated business r prfessin (hereinafter reprting enterprise ) is required t: Maintain a recrd f all transactins the nature and value f which may be prescribed, whether such transactin cmprise f a single transactin r series f transactins integrally cnnected t each ther and where such series f transactins take place within a mnth.

5 Anti Mney Laundering Plicy and KYC Nrms Versin N. 5 Furnish infrmatin f transactins referred t in the clause abve t the Directr (FIU IND) within such time as may be prescribed. Verify and maintain recrds f the identity f all its clients, in such a manner as may be prescribed. Identify Beneficial Owner, if any, f such f its clients, as may be prescribed. Maintain recrd f dcuments evidencing identity f its clients and Beneficial Owners as well as accunt files and business crrespndence relating t its clients. Where the Principal Officer f a banking cmpany r financial institutin r intermediary, as the case may be, has reasn t believe that a single transactin r series f transactins integrally cnnected t each ther have been valued belw the prescribed value s as t defeat the prvisins f this sectin, such fficer shall furnish infrmatin in respect f such transactins t the Directr-FIU IND within the prescribed time. The recrds referred t abve shall be maintained fr a perid f ten years frm the cessatin f the transactins between the clients and the banking cmpany f financial institutin r intermediary, as the case may be. Hwever, details furnished t Directr FIU-IND, dcuments related t identity and Beneficial Owner f the client shall be maintained permanently. The reprting entities shall have Designated Directr" designated by the reprting entity t ensure verall cmpliance with the bligatins impsed under chapter IV f the Act and the Rules theref. The Designated Directr can be any ne f the Managing Directr r a whle-time Directr r a persn wh hlds the psitin f senir management (One level belw the Bard) r equivalent, duly authrized by the Bard f Directrs f the cmpany. Hwever, in n case, the principal fficer shall be nminated as the Designated Directr fr the purpse f this Plicy. The Directr-FIU IND may whether n his wn r n an applicatin made by an authrity, fficer r persn call fr recrds referred t abve and may make such inquiry r cause such inquiry t be made, as he thinks fit, with respect t bligatins f the reprting entity. If the Directr-FIU IND, in the curse f any inquiry, finds that a banking cmpany, financial institutin r intermediary r any f its fficers has failed t cmply with the prvisins fr maintenance f recrds, furnishing f infrmatin, verificatin f identity f custmers etc., then withut prejudice t any ther actin that may be taken under any ther prvisins f PMLA, Directr FIU-IND may, by an rder, levy a fine n such banking cmpany r financial institutin r intermediary which shall nt be less than ten thusand rupees but may extent t ne lakh rupees fr each failure. 4. Knw Yur Custmer (KYC) Standards

6 Anti Mney Laundering Plicy and KYC Nrms Versin N. 5 Magma s KYC standards wuld include the fllwing elements 4.1 Custmer Acceptance Plicy Magma prpses the fllwing custmer acceptance plicy: The cmpany shall nt undertake any transactin with entity that has fictitius/ benami name(s). All the Custmers wuld be classified under tw heads viz. Lw Risk and Medium/High Risk. The Lw Risk Custmers wuld be the Individuals (ther than High Net Wrth Individuals with NW f ver Rs.100 lacs) and entities whse identities and surces f wealth can be easily identified and transactins in whse accunts by and large cnfrm t the knwn prfile (salaried emplyees, peple belnging t lwer ecnmic strata) High/Medium Risk Custmers wuld include (a) nn-resident Custmers, (b) high net wrth individuals (NW exceeding Rs.100 lacs), (c) trusts, charities, NGOs and rganizatins receiving dnatins, (d) cmpanies having clse family sharehlding r Beneficial Ownership, (e) firms with 'sleeping partners', (f) plitically expsed persns (PEPs), (g) nn-face t face Custmers and (h) thse with dubius reputatin as per public infrmatin available, etc. PEPs - prminent public figures f freign cuntry (Heads f States/Gvernments, senir pliticians, senir gvernment/judicial/military fficers, senir executives f state-wned crpratins, imprtant plitical party fficials, etc.) wuld be subjected t enhanced Custmer Due Diligence (CDD) and such accunts wuld be permitted at least at a level higher than what is therwise permitted t apprve the accunt. Clse relative f PEP als wuld be treated at par with PEP In the case f prprietrship firms, in additin t the prprietr's ID, the firm s ID (business prf) als wuld be btained at least thrugh any f the fllwing tw dcuments: Prf f the name, address and activity f the firm, namely Registratin Certificate (if registered), Shps & Establishment Certificate, Sales and Incme Tax Returns, CST/ VAT Certificate etc. Any registratin / licensing dcument issued in the name f the firm by the Central Gvernment r State Gvernment Authrity/ Department. The cmplete ITR including the acknwledgement, issued in the name f the sle prprietr wherein the firm's incme is reflected, duly authenticated/acknwledged by the IT Authrities. Utility bills namely electricity/ water/ r landline telephne bills issued in the name f the firm.

7 Anti Mney Laundering Plicy and KYC Nrms Versin N. 5 In cases, where it is nt pssible t furnish any tw f the abve dcuments, the Cmpany may accept any ne f abve stipulated dcument subject t field investigatin dne fr the prprietrship firm. In the case f firms recnstituted and the cmpanies that changed the name within the past tw years, the CDD wuld be enhanced. Fr all the Custmers irrespective f the risk categrizatin, Magma wuld undertake fllwing custmer acceptance prcedure withut fail: Internal dedupe - Checking the internal recrds f Magma t cnfirm abut any past dealings f the Custmer with Magma either as brrwer, c-brrwer r guarantr; External dedupe Verifying with the data base maintained by at least ne RBI apprved credit infrmatin bureau; Field investigatin f Custmer s residence and ffice. Neighburhd check; Trade reference check in the case f cmmercial lending; Tele verificatin with the Custmer and underwriting; Dcumentatin requirements and ther infrmatin t be cllected in respect f different categries f Custmers depending n perceived risk and keeping in mind the requirements f PMLA and guidelines issued by Reserve Bank frm time t time. The cmpany shall nt start r clse a business transactin where the cmpany is unable t apply apprpriate Custmer due diligence measures i.e. the cmpany is unable t verify the identity and /r btain dcuments required as per the risk categrisatin due t nn-cperatin f the Custmer r nn-reliability f the data/infrmatin furnished t the cmpany. It may, hwever, be necessary t have suitable built in safeguards t avid harassment f the Custmer. In case f existing business relatinships, if the Custmers are nt KYC cmpliant, the Cmpany will take necessary measures t carry ut necessary actins t cmply with the requirements and where the Cmpany fails t d s, it will take necessary measures t either terminate the existing relatinship r carry ut necessary actins t partially freeze the business relatinship in accrdance with the prvisins f the RBI s Guidelines n Knw Yur Custmer and Anti-Mney Laundering Measures, as amended frm time t time, have been cmplied with. The identity f the Custmer des nt match with any persn with knwn criminal backgrund r with banned entities such as individual terrrists r terrrist rganizatins etc., as apprved by the Security Cuncil Cmmittee established pursuant t varius United Natins' Security Cuncil Reslutins (UNSCRs). If an existing KYC cmpliant Custmer desires t pen anther accunt, there wuld be n need fr submissin f fresh prf f identity and/r prf f address fr the purpse.

8 Anti Mney Laundering Plicy and KYC Nrms Versin N. 5 The System is being enabled t capture Custmer classificatin frm Mney Laundering perspective and the data capture and analysis wuld fllw as sn as the System is enabled. 4.2 Custmer Identificatin Prcedure Magma shall ensure adherence f Custmer Identificatin Prcedure as prescribed by the Reserve Bank f India frm time t time. Magma wuld btain the KYC dcuments whenever there is dubt abut the authenticity/veracity r the adequacy f the previusly btained Custmer identificatin data. If Aadhaar card is taken as KYC, Magma wuld satisfy itself abut current address by btaining required prf. Magma als have the prcess f alltting Unique Custmer Identificatin Cde (UCIC) fr easy identificatin f all the relatinships f any Custmer with Magma. Infrmatin cllected fr the purpse f pening f accunt wuld be kept as cnfidential and wuld nt be divulged t utsiders fr crss selling r any ther purpse ther than fr the statutry requirement f sharing the Custmer accunt details with at least ne credit infrmatin agency apprved by RBI. Infrmatin sught frm the Custmer wuld be relevant t the perceived risk and wuld nt be intrusive. The Beneficial Owner in the case f trust, partnership and Jint stck cmpanies wuld be reckned in pursuance f this plicy. 4.3 Mnitring f Transactins Magma wuld cntinue t maintain prper recrd f all cash transactins f Rs.10 lakh and abve and have in place centralised internal mnitring system at head ffice. Magma shall btain cpy f PAN f all the Custmers fr cash transactin f Rs 50,000 r mre entered int with them. In case a Custmer des nt have a PAN, Frm 60, duly signed by the Custmer alng with a valid identity prf and signature prf, shuld be accepted. Magma wuld strive t have an understanding f the nrmal and reasnable activity f the Custmer thrugh persnal visits and by bserving the transactins and cnduct f the accunt in rder t identify transactins that fall utside the regular pattern f activity unusual transactins. Fr the simplicity f data capture, the fllwing transactins wuld be cnsidered as unusual transactins deserving special attentin. Such accunts wuld be treated as Medium/High Risk Custmers after review f the unusual transactins by the Principal Officer PMLA. Repeated pre terminatin f lan accunts f size exceeding Rs.10 lacs; Same Custmer appearing in the Cash Transactin Reprt (CTR) mre than 3 times during a span f 6 mnths;

9 Anti Mney Laundering Plicy and KYC Nrms Versin N. 5 Ttal cash received frm a custmer exceeding Rs 50 lacs in a financial year r Rs 25 lacs in a mnth; Being an NBFC, Magma is nt empwered t seize any cunterfeit currency like in the case f banks. Hwever, the fllwing incidents f cunterfeit currency at the cash cunters wuld be recrded and repeated ccurrence wuld be reprted. Bulk cunterfeit currency f mre than 10 pieces at a time; Repeated event within a week frm a cllectin executive r Custmer; All such transactins wuld be reprted t and reviewed by Principal Officer PMLA wh wuld enquire int the matter and decide whether the transactin wuld qualify t be termed as a suspicius transactin. When it is believed that we n lnger are satisfied that we knw the true identity f the accunt hlder, STR wuld be filed with FIU-IND. The Principal Officer - PMLA wuld file the Suspicius Transactin Reprt (STR) with the Directr, Financial Intelligence Unit-India (FIU-IND) within 7 days f identifying them. After filing STR, transactins wuld be allwed t be cntinued in the accunt unhindered and the Custmer wuld nt be tipped in any manner. All CTR/STR wuld be filed electrnically r as per the nrms stipulated by FIU-IND frm time t time. The STR wuld be filed even fr attempted transactins List f individuals and entities, apprved by UN Security Cuncil Cmmittee and circulated by RBI wuld be updated and the list wuld be available at every ffice entrusted with the respnsibility f custmer acceptance and wuld be verified befre pening an accunt. Financial Actin Task Frce (FATF) statements regarding cuntries with deficient AML/CFT wuld be verified and cautin wuld be exercised with Custmers wh cnduct business activities in these cuntries. Magma has a laid dwn Dcument retentin plicy which wuld be reviewed peridically t be in cmpliance t the requirements f PMLA. The fllwing dcuments/ recrds wuld be held fr a perid f 10 years: Recrds with respect t the cash transactins f value f mre than Rs. 10 lacs Recrds with respect t series f cash transactins integrally cnnected t each ther f mre than Rs.10 lacs within a mnth Recrds with respect t transactins where cunterfeit currency ntes have been used Recrds with respect t all suspicius transactins KYC dcuments after the business relatinship ending. The dcuments/ recrds maintained wuld hld the fllwing infrmatin Nature f transactin; Amunt f the transactin;

10 Anti Mney Laundering Plicy and KYC Nrms Versin N. 5 Date n which the transactin was cnducted; and The parties t the transactin; All the units reprting the unusual transactins t Principal Officer PMLA wuld be subjected t audit by Internal Audit Department. 4.4 Risk Management The fllwing elements f Magma wuld manage the Risk arising ut f the nncmpliance t PMLA Bard wuld ensure that an effective KYC prgramme is put in place by establishing apprpriate prcedures and ensure their effective implementatin; Internal audit and cmpliance functin wuld evaluate and ensure adherence t the KYC plicies and prcedures and prvide independent evaluatin f Magma s wn plicies and prcedures, including legal and regulatry requirements. Cncurrent/ Internal Auditrs shuld specifically check and verify the applicatin f KYC prcedures at the branches and cmment n the lapses bserved in this regard. The cmpliance in this regard wuld be put up befre the Audit Cmmittee f the Bard n quarterly basis; Magma wuld have an n-ging emplyee training prgramme with different fcuses fr frntline staff, cmpliance staff and staff dealing with new Custmers and educating them with respect t the bjectives f the KYC Prgramme. The risk categrizatin wuld be reviewed n real time basis based n the Cllectin feedback and enhanced due diligence measures wuld be applied in case f higher risk perceptin n a Custmer. Peridical updating f Custmer identificatin data wuld be taken up nce in eight years fr Lw/medium risk Custmers and nce in tw years fr high risk Custmers. Fr lw risk custmers the updating wuld be nly thrugh a self-certificatin by the Custmer in cases where there is n change in the status with respect t their identities and addresses. In case f change f address f such lw risk Custmers, they wuld be merely asked t submit a certified cpy f the dcument (prf f address) in any manner by mail/pst, etc. Fresh phtgraphs wuld be btained frm minr Custmers upn becming majr. A senir management fficer wuld be designated as the Principal Officer PMLA and wuld reprt t senir management and the Principal Officer PMLA wuld have staff t verify KYC/AML cmpliance. The Principal Officer PMLA wuld perfrm the fllwing duties Develp effective Anti Mney Laundering prgrams, including training prgrams Assist business in assessing hw the System can be abused

11 Anti Mney Laundering Plicy and KYC Nrms Versin N. 5 Identify suspicius activity Mnitr implementatin f Anti Mney Laundering Plicy and KYC Nrms Submit reprts t statutry bdies, management and maintain liaisn 5. CDD Prcedure and sharing KYC infrmatin with Central KYC Recrds Registry (CKYCR) Cmpany shall capture the KYC infrmatin fr sharing with the CKYCR in the manner mentined in the Rules, as required by the KYC templates prepared fr individuals and Legal Entities as the case may be. 6. Reprting f infrmatin with the FIU-IND The Cmpany will make necessary arrangements frm time t time t ensure cmpliance with the varius reprting requirements as per the RBI s guidelines n Knw Yur Custmer and Anti-Mney Laundering Measures r any ther applicable law in frce. 7. Recent mdificatins Gvernment f India ntified the Preventin f Mney-Laundering (Maintenance f Recrds) Amendment Rules, 2013 (Rules) and accrdingly RBI aligned the instructins cntained in their Master Circular DNBS (PD) CC. N. 387/ / dated July 1, 2014 n Knw Yur Custmer (KYC) Guidelines /Anti-Mney Laundering Standards (AML) / Obligatin f NBFCs under Preventin f Mney Laundering Act (PMLA), 2002 with the amendment t PML Rules. The summary f the changes prpsed by RBI and the prpsed actin by the Cmpany is appended as Annexure t this nte. ****