POLICY ON KNOW YOUR CUSTOMER ( KYC) STANDARDS AND ANTI-MONEY LAUNDERING (AML) MEASURES

Transcription

1 POLICY ON KNOW YOUR CUSTOMER ( KYC) STANDARDS AND ANTI-MONEY LAUNDERING (AML) MEASURES Approved on: 11 th May,2017 1

2 POLICY ON KNOW YOUR CUSTOMER (KYC) STANDARDS AND ANTI-MONEY LAUNDERING (AML) MEASURES PREAMBLE This policy document is prepared in line with the Bank of Botswana guidelines Banking Act 2003 (Anti money laundering regulations) and Prevention of Money Laundering Act 2002 of Government of India and incorporates the Bank s approach to customer identification procedures, customer profiling based on the risk perception and monitoring of transactions on an on-going basis. Money Laundering is a global phenomenon that affects all countries in varying degrees. According to UN estimates, more than a trillion dollars per annum of illicit funds are generated globally from illegal activities, out of which almost 50% is from drugs. Money Laundering is being considered as world s third largest business next to Petroleum and Foreign Exchange. Banks have become major targets in laundering operations because they provide a variety of services and instruments (Banker s cheques, travellers cheques, telegraphic transfers, credit cards, demand drafts, international money orders issued by banks and lately Internet Banking) that can be used to conceal the source of money. MONEY LAUNDERERS, WHO ARE BASICALLY DRIVEN BY CRIMINAL ACTIVITIES, AIM TO CONCEAL THE TRUE SOURCE OF FUNDS SO THAT FUNDS COULD BE USED FREELY. POLICY OBJECTIVES To prevent criminal elements from using the Banking System for money laundering activities; To enable the Bank to know/ understand the customers and their financial dealings better, which in turn would help BSBIBL to manage risks prudently; To put in place appropriate controls for detection and reporting of suspicious activities in accordance with applicable laws/ laid down procedures; To comply with applicable laws and regulatory guidelines; To take necessary steps to ensure that the concerned staffs are adequately trained in KYC/ AML procedures. SCOPE This Policy is applicable to all branches/ offices of BSBIBL and is to be read in conjunction 2

3 with related operational guidelines issued from time to time. DEFINITION OF MONEY LAUNDERING Section 3 of the Prevention of Money Laundering [PML] Act 2002 has defined the offence of money laundering as under: Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property shall be guilty of offence of money laundering. Money launderers use the banking system for cleansing dirty money obtained from criminal activities with the objective of hiding/ disguising its source. The process of money laundering involves creating a web of financial transactions so as to hide the origin and true nature of these funds. The term money laundering would also cover financial transactions where the end use of funds goes for terrorist financing irrespective of the source of funds. Money Laundering is any transaction involving the proceeds of crime, in particular offences related to drug trafficking, smuggling of goods and human beings, tax evasion etc. The process of money laundering aims at severing the connection between the money and the source from where it was generated thereby enabling the money to be used openly. The source of such money could be: Drug trafficking trafficking in human beings Theft or burglary Smuggling Black mail / extortion / kidnapping etc. Any other illegal means DEFINITION OF A CUSTOMER A customer for the purpose of this policy is defined as: A person or an entity that maintains an account and/ or has a business relationship with the Bank; One on whose behalf the account is maintained [i.e. the beneficial owner]; Beneficiaries of transactions conducted by professional intermediaries, such as Stock Brokers, Chartered Accountants, Solicitors etc. as permitted under the law, and Any person or entity connected with a financial transaction. 3

4 MONEY LAUNDERING RISK PERCEPTION Money Laundering activities expose BSBIBL to various risks such as Operational Risks, Reputation Risk, Compliance Risk and Legal Risk. State Bank of India, is aware of its duties as a responsible corporate citizen and has evolved a policy for its Foreign Offices, regarding measures to be taken on an on-going basis to adequately prevent and expeditiously detect and report in terms of the Anti-Money Laundering Policy which shall also contain the Know Your Customer (KYC) Guidelines and Suspicious Activity Reporting (SAR) procedures as required by the rules and regulations of the Host Country. Anyone commits the offence of money laundering if they carry out a transaction involving property, including money, in circumstances in which a reasonable person would have believed that the property was the proceeds of serious crime. Whether or not there is any attempt to hide or disguise the source of the criminal proceeds is irrelevant. Money Laundering is a serious criminal offence in several countries punishable by imprisonment and monetary penalty. However, whether it is punishable or not it is SBI s corporate policy not to get associated in any form with Money Laundering in any country, for any reason whatsoever, including anxiety for Corporate Profit or assisting a customer. All employees of State Bank of India irrespective of their position have to abide by the above requirement. SOME MAJOR EFFECTS OF MONEY LAUNDERING Money Laundering in the form of inter-country capital transfers encompassing flight of capital, tax evasion and criminal flows leads to adverse Balance-of-Payment consequences. Massive tax evasion, corruption and increase in criminal activities in both economic and political areas. Income from such activities gets redirected from sound investments to risky low quality investments, thereby affecting economic growth. It has also indirect effects like Illegal transactions, which can compromise legal ones by contamination. There will be contempt for the law i.e. success achieved in breaking one law encourages the money launderer to break other laws. THE PROCESS OF MONEY LAUNDERING Generally the process of Money laundering comprises three stages, during which there may be numerous transactions that could alert a Bank to the Money Laundering activity. The three different stages are: 4

5 Placement Placement involves putting cash (banknotes) into a bank account, which means getting it across the counter. Examples: depositing a large amount of cash in numerous small instalments. setting up a cash business as a cover for banking criminal money. money exchange. Layering Layering separates the illicit proceeds from their source by creating complex layers of financial transactions, usually by using monetary instruments (such as cashier s orders) and electronic funds transfers. Taken individually, the transactions may seem perfectly innocent. Such transactions could be: A company passes money through its accounts under cover of bogus invoices, merely to generate additional transactions. a customer raises a loan on the security of a deposit in another bank to help break the connection with the criminal funds. a customer pays large credit card debts from an account funded by criminal money. Integration After the layering process, an integration scheme brings the laundered proceeds back into the legitimate economy, so that the proceeds appear to be normal business funds, arousing no suspicion. As a part of integration, laundered money could be used to gain control of a private company by investing money in it. The company appears to trade normally, but it is using criminal money as its capital. All these three stages may occur as separate and distinct stages or may overlap. To make it successful there should be FACILITATORS at each stage like Offshore Banks, Shell Companies, Nominees etc., which are lawful machineries. Hence, the Financial Institutions (both Banks and Non-Banks) are always vulnerable to the Money Laundering activity. A few illustrations of the methods of the three stages are given in Annexure 1. 5

6 PREVENTION Several countries, especially OECD countries have enacted laws governing Money Laundering making Money Laundering as an offence punishable by Law. Accordingly, each Foreign Office shall adopt a suitable internal control system for controlling the risks of Money Laundering. While these are not exhaustive, they would serve as the main principles of the Branch Anti-Money Laundering (AML) Policy, which should also incorporate the requirements of local regulatory and legal enactments. BASIC PRINCIPLES AND POLICIES TO COMBAT MONEY LAUNDERING BSBIBL has to adhere strictly to the following four basic principles to combat Money Laundering. Know your Customer (KYC) Compliance with Laws relating to Money Laundering Co-operation with Law Enforcement Agencies Formulation and adoption of Branch Policies and Procedures and so ensure that staffs of BSBIBL are made aware of these policies through regular awareness and training programmes. To promote adherence to these principles, BSBIBL shall implement specific procedures for o customer identification, retention of Financial Transaction Documents and reporting of Suspicious Transactions. o Maintaining a record of prescribed transactions o Furnishing information of prescribed transactions to the specified authority o Verifying and maintaining records of the identity of its clients o Preserving records in respect of (i), (ii), (iii) above for a period of five years from the date of cessation of transactions with clients (Refer to Annexure 5) These requirements will be met by BSBIBL. KEY ELEMENTS OF THE POLICY o Customer Acceptance Policy o Customer Identification Procedures o Monitoring of Transactions and o Risk Management 6

7 A. CUSTOMER ACCEPTANCE POLICY BSBIBL will: - Classify customers into various risk categories and based on risk perception decide on acceptance criteria for each category of customers; - Accept customers after verifying their identity as laid down in Customer Identification Procedures; - Not open accounts in the name of anonymous/ fictitious/ persons; - Strive not to inconvenience the general public, especially those who are financially or socially disadvantaged. B. CUSTOMER IDENTIFICATION PROCEDURES The first requirement of customer identification procedures is to be satisfied that a prospective customer is who he/ she claims to be. The second requirement is to ensure that sufficient information is obtained on the nature of the business that the customer expects to undertake and any expected or predictable pattern of transactions. The information collected will be used for profiling the customer and transaction monitoring. Identity to be verified for: The named account holder Beneficial owners Signatories to an account and Intermediate parties The Customer Identification Procedures are to be carried out at the following stages: While establishing a banking relationship with BSBIBL; When BSBIBL feels it is necessary to obtain additional information from the existing customers based on the conduct or behaviour of the account. Wherever applicable, information on the nature of business activity, location, mode of payments, volume of turnover, social and financial status etc. will be collected for completing the profile of the customer. Customer Identification will be carried out in respect of non-account holders 7

8 approaching BSBIBL for High Value One - Off transaction as well as any person or entity connected with a financial transaction which can pose Significant Reputational or other Risks to the Bank. C. MONITORING OF TRANSACTIONS Monitoring of transactions will be conducted taking into consideration the risk profile of the account. Special attention will be paid to all complex, unusually large transactions and all unusual patterns, which have no apparent economic or visible lawful purpose. Transactions that involve large amounts of cash inconsistent with the normal and expected activity of the customer will be subjected to detailed scrutiny. After the due diligence at the appropriate level in BSBIBL, transactions of suspicious nature will be reported to the appropriate authority and a record of such transactions will be preserved and maintained for a period as per Banking (Anti money laundering ) regulations (Section 51). D. RISK MANAGEMENT While the BSBIBL has adopted a Risk Based Approach to the implementation of this Policy, it is necessary to establish appropriate framework covering proper management oversight, systems, controls and other related matters. Reasonable enough information should be sourced by the bank staff and provided by the customers on the nature of business, predictable pattern of transaction, source of income to enable the banker to risk categorise the account for KYC/AML purposes. Upon scrutiny of the information account can be opened and categorised as Low for salaried customer, Medium for business owners / selfemployed and High for Politically Exposed Persons based on the information and evidence provided by the customer. Accounts with identified Suspicious Transactions will be converted into High risk category. Risk categorisation on customer accounts will be reviewed on annual bases or as and when the need be for suspicious accounts. Bank s Internal Audit of compliance with KYC/ AML Policy will provide an independent evaluation of the same including legal and regulatory requirements. External Auditors shall specifically check and verify the application of KYC/ AML procedures at the branches and comment on the lapses observed in this regard. The compliance in this regard will be placed before the Audit Committee of the Board at quarterly intervals. All employee training programmes will have a module on KYC Standards AML Measures so that members of the staff are adequately trained in KYC/ AML procedures. The Principal Officer Designate of BSBIBL in this regard will have an important responsibility in 8

9 managing oversight and coordinating with various functionaries in the implementation of KYC/ AML Policy. E. CUSTOMER EDUCATION BSBIBL recognizes the need to spread awareness on KYC, Anti Money Laundering measures and the rationale behind them amongst the customers and shall take suitable steps for the purpose. F. INTRODUCTION OF NEW TECHNOLOGIES BSBIBL will pay special attention to the money laundering threats arising from new or developing technologies and take necessary steps to prevent its misuse for money laundering activities. The Bank will ensure that appropriate KYC procedures are duly applied to the customers using the new technology driven products. G. CORRESPONDENT BANKING This Policy will apply to the dealings of BSBIBL with correspondent banks. For correspondent banking relationship an appropriate due diligence procedure will be laid down keeping in view KYC standards existing in the country where the correspondent bank is located and the track record of the correspondent bank in the fight against money laundering and terrorist financing. H. PEP Accounts Politically Exposed Persons are regarded as High Risk clients and as a result due care and diligence should be performed on this category of clients including their families and closely associated people. In accordance with Recommendation 12 of the 40 Financial Action Task Force (FATF) below are definitions of Politically Exposed Person i. Foreign PEPs Individuals who are or have been entrusted with prominent public functions by a foreign country e.g. Heads of State or of Government, senior politicians, senior government, judicial or military officials, senior executives of state owned corporations, and important political party officials ii. Domestic PEPs Individuals who are or have been entrusted domestically with prominent public functions e.g. Heads of State or of Government, senior politicians, senior government officials, judicial or military officials, senior executives of state owned corporations, and important 9

10 political party officials and important political party officials iii. iv. International Organisations PEPs Persons who are or have been entrusted with prominent public functions by an international organisation i.e. senior management, directors, deputy directors and members of the board or equivalent functions Family Members PEPs Individuals who are related to PEP either directly or through marriage or similar (civil) forms of partnership v. Close Associates Individuals who are closely connected to a PEP, either socially or professionally The following examples serve as guidelines in defining PEPs: Head of State and cabinet ministers Influential functionaries in the nationalised industries and government administration Senior Judges Senior political party functionaries Military leaders and people with similar functions in international organisations Members of ruling families The Bank will therefore take the necessary care when opening accounts of PEP. In additional to the following measures will be adopted: Approval for opening such account will be obtained from Managing Director The conduct of the account will be monitored quarterly by the MLRO. I. PRINCIPAL OFFICER [MONEY LAUNDERING REPORTING OFFICER] (MLRO) BSBIBL will designate a senior officer as Principal Officer who shall be responsible for implementation of and compliance with this Policy. He will serve as a contact person on money laundering matters between the bank, Central Bank and Financial Intelligence Agency. The MLRO shall keep a register of all reports made to him by the employees of the bank and of all reports that he makes to the Central Bank and the Financial Intelligence Agency, and shall, on written request by the other law enforcement agencies 10

11 a) Provide to them an acknowledgement receipt of the reports, from the Central bank and the Financial Intelligence Agency and b) Make available to those law enforcement agencies copies of reports he makes to the Central bank and the Financial Intelligence Agency and those made to him by employees of the bank. c) The MLRO shall prepare for the board of the bank an annual compliance report relating to among others i) Changes in legislation or industry rules on money laundering issues ii) Compliance deficiencies in relation to money laundering and iii) Number of internal reports received on money laundering and the percentage of reports that have been submitted to the law enforcement agencies. d) His illustrative duties will be as follows: - Monitoring the implementation of the Bank s KYC/ AML Policy; - Reporting of transactions and sharing of the information as required under the law; - Maintaining liaison with law enforcement agencies; - Ensuring submission of periodical reports to the Top Management/ Board J. REVIEW OF THE POLICY The Policy will be reviewed at yearly intervals or as and when considered necessary by the Board. KNOW YOUR CUSTOMER GUIDELINES (KYC) 1 INTRODUCTION It is the corporate policy of State Bank of India to have policies, practices and procedures in place for the prevention of money laundering. This policy document lays down the Know Your Customer (KYC) and the anti-money laundering policies to be followed by State Bank of India (Botswana) Ltd BSBIBL is committed to comply with the statutory and regulatory obligations to combat money laundering in letter and spirit. BSBIBL is conscious of these obligations and will act to meet requirements of both host as well as home country regulators. BSBIBL will comply with all statutory and regulatory requirements of:- 11

12 o Bank of Botswana o Financial Intelligence Agency o Botswana Unified Revenue Service o Customs & Excise o Botswana Police Service o Other Investigating Agencies Know Your Customer (KYC) is the platform on which the banking system operates to help control financial frauds, identity money laundering and suspicious activities, and for scrutiny and monitoring of large value transactions. It is also absolutely imperative for employees of BSBIBL to know clearly: a the customer identity b the source of his wealth c the nature of his transactions and proper documentation for the same is a sine qua non. 2 OBJECTIVES 1 To establish procedures to verify the bona-fide identification of individuals/corporates opening an account. 2 To establish processes and procedures to monitor high value transactions and transactions of suspicious nature in accounts. 3 Establish systems for conducting due diligence and reporting of such transactions. The focus of the KYC is on back to basics and adopting an elaborate standard for obtaining comprehensive information regarding new customers at the initial stage establishing the bonafides of customers opening accounts with BSBIBL and identifying and keeping a watch on high value transactions and those of suspicious nature, as well as reporting them to Law enforcing/regulatory authorities. 3 CUSTOMER IDENTIFICATION AND PROFILE 1 Customer Identification and Verification: 12

13 A Accounts of Individuals: The true identity and bona fides of the potential customers opening accounts with BSBIBL and obtaining basic background information is of paramount importance. Potential customers opening accounts with BSBIBL, will be informed regarding identification and verification documents BSBIBL will require, in order to establish the true identities and bonafides of these customers. The customer identification will be through an introductory reference from an existing account holder/person known to BSBIBL or on the basis of documents provided by the customer. Accounts may be opened on the basis of any two of the following, together with Customer Profile details: a An introduction from a third person having satisfactory conduct of the account for the period stipulated by BSBIBL from time to time, presently at least 6 months or by well-known local authorities or through staff members knowing the potential customer b Passport alone when the address on the passport is the same as the address on the account opening form. c Any other document from each of the under noted two lists for a photo I.D. and proof of residence. Individuals: List 1 Identification: Passport where the address differs I.D (Omang) Government/Defence I.D. Card Contact Particulars BURS Income Tax Number (If Applicable) (optional) List 2 Verification (Independent Sources): Proof of Full Names, Date of Birth, I.D. Number, Passport Number (Foreign National), Nationality (Foreign National), Income Tax Number (If Applicable), Contact Details and Residential Address, Residence Permit and Work Permit (Foreign Nationals). 13

14 Credit Card Statement ** Salary Slip Electricity Bill (BPC) ** Water Utility Bill (WUC) ** Telephone Bill (BTC) ** Property Rates & Taxes Statement Valid Lease Agreement Other Bank Account Statements BURS Income/Wealth Tax Assessment order or other BURS document (If Applicable) Or any other document from an independent source that could verify the required information e.g. a letter from the employer giving the correct address. * With self-signed cheque drawn on existing bank ** Latest/Most recent Documents under list1 will establish identity of the account holder and documents of list2 will give the present address of the account opener. Proof of employment can be verified by means of: Telephonic confirmation from salary department of employer (Only with Clients Consent) Salary Slip, ITW8 Income Tax registration number must also be given by the individual, if such a number has been issued to that individual, e.g. BURS document, ITW8, Tax Clearance or any document from BURS confirming the individual s Tax reference number. In the case of an Individual (National & Foreign) assisting the customer if the customer does not have Legal Capacity, then the necessary Identification and Verification documentation, stated above, will be required from the individual assisting the customer Including the identification and verification of the contact details of the individual assisting In the case of joint accounts, applicants who are not closely related to each other would require to establish their identity and address independently. Other than Individual Accounts: Accounts on behalf of the following customers to be opened by BSBIBL after obtaining documents stated against their names and/ any other documents/introduction that BSBIBL feel necessary to comply with KYC guidelines:- Companies (BOTSWANA): Identification: 14

15 1) Certificate of Incorporation 2) Notice of Registered Office and Postal Address Bearing the stamp of the Registrar of Companies and Signed by the Company Secretary. 3) Memorandum and Articles of Association/Constitution of the company 4) Resolution of the Board of Directors for opening the account duly signed by the company secretary Details of Directors Citizens - Passport / Omang Foreign National Valid Pass Port, Valid Residence Permit and Valid Work Permit. Proof of Residence / Address Proof Shareholders holding 25% or more of the Voting Rights (At a General Meeting of the company concerned): (Entity Dependent: Not Applicable for Companies listed on the BSE) Different types of accounts Individual Person o BOTSWANA Resident - I.D. (Omang) o Foreign National - Valid Pass Port o Proof of Residence Company o Certificate of Incorporation Closed Corporation o Founding Statement Foreign Company o Official document issued by an authority recording the incorporation of the company Other legal entities o Constitution or any other founding documents Partnership o Partnership agreement Trust o Trust Deed For all the above entities Verification (Independent Sources) shall be done by verifying the following Proof of Company /Closed Corporation/Society/Trust/Partnership Registration Name, Registration Number, Registered Address and Trade Name and Address from which the company conducts business & Proof of details concerning Managers, Mandated Officials and 15

16 Shareholders etc.: Electricity Bill Property Rates and Taxes Statement Lease Agreement Account Statements Telephone Directory BURS Document If Applicable Companies (Foreign): Identification: Official document issued by an Authority for recording the incorporation of the companies of the country of incorporation of the foreign company, witnessing its incorporation and bearing its name and number of incorporation and the address where it is situated for purposes of its incorporation Details of Manager / Managing Director and Officials Authorised to establish the business relationship and enter into a transaction: BOTSWANA Resident I.D. (Omang) Foreign National Valid Pass Port Proof of Residence Mandated officials and Shareholders holding 25% or more of the Voting Rights (At a General Meeting of the company concerned): (Entity Dependent: Not Applicable for Companies listed on the BSE) Individual Person BOTSWANA Resident - I.D. (Omang) Foreign National - Valid Pass Port Proof of Residence Residential Address Contact Particulars Company s BURS Income Tax Number and Value Added Tax Registration Number (If Issued) Closed Corporations Identification: Most recent version of the Founding Statement and Certificate of Incorporation Amended Founding Statement (If Applicable) 16

17 o Bearing the stamp of the Registrar of Closed Corporations o And signed by an Authorised member or employee of the CC Details of each Member, Mandated Officials and Officials authorised to establish a business relationship or enter into an agreement: BOTSWANA Resident I.D. (Omang) Foreign National Valid Pass Port Proof of Residence CC s BURS Income Tax Number and Value Added Tax Registration Number (If Issued) Residential Address Contact Particulars Society/Associates/Clubs (Other Legal Entities): Identification: Resolution for opening of the account A copy of Bye-laws and Certificate of Registration in the case of registered clubs, societies and associations Constitution or any other founding documentation in terms of which the legal entities were created Details of Mandated Officials and Officials Authorised to establish a business relationship and enter into a transaction: BOTSWANA Resident I.D. (Omang) Foreign National Valid Pass Port Proof of Residence Entity s BURS Income Tax Number and Value Added Tax Registration Number (If Issued) Residential Address Contact Particulars Trust: Identification: - A copy of the Resolution - Trust Deed - A copy of Registration Certificate - Other founding documentation in terms of which the trust is created - In the case of a trust created in the Republic, the authorisation given by the Master of 17

18 the High Court in terms of Section 7 of the Trust Property Control Act, 1988, (Act No. 57 of 1988) to each trustee of the trust to act in that capacity - In the case of a trust created outside the Republic, an official document which reflects these particulars, issued by an authority in the country where the trust is created which administers or oversees laws relating to trust in that country Personal details of each Trustee of the trust, each Mandated Official, each Beneficiary of the trust referred to by name in the Trust Deed or other founding documentation in terms of which the trust is created, founder of the trust: (Entity Dependent) Trustee, Mandated Official & Beneficiary o BOTSWANA Resident - I.D. (Omang) o Foreign National - Valid Pass Port Individual Person o BOTSWANA Resident - I.D. (Omang) o Foreign National - Valid Pass Port Residential Addresses Contact Particulars The address of the Master of the High Court where the Trust is registered (If Applicable) Trust s BURS Income Tax Number and Value Added Tax Registration Number (If Issued) Proof of Trust Name and Trust Number and Particulars on how the Trust is Determined & Proof of details concerning each Trustee, Mandated Official, beneficiary and Founder of the Trust etc.: Firms (Partnership Firm): Identification: Partnership Deed (Agreement in terms of which the partnership was formed) Partnership Letter Introduction from a person known to STATE BANK OF INDIA (BOTSWANA) LTD. Personal details of the Mandated Officials who are authorised to establish a business relationship or enter into a transaction as per resolution, every partner, every member of a partnership, and anonymous partnership or any similar partnership, and the person who exercises executive control over the partnership: (Entity Dependent) Individual Person o BOTSWANA Resident - I.D. (Omang) o Foreign National - Valid Pass Port 18

19 Residential Addresses Contact Particulars Partnership s BURS Income Tax Number and Value Added Tax Registration Number (If Issued) Proof of Partnership Name and Business Address & Proof of details concerning Mandated Officials, Partners, Members and Person exercising executive control over partnership etc.: BSBIBL will then submit registered post at the recorded addresses to all customers and introducers with the purpose, thanking them for opening the account with BSBIBL and for verification of genuineness of address furnished by the account holder. Undelivered envelopes in this regard would be required to be followed-up closely. The operating staff/officers at BSBIBL associated with opening of accounts would be required to exercise due diligence and care at the time of opening of accounts in terms of various local guidelines/regulations and legal compliance in force. All documents are obtained on face to face basis certified by operating staff and scrutinised by the senior management of the bank. Care should, however, be taken that implementation of KYC guidelines do not result in denial of opening of new accounts. All the KYC documents taken at the time of opening of the documents/ or taken subsequently are to be maintained within their validity. The up dated KYC documents and renewed documents are to be obtained on continual basis to ensure that KYC documents remains current during operations in accounts. BSBIBL shall periodically update the KYC information in respect of every customers. BENEFICIAL OWNERSHIP The policy provide for requirements to take reasonable measures to understand the ownership and control structure of the customer, and enquire if any beneficial owner exists in relation to a customer. Where there is one or more beneficial owner (s) in relation to a customer, the bank needs to take reasonable measures to obtain information sufficient to identify and verify the identities of the beneficial owner (s). Where the customer is not a natural person, the BSBIBL shall: (i) Take reasonable measures to understand the ownership and control structure of the customer for obtaining information required (ii) Determine that the natural persons who ultimately own or control the customer. The BSBIBL must identify and verify the beneficial owner. BSBIBL must conduct customer due 19

20 diligence on the natural person that ultimately owns or controls the customer's transaction when they suspect the transaction is conducted on behalf of a beneficial owner and not the customer who is conducting such a transaction. The customer due diligence conducted should be as stringent as that imposed on an individual customer. BSBIBL should take reasonable measures to identify the beneficial owner(s) and verify his/her/their identity in a manner so that it is satisfied that it knows who the beneficial owner(s) is/are. BSBIBL should identify the beneficial owner of an account (regardless of whether it is a corporate body or trust opening the account) and if it fails to ascertain the identity of the said owner or person, it should make a report to the FIA. BSBIBL must shall identify the beneficial owner and shall take reasonable measures to verify the identity of the beneficial owner unless the Government prescribes the circumstances, such as the ownership of publicly held corporations, in which such identification and verification is not necessary. Documents Requirements for the identification of the beneficiary may vary depending on the type of client and the institution that requires them, but in general they include: a) Full name b) Date of birth c) Proof of address d) Same documents required by client e) If a document presents scraps or has been repaired the entity should ask for this other information: 2 bank references or commercial references. Individuals: In the case of a foreign national, a national registration card and a valid passport (and where applicable, an issued visa). Legal entities: Verify the identity of the directors, beneficial owners and management i.e. obtain Certificate of Incorporation or equivalent and details of the registered office/place of business; details of the nature of their business; the reason for the account being opened; indication of the expected turnover; the source of funds and a copy of the last available accounts where applicable. The beneficial owners owning more than 25% of its shares or voting rights are required to be identified and their identities verified. Corporate Customers: It is required to collect information on ownership and control structure to determine the individual with the controlling interest and who has the control of the corporate. BSBIBL Institutions should verify and maintain the power of attorney of beneficial owners from the customer who is conducting the transaction. The beneficial ownership threshold level is to be set at 25%. This means any individuals owning 25% (or more) of a customer would be subject to KYC/ALM requirements. For legal entities, the beneficial owners owning more than 25% of its shares or voting rights are required to be identified and their identities verified. BSBIBL shall, with respect to each customer obtain and verify the following: a) For a Natural Person: The full name and address and date of birth and place of birth. b) For a Legal Entity. The corporate name, the head office address, identities of directors, proof of incorporation or similar evidence of legal status and legal form, provisions of governing the authority to bind the legal person, and such information as is necessary to understand the ownership and the control of the legal person. c) For Legal Arrangement. The name address of the trustees, the settler and the beneficiary of express trusts, and any other parties with the authority to manage, vary or otherwise control the 20

21 arrangement d) In addition to the identity of a customer, the identity of any person acting on behalf of the customer, including evidence that such person is properly authorized to act in that capacity. e) Information on the intended purpose and nature of each business relationship. f) Sufficient information about the nature and business of the customer to permit the BSBIBL to fulfil its obligations. High level requirements around beneficial ownership (identification and verification) 1. The high level requirements are: a) Obtain information on the beneficial owner; b) Verification of the identification and the address of the professional intermediary. Local guidance requires institutions to have full disclosure of beneficial owners or controlling persons behind nominee accounts. When one person is acting on behalf of another, the obligation is to obtain sufficient evidence of the identities of the two persons involved. In consortium lending, the lead manager/agent shall supply a confirmation letter as evidence that he has obtained the required identity. Beneficial Ownership: Collection of additional Information The level of ownership in a customer entity that triggers beneficial owner identification and due diligence should be determined by the AML risk profile of the customer. It is generally considered that at a minimum any beneficial owner holding >25% interest in the customer entity should be subject to due diligence. The percentage of ownership that triggers due diligence should be lower as the AML risk of the customer/account increases. For identified beneficial owners, the KYC and identification requirements must be followed. The following three situations require financial institutions to collect additional information about beneficial ownership: a) When the client informs the institutions that the final beneficiary is another person or entity. b) When the financial institution has doubts about the final beneficiary. c) When the customer engages in commercial, financial or industrial transactions in a location where they have no operations. BSBIBL should carry out verification in respect of the parties operating the account. Where there are underlying principals, the true nature of the relationship between the principals and the account signatories must also be established. Appropriate enquiries should be performed on the principals, especially if the signatories are accustomed to acting on their instructions. In this context principals should be understood in its widest sense to include, for example, beneficial owners, settlers, controlling shareholders, directors, major beneficiaries etc for mentioned data. 1. All beneficial owners of 10% or greater of a company's holdings must be identified/verified. Beneficial owners below 10% should be identified if the entity appears structured to avoid this requirement. Note that certain entities are exempt, such as those listed on a recognised stock exchange. 2. When a firm has to identify an entity, it must take reasonable measures to obtain and keep a record of information relating to the entity s beneficial ownership. For a corporation, this includes the name and occupation of all directors and the name, address and occupation of 21

22 all individuals who own or control 25% or more of the shares of the corporation. If the information cannot be obtained, a record must be maintained explaining why beneficial ownership could not be determined. 3. For insurance entities, the identification information required for beneficial ownership (not required to go up to level of ultimate beneficial owners) should contain, at a minimum, the information/documentation specified for both individuals and legal entities. 4. The following situations require financial institutions to collect additional information about beneficial ownership: a) when the client informs the institutions that the final beneficiary is another person or entity; b) when the financial institution has doubts about the final beneficiary; c) when the customer engages in commercial, financial or industrial transactions in a location where they have no operations; d) when transactions are greater than BWP or USD equivalent in local currency in current accounts, saving accounts, long term deposits, money exchange, among others; or e) when the total of multiple linked transactions is an amount greater than BWP10000 or USD equivalent. BSBIBL is required to exercise extraordinary diligence if the transaction of a customer meets, among other things, the situations where the end beneficiary or transaction counterparty is found to be a terrorist individual or entity as advised by a foreign government via the Financial Supervisory Commission, deemed by an international AML institution, or Financial Intelligence Agency (FIA) or based on reasonable doubts. If any suspicious fact about a beneficial owner is detected from a transaction, the identity of the person and the purpose of the transaction be obtained to be advised to FIA. Identification and verification processes of customers have to be strengthened on continuing manner in view of regulations and guidance relating to verification of beneficial ownership. The updated regulations recommend that enhanced customer due diligence is applied in respect of customers that fall into major high risk categories specified by the FATF, such as Politically Exposed Persons ( PEPs ), private banking, correspondent banking and terrorist facilitators/financiers. COMPLIANCE TO FOREIGN TAX COMPLIANCE ACT (FATCA ) AND COMMON REPORTING STANDARD (CRS) BSBIBL should obtain additional information from prospective customers in respect of their status under Foreign Account Tax Compliance Act and Common Reporting Standard and also to report to FIA in conductor form for reporting the transactions etc. Customer Profile: For the purpose of exercising due diligence on individual transactions in accounts, it is felt desirable to include Customer Profile of individual account holders in the account opening 22

23 forms, covering the following information:- Occupation Source of Funds Monthly Income Annual Turnover Date of Birth Permanent Residential Address Educational Qualification (Optional) Spouses Qualification (Optional) Family Members (Optional) Any Relative Settled Abroad Dealings with other Banks Existing Credit Facilities Assets (Approximate Value) Purpose of Opening Account. - Customer profiles to be prepared for all accounts. - Customer profiles have to be reviewed once in three years. - For opening accounts by transfer from other branches/banks, a new set of account forms along with the customer profile to be obtained. - While transferring accounts from inoperative accounts to live ledger, a new set of account opening form along with the customer profile to be obtained/updated. - A declaration/undertaking via account opening application form will be obtained as well, stating that any money deposited in the account is beneficially owned by the applicant for business and that neither part nor all of it is associated with illegal/criminal activity and that transaction of the money does not constitute money laundering. - As a prudent measure, a declaration/undertaking via account opening application form will be obtained that should there be any change in the circumstance of the applicant for business; applicant would inform the Bank about such changes promptly. - After obtaining all the necessary KYC documentation, the account opening form is to be signed by the Assistant /Supervisor and further reviewed and if found satisfactory, the same is signed off by the VP(OPERATIONS) / Compliance Officer and the account relationship is to be established or transaction is to be carried out duly verified under Four Eye Principle. BSBIBL staff will maintain copies of all KYC documentation within the banks custody within the life span of the customer account and a further 5 years period after account closure. IDENTIFICATION OF HIGH VALUE / SUSPICIOUS TRANSACTIONS / TERRORISM 23

24 FINANCE Cash transactions of Pula 10, and above: In cash transactions local regulatory guidelines are required to be strictly complied with as under:- Close watch of the individual cash withdrawals and deposit for Pula 10, and above or the limit prescribed by the Regulators for transactions and reporting of the transactions is to be done, as per Regulatory Requirements. Transactions of suspicious nature: For identification of suspicious transactions one has to be very cautious and use his/her judgement as a man of ordinary prudence. Some of the reasons identified as to suspect involvement of money laundering activity are under: a Involvement of funds or illegal activity or b Intended to hide or disguise assets derived from illegal activities, or c Is designed to evade anti money laundering guidelines, or d has no business or apparent lawful purpose, or e Is the sort in which the particular customer is not normally expected to engage in and for which, after examining available facts, satisfactory linkage is obtained. The illustrative list of suspicious transactions has been furnished as Annexure - 2. Terrorism finance: List of terrorist organisations/banned organisations circulated by the Regulators for time to time would require to be consulted to check existence of account of such organisation and initiate appropriate action before opening of any new accounts in the future and the list to be made available at all counters. o At branch, suitable filters will be introduced on the basis of Payee/last endorsee s name/applicant. o Necessary reporting would be made in case of accounts suspected belong to terrorist entities to the Regulatory Agencies. BSBIBL should not open accounts in the names of terrorist/banned organisations. o In case the name of any banned organization appears as payee/endorsee/applicant, the computer should throw caution. 24

25 Reporting of such transactions as and when detected is to be done as mentioned below. OTHER GUIDELINES Implementation of the KYC guidelines should not result in denial of opening of new accounts at BSBIBL. Nevertheless, customer profiles to be compiled without exception. Introduction of large number of accounts by a single introducer (either account holder or staff) to be accepted with caution. All applicants for remittances, must necessarily state the following: 1 Their address 2 Phone number 3 Identification Document Number 4 Purpose of Remittance 5 Occupation 6 Source of funds etc. 7 The Identity Document should be verified by an authorised official who would evidence such verification. A photocopy of the Identity Document must be retained with the remittance application. The applicant s I.D. Card/Passport shall serve as sufficient proof of identity. The remittance application form should be completely filled up. As far as is feasible, the signatures of the account holders/ directors/ partners of a company must be obtained in the presence of BSBIBL officials. It shall be necessary to keep on record copies of the identification particulars of all account holders, directors/ partners of a company. It shall be sufficient if the original is verified by a BSBIBL official and a copy duly certifying this fact is kept on record. If for some reason the identification documents of an account holder/ director, etc. cannot be verified by the branch officials, it shall suffice if a copy attested by the Individual/ Company s present bankers is provided. BSBIBL shall not act on messages, which do not clearly state the name of the remitter and if the name stated, is other than what appears on BSBIBL records. BSBIBL shall not send payment advices with the remitter s name being stated other than what appears on BSBIBL records. The Enhanced Due Diligence and Compliance with the Know Your Customer (KYC) principle, at the time of opening a new customer record or in the case of Remittance 25

26 transactions will be the responsibility of the concerned official/department. Any deviation from the laid down instructions would have to be specifically approved by the Managing Director. Customer Due Diligence (CDD) is an on-going process. In case it is felt that the principles of CDD & KYC are not being met, the relationship shall be terminated after giving the customer adequate notice at their recorded address. The decision to terminate the relationship with the customer in this manner shall be permitted only by the Managing Director. Shell Companies are legal entities, which have no business substance in their own right but through which financial transactions may be conducted. These are the common vehicles for Money Laundering because these provide the criminal owner with anonymity behind a legal entity. As such it becomes difficult to establish the beneficial or ultimate true owner of a shell company. Another reason for the use of shell companies for Money Laundering is that shell companies are commonly incorporated in Tax Haven countries. Hence, adequate care need to be taken to ascertain the beneficial ownership of such companies failing which, no dealings should be done with them. Normally, accounts of such companies should not be opened nor any financial dealings should be done with them. However, under exceptional circumstances, when it is warranted to open such accounts or to deal any financial dealings with them, specific approval from the Managing Director should be obtained before-hand, in writing. For companies or firms registered or incorporated overseas, comparable documents as mentioned above should be obtained, duly certified by any authorised officer of any SBI domestic or foreign branches, or of any SBI associate banks or of any SBI correspondents, where the said company or firm is situated. If in the case of a corporate account, if it is difficult to identify the beneficial owner of an account such accounts may be used for money laundering. Therefore, it is essential that BSBIBL should make efforts to determine the beneficial ownership of a corporate account. Periodically, necessary crosschecks should be made to ascertain any significant or complete change in the structure or ownership of the company or business entity. SUSPICIOUS ACTIVITY REPORTING (SAR) The bank shall report to both the Central bank and the Financial Intelligence Agency, in the form set out as Annexure hereto, any transaction involving large amounts of money or suspicious activities by its customers.and shall for this purpose send to those institutions copies of the relevant documents and retain the originals. 26