Hero FinCorp Limited

Transcription

1 Hero FinCorp Limited Know Your Customer (KYC) and Anti-Money Laundering (AML) Policy Effective date: 03 rd Oct 2017 Recommended by Amninder Singh Lead Operations Recommended by Recommended by Reviewed by Reviewed by Deepak Kapoor Tarang Jain Bijju Pillai Amit Jain Sr. Associate Risk Infrastructure Lead Finance & Accounts Head Credit - Retail Finance Head Legal & Company Secretary Reviewed by Subhransu Mandal Head Operations Reviewed by Approved by Approved by Approved by Nipun Kapur Mahesh Sanghavi Samir Mehta Ajay Sahasrabuddhe Head Strategy & Planning Head Credit & Risk (Corporate Finance) Business Head (Corporate Finance) Business Head (Retail Finance) Approved by Shyam Lal Chief Finance Officer Approved by Abhimanyu Munjal Jt. Managing Director & CEO 1

2 Contents 1. Introduction Objective Key Elements of Policy Customer Acceptance Policy (CAP) Customer Identification Procedures Monitoring of Transactions Risk Management Allotment of Unique Customer Identification Code (UCIC) KYC Refresh of on-boarded customers Maintenance of records of transactions Preservation of records Reporting to Financial Intelligence Unit-India Customer Education Combating financing of terrorism Appointment of Compliance/Principal Officer Annexure - I Annexure II Annexure III Glossary of Terms References Introduction 2

3 Reserve Bank of India (RBI) has issued guidelines on Know Your Customer (KYC) and Anti Money Laundering Standards (AML) vide their circular Master Circular 'Know Your Customer' (KYC) Guidelines Anti Money Laundering Standards (AML) -'Prevention of Money Laundering Act, Obligations of NBFCs in terms of Rules notified thereunder (circular no. RBI/ /108 DNBR (PD) CC No. 051/ / ) dated 1st July The Company shall adopt all the best practices prescribed by RBI from time to time and shall make appropriate modifications if any necessary to this code to conform to the standards so prescribed. This policy is applicable across all branches / business segments of the Company, and its financial subsidiaries and is to be read in conjunction with related operational guidelines issued from time to time. The contents of the policy shall always be read in tandem/auto-corrected with the changes/modifications which shall be advised by RBI from time to time. The Company is committed for transparency and fairness in dealing with all stakeholders and in ensuring adherence to all laws and regulations. The Company ensures that the information collected from the customer for any purpose would be kept as confidential and not divulge any details thereof for cross selling or any other purposes. The Company commits that information sought from the customer is relevant to the perceived risk, is not intrusive, and is in conformity with the RBI guidelines issued in this regard. The Company s Board of Directors will oversee the implementation of KYC & AML norms and management team is responsible for implementing the KYC & AML norms hereinafter detailed, and also to ensure that its operations reflect its initiatives to prevent money laundering activities. For the purpose of KYC norms, a Customer shall be defined as: A Customer is defined as a person who is engaged in a financial transaction or activity with a reporting entity and includes a person on whose behalf the person who is engaged in the transaction or activity, is acting. 2. Objective The objective of KYC guidelines is to prevent the Company from being used, intentionally or unintentionally, by criminal elements for money laundering activities. KYC procedures also enable the Company to know/understand their customers and their financial dealings better which in turn help them manage their risks prudently. 3. Key Elements of Policy The Company hereunder framing its KYC policies incorporating the following four key elements: i) Customer Acceptance Policy ii) Customer Identification Procedures iii) Monitoring of Transactions 3

4 iv) Risk management 3.1. Customer Acceptance Policy (CAP) The guidelines for Customer Acceptance Policy (CAP) for the Company are given below: i. No account is opened in anonymous or fictitious/ benami name(s) ii. The Company shall classify customers into various risk categories and based on risk perception decide on acceptance criteria for each customer category iii. Accept customers after verifying their identity as laid down in customer identification procedures iv. While carrying out due diligence the Company shall ensure that the procedure adopted shall not result in denial of services to the genuine customers v. For the purpose of risk categorization of customer, Company shall obtain the relevant information from the customer at the time of account opening vi. Parameters of risk perception shall be clearly defined in terms of the nature of business activity, location of customer and his clients, mode of payments, volume of turnover, social and financial status etc. to enable categorization of customers into low, medium and high risk; customers requiring very high level of monitoring, e.g. Politically Exposed Persons (PEPs as explained in Annex II) may, if considered necessary, be categorized even higher vii. Documentation requirements and other information to be collected in respect of different categories of customers depending on perceived risk and keeping in mind the requirements of Prevention of Money Laundering (PML) Act, 2002 and guidelines issued by Reserve Bank from time to time viii. The Company shall not open an account or close an existing account where the Company is unable to apply appropriate customer due diligence measures i.e. the Company is unable to verify the identity and /or obtain documents required as per the risk categorization due to non-cooperation of the customer or non-reliability of the data/information furnished to the Company. It shall be necessary to have suitable built in safeguards to avoid harassment of the customer. For example, decision to close an account shall be taken at a reasonably high level after giving due notice to the customer explaining the reasons for such a decision ix. Circumstances, in which a customer is permitted to act on behalf of another person/entity, shall be clearly spelt out in conformity with the established law and practice of banking as there shall be occasions when an account is operated by a mandate holder or where an account shall be opened by an intermediary in the fiduciary capacity x. Necessary checks before opening a new account so as to ensure that the identity of the customer does not match with any person with known criminal background or with banned entities such as individual terrorists or terrorist organizations etc. xi. Adoption of customer acceptance policy and its implementation shall not become too restrictive and shall not result in denial of financial services to general public, especially to those, who are financially or socially disadvantaged 4

5 xii. As advised by RBI, the Company shall not allow opening and/or holding of an account on behalf of a client/s by professional intermediaries, like Lawyers and Chartered Accountants, etc., who are unable to disclose true identity of the owner of the account/funds due to any professional obligation of customer confidentiality. Further, any professional intermediary who is under any obligation that inhibits the Company s ability to know and verify the true identity of the client on whose behalf the account is held or beneficial ownership of the account or understand true nature and purpose of transaction/s, should not be allowed to open an account on behalf of a client Prohibitions Countries, governments, entities and individuals that are subject to economic sanctions Countries identified by Financial Action Task Force (FATF) as High Risk and non-cooperative Jurisdictions ( List of Terrorist Individuals / Organizations- under UN Security Council resolution pursuant to resolutions 1267 (1999) 1989 (2011) AND 2253 (2015) ( and Resolution pursuant to 1988 (2011) ( Entities / persons involved in unlawful activities 3.2. Customer Identification Procedures The policy clearly spells out the Customer Identification Procedure to be carried out at different stages i.e. while establishing a business relationship; carrying out a financial transaction or when the Company has a doubt about the authenticity/veracity or the adequacy of the previously obtained customer identification data. Customer identification means identifying the customer and verifying his/ her identity by using reliable, independent source documents, data or information. The Company shall obtain sufficient information necessary to establish, to its satisfaction, the identity of each new customer, whether regular or occasional, and the purpose of the intended nature of business relationship. Being satisfied means that the Company must be able to satisfy the competent authorities that due diligence was observed based on the risk profile of the customer in compliance with the extant guidelines in place. Such risk based approach is considered necessary to avoid disproportionate cost to Company and a burdensome regime for the customers. Besides risk perception, the nature of information/documents required would also depend on the type of customer (individual, corporate etc). For customers that are natural persons, the Company shall obtain sufficient identification data to verify the identity of the customer, his address/location, and also his recent photograph. For customers that are legal persons or entities, the Company shall i) Verify the legal status of the legal person / entity through proper and relevant documents ii) Verify that any person purporting to act on behalf of the legal person/entity is so authorized and identify and verify the identity of that person iii) Understand the ownership and control structure of the customer and determine who are the natural persons who ultimately control the legal person. The Company shall take into account Customer identification requirements in respect of a few typical cases, especially; legal persons 5

6 requiring an extra element of caution are given in Annexure-II of this policy document (reference RBI Circular No.: DNBS (PD) CC NO. 48/10.42/ dated ) iv) An indicative list of the nature and type of documents/information that shall be relied upon for customer identification is given in the Annexure-I The documents requirements would be reviewed periodically as and when required for updation keeping in view the emerging business requirements. Customer Identification Procedure is to be carried out at different stages i.e. a) While establishing a business relationship (or) b) Carrying out a financial transaction (or) c) Where the Company has a doubt about the authenticity/veracity (or) d) Inadequacy of the previously obtained customer identification data if any e) When the Company feels it is necessary to obtain additional information from the existing customers based on the conduct or behavior of the account No deviations or exemptions shall normally be permitted in the documents specified for account opening. In case of any extreme cases of exceptions, concurrence shall be obtained duly recording the reasons for the same. Suitable operating guidelines for implementation of the KYC/ AML guidelines shall be issued by the Company for its different business segments from time to time. The following due diligence must also be performed on prospective customers: 1. Individual Customers: Verify Identity: In the case of privately owned Customers not well-known in the local market, obtain originals of and file legible copies of identification documents which contain photographs of the individual. Acceptable examples include: i) Passports (obtain all nationalities an individual may have) ii) PAN Card iii) Driver s licenses Face-to-face meetings with the Customers are required prior to initiation of any financial relationship. Verify domicile of residence: Example: Obtain copies of utility bill receipts or other form of objective verification of residence where possible; check the Telephone numbers against a directory of telephone numbers to verify address. Verify source of income: Obtain bank references where permissible 2. Legal Entity Customers: 6

7 Verify Identity: 1. Obtain and file legible copies of corporate formation and registration documents or public company prospectuses and government filings 2. TAN Card/PAN Card of the Directors etc. 3. Where possible (in the case of privately owned entities), arrange for recommendation from legal counsel to the company 4. Where possible (in the case of privately owned entities), obtain from appropriate government entity confirmation of due incorporation and existence of the corporation Verify source of income: Research Company in available news or business databases and obtain all corporate earnings information available. The Company shall maintain files on each Customer with copies of all data obtained and memorialize in writing all verification efforts. These files may be maintained electronically and should be accessible quickly when needed Monitoring of Transactions Ongoing monitoring is an essential element of effective KYC procedures. The Company can effectively control and reduce their risk only if they have an understanding of the normal and reasonable activity of the customer so that they have the means of identifying transactions that fall outside the regular pattern of activity. However, the extent of monitoring shall depend on the risk sensitivity attached with the client. The Company shall pay special attention to all complex, unusually large transactions and all unusual patterns which have no apparent economic or visible lawful purpose. The Company shall prescribe threshold limits for a particular category of clients and pay particular attention to the transactions which exceed these limits, Transactions that involve large amounts of cash inconsistent with the normal and expected activity of the customer would particularly attract the attention of the Company. The Company does not accept any deposits. Further, there are no operative accounts where in the need for fixing the threshold limits for individual transactions and aggregate is more relevant and necessary. Most of the Company s loans are EMI based loans on all categories of borrowers. Hence the transactions with the Company are purely shall be restricted to the EMI/loan repayable over the tenor of the loan. Hence while the threshold limit for transactional basis is restricted to the EMI/loan payable, the threshold for turnover shall be restricted to the aggregate EMIs, Penal Interest, Fee and/or other payable year after year. No other transactions what so ever nature other than repayment of loan with interest is carried out by the customer with the Company. 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. The Company shall adopt the guidelines issued by RBI for Prevention of Money Laundering vide Circular

8 No. DNBS (PD) CC No. 48/10.42/ dated For assessment and monitoring of the risk categorization of the customers, the Company would take into consideration to necessary extent, the Guidance note on KYC norms / AML Standards issued by Indian Bank s Association (IBA) for Banks as advised by RBI vide its Circular No. RBI/ /466 DNBS(PD).CC. No 264/ / dated March 21, All transactions of cash and suspicious as required under PML Act 2002 shall be reported to Financial Intelligence Unit (FIU) from time to time. The Principal Officer specified by the Company shall ensure that such reporting system is in place and shall monitor receipt of the reports. The name of the Principal Officer shall be specified by the Jt. MD & CEO of the Company from time to time. All transactions of suspicious nature and / or any other type of transaction notified under section 12 of the PML Act, 2002, shall be reported to the appropriate law enforcement authority by the Principal Officer Risk Management There will be three categories of customers i.e. Low risk, Medium risk and High risk. Such levels will be decided on the basis of risk element involved in each case which will be determined by considering the following information submitted by the customer: 1. Nature of business of the Customer 2. Work place of customer and of his clients 3. Social and financial status 4. Quantum & tenure of Loan facility applied for and proposed schedule for repayment of Loan 5. Customer Type (Partnership, Pvt. Ltd. Public Ltd., Trust, NGOs etc) 6. Transparency in ownership & control structure 7. Businesses / Industries with high AML Risk e.g. Dealers in high value or precious goods e.g. bullion dealers, Casinos and other gambling businesses, Arms & Ammunition manufacturers and dealers 8. Presence of PEP (Politically Exposed Person) 9. Company s activities involve extensive import/export activities Company shall categorize its customers on the basis of the risk perceived. Normally, Low risk customers would be Publicly Listed Entities, salaried employees having definite and well-defined salary structure, employees of Government Departments or Government owned companies, statutory bodies, people belonging to low income group whose financial resources although show small balance in their bank accounts and low turnover, but on the other hand indicate regular and consistent flow of financial returns/income showing capacity to repay without default. Information to be collected from the customers will vary according to categorization of customer from the point of view of risk perceived. Special care and diligence will be taken and exercised in respect of those customers who happen to be high profile and/or politically exposed persons within or outside 8

9 country. Such persons will include foreign delegates or those working in foreign high commissions or embassies, senior politicians, senior judicial officers, senior military officers, senior executives of state owned corporations and officials of important and leading political parties (as explained in Annexure II). The profile of new customers will be prepared on risk categorization basis. Such profile will contain the following information about the new customers: 9 1. Customer s Identity 2. Social and financial status of the customer 3. Nature of the business activity 4. Information about the business of the customer s clients and their locations Cases where the Company is likely to incur higher risk will be categorized as medium or high risk customers and will be placed in medium or high risk category. In such cases the Company will apply higher due diligence measures as mentioned in Annexure-II of this policy keeping in view the risk level. While placing the customers in the above categories, the Company will give due consideration to the customer s background, country of his origin, nature and location of his business activities, source of funds and profile of customer s clients etc. The extent of due diligence requirement will vary from case to case as the same will depend upon risk perceived by the Company while granting credit facilities to customers. For the purpose of preparing customer profile only such relevant information from the customers will be sought based on which the Company can easily decide about the risk category in which the customer is to be placed. Ordinarily, the customer profile maintained by the Company will be kept confidential save and except where the customer himself allows and/or gives consent for the use of the information given in customer profile/application form for the purpose of offering other products/services of other companies/entities belonging to the Company s Group or any other legal entity with whom the Company is having any business tie-ups. However, while taking any such permission or consent of the customer for using his above referred information provided to the Company, it will be ensured that such permission/consent of the customer is unambiguous and explicit. The Company shall have a system of risk categorization of accounts and periodical review thereof at a periodicity of not less than once in six months. The company shall also introduce a system of periodical updation of customer identification data (including photographs) after the account is opened. The periodicity of such updation shall not be less than once in eight years in case of low risk category customers, and not less than once in five years in case of medium risk and once in 2 years for high risk category customers. Cases in which the risk level is higher will require intensive due diligence exercise. Such cases will include those where the source of funds to be used for business operations or sources to repay the Loan to the Company are not clearly disclosed or cannot be ascertained from the financial statements submitted by the customer to the Company. Besides above, some of such customers in whose cases the Company will require higher due diligence measures are mentioned below:

10 1. NRI Customers 2. High Networth Individuals 3. Trusts 4. Societies 5. Charitable Institutions 6. NGOs and other organizations receiving donations from within or outside the country 7. Partnership firms with sleeping partners 8. Persons with dubious or notorious reputation as per the information available from different of sources like media, newspapers etc 9. Politically exposed persons (PEPs) of foreign origin means individuals who are or have been entrusted with prominent public functions in a foreign country, e.g., Heads of States or of Governments, senior politicians, Senior Government, Important political officials 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 low risk. Illustrative examples include salaried employees 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 HFCL will draft a detailed internal SOP for arriving at the categorisation for each account based on the assessment and risk perception of the customers. The Board of Directors of the Company shall ensure that an effective KYC program is put in place by establishing appropriate procedures and ensuring their effective implementation. It shall cover proper management oversight, systems and controls, segregation of duties, training and other related matters. Responsibility would be explicitly allocated within the Company for ensuring the implementation of Company s policies and procedures. The Company shall, devise procedures for creating Risk Profiles of their existing and new customers and apply various Anti Money Laundering measures keeping in view the risks involved in a transaction, account or business relationship. The Company s internal audit and compliance functions shall have an important role in evaluating and ensuring adherence to the KYC policies and procedures. The Company shall ensure that its audit machinery is staffed adequately with individuals who are well-versed in such policies and procedures. 10

11 Concurrent / Internal Auditors shall 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 shall be put up before the Audit of the Board on quarterly intervals. 4. Allotment of Unique Customer Identification Code (UCIC) As required by the RBI guidelines DNBS/PD.CC.No.325/ / dated May 3, 2013, the Company shall allot Unique Customer Identification Code to all its new customers while entering new relationships. Further for the existing customers such a code would be created within the permitted timeframes. This UCIC will be used to identify customers, track the facilities availed, monitor financial transactions in a holistic manner and enable NBFCs to have a better approach to risk profiling of customers. 5. KYC Refresh of on-boarded customers i. Full KYC exercise will be required to be done at least every two years for high risk individuals and entities. ii. Full KYC exercise will be required to be done at least every eight years for low risk and at least every five years for medium risk individuals and entities taking in to account whether and when client due diligence measures have previously been undertaken and the adequacy of data obtained. Physical presence of the clients may, however, not be insisted upon at the time of such periodic updation. iii. Fresh photographs will be required to be obtained from minor customer on becoming major. 6. Maintenance of records of transactions The Company shall introduce a system of maintaining proper record of transactions prescribed under rule 3, as mentioned below: i) All cash transactions of the value of more than rupees ten lakh or its equivalent in foreign currency ii) 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 iii) All cash transactions where forged or counterfeit currency notes or bank notes have been used as genuine and where any forgery of a valuable security has taken place iv) All suspicious transactions whether or not made in cash and in manner as mentioned in the Rules framed by Government of India under the Prevention of Money Laundering Act,

12 7. Preservation of records The Company shall take appropriate steps to 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. Further, the Company shall maintain for at least ten years from the date of cessation of transaction between the Company and the client, all necessary records of transactions, both domestic or international, which shall permit reconstruction of individual transactions (including the amounts and types of currency involved if any) so as to provide, if necessary, evidence for prosecution of persons involved in criminal activity. The Company shall ensure that records pertaining to the identification of the customer and his address (e.g. copies of documents like passports, identity cards, driving licenses, PAN, utility bills etc.) obtained while opening the account and during the course of business relationship, are properly preserved for at least ten years after the business relationship is ended. The identification records and transaction data shall be made available to the competent authorities upon request. 8. Reporting to Financial Intelligence Unit-India In terms of the PMLA rules, the Company shall report information relating to cash and suspicious transactions to the Director, Financial Intelligence Unit-India (FIU-IND).The Company shall adopt the format prescribed; follow timelines, guidelines on the compilation and manner/procedure of submission of the reports to FIU-IND. The Company shall initiate urgent steps to ensure electronic filing of cash transaction report (CTR).The Company shall not put any restrictions on operations in the accounts where Suspicious Transaction Report (STR) has been made. However, it shall be ensured that there is no tipping off to the customer at any level. For determining integrally connected cash transactions, Company shall take into account all individual cash transactions in an account during a calendar month, where either debit or credit summation, computed separately, exceeds Rupees ten lakh during the month. All cash transactions, where forged or counterfeit Indian currency notes have been used as genuine shall be reported by the Principal Officer to FIU-IND immediately. These cash transactions shall also include transactions where forgery of valuable security or documents has taken place and may be reported to FIU-IND in plain text form. The Company shall pay special attention to all complex, unusual large transactions and all unusual patterns of transactions, which have no apparent economic or visible lawful purpose. It is further clarified that the background including all documents/office records/memorandums pertaining to such transactions and purpose thereof shall, as far as possible, be examined and the findings at branch as well as Principal Officer Level shall be properly recorded. These records are required to be preserved for ten years as is required under PMLA, Such records and related documents shall be made available to help auditors in their work relating to scrutiny of transactions and also to Reserve Bank/other relevant authorities. It is likely that in some cases transactions are abandoned/ aborted by customers on being asked to give 12

13 some details or to provide documents. The Company shall report all such attempted transactions in STRs, even if not completed by customers, irrespective of the amount of the transaction. The Company shall make STRs if they have reasonable ground to believe that the transaction involve proceeds of crime generally irrespective of the amount of transaction and/or the threshold limit envisaged for predicate offences in part B of Schedule of PMLA, In the context of creating KYC/AML awareness among the staff and for generating alerts for suspicious transactions, the Company shall consider the indicative list of suspicious activities contained in Annexure-III 9. Customer Education Implementation of KYC procedures requires the Company to demand certain information from customers which shall be of personal nature or which have hitherto never been called for. This may sometimes lead to a lot of questioning by the customer as to the motive and purpose of collecting such information. The Company shall take all the necessary steps so as to educate the customer of the objectives of the KYC program. The front desk staffs shall be specially trained to handle such situations while dealing with customers. 10. Combating financing of terrorism In terms of PMLA Rules, suspicious transaction shall include inter alia transactions which give rise to a reasonable ground of suspicion that these may involve financing of the activities relating to terrorism. The Company, therefore, shall develop suitable mechanism through appropriate policy framework for enhanced monitoring of accounts suspected of having terrorist links and swift identification of the transactions and making suitable reports to the Financial Intelligence Unit India (FIU-IND) on priority As and when list of individuals and entities, approved by Security Council established pursuant to various United Nations' Security Council Resolutions (UNSCRs), is circulated by Reserve bank, the Company shall ensure to update the consolidated list of individuals and entities as circulated by Reserve Bank. Further, the updated list of such individuals/entities shall be accessed in the United Nations website at The Company shall before opening any new account, ensure that the name/s of the proposed customer does not appear in the list. Further, the Company shall scan all existing accounts to ensure that no account is held by or linked to any of the entities or individuals included in the list. Full details of accounts bearing resemblance with any of the individuals/entities in the list shall be immediately be intimated to RBI and FIU-IND. KYC norms/aml standards/cft (Combating Financing of terrorism) measures have been prescribed to ensure that criminals are not allowed to misuse the financial channels. Adequate screening mechanism shall be put in place by the Company as an integral part of recruitment/hiring process of personnel. The Company shall take into account risks arising from the deficiencies in AML/CFT regime of countries of Iran, Angola, Democratic People's Republic of Korea (DPRK), Ecuador, Ethiopia, Pakistan, Turkmenistan and Sao Tome and Principe and list of countries circulated by RBI from time to time. In 13

14 the context of creating KYC/AML awareness among the staff and for generating alerts for suspicious transactions, the Company shall consider the indicative list of suspicious activities contained in Annexure- III. Applicability to branches and subsidiaries outside India (Presently we do not have any branches outside India, shall be applicable whenever branches are opened outside India) The extant instructions that KYC/AML guidelines issued by Reserve Bank of India shall also apply to their branches and majority owned subsidiaries located outside India, especially, in countries which do not or insufficiently apply the FATF Recommendations, to the extent local laws permit. It is further clarified that 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 Company shall adopt the more stringent regulation of the two. 11. Appointment of Compliance/Principal Officer The Company has a senior management officer to be designated as Compliance/Principal Officer. Compliance/Principal Officer shall be located at the head/corporate office of the Company and shall be responsible for monitoring and reporting of all transactions and sharing of information as required under the law. He shall 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. The Manager appointed under Companies Act shall be the Compliance/ Principal Officer of the Company for this purpose. The Company shall abide by all guidelines, directives, instructions and advices of Reserve Bank of India as shall be in force from time to time. The contents in this document shall be read in conjunction with these guidelines, directives, instructions and advices. The Company shall apply better practice so long as such practice does not conflict with or violate Reserve Bank of India regulations. 14 Annexure - I Customer Identification Procedure Features to be verified and documents that shall be

15 obtained from customers - Indicative Identity Proof / Address Proof / Signature Proof / D.O.B. Proof and Relationship Proof for Individual/s Features Accounts/ Individuals Borrowers Identity Poof Address Proof Signature Proof DOB Proof Identity Proof for Individual/s Address Proof for Individual/s Documents List of documents mentioned below PAN Card Indian Passport Voter Identity Card Driving License (Booklet Form Not Accepted) Job card issued by NREGA duly signed by an officer of the State Government Aadhaar Unique ID Bank passbook with bank stamp & sign on photograph of account holder with latest transaction entry (not older than 90 days) Certificate with photograph of practice issued by professional bodies like ICAI/ICSI/ICWAI/ ICFA can be accepted as ID proof (Provided it has the photo of the member on the certificate) 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. Original letter issued by a gazetted officer, with a duly attested photograph of the person with name (letter not older than 60 days). Original written and attested confirmation from banks regarding identity of the customer, provided this has the across-stamped photograph of the individual (not older than 30 days) Indian Passport PAN Intimation Letter Voter Identity Card Driving License (Booklet Form Not Accepted) Bank account or Post Office savings bank account statement (transactions not older than 90 days) Job card issued by NREGA duly signed by an officer of the State Government Aadhaar Unique ID 15

16 Latest House Tax Receipt Registered / Notarized Rent Agreement with latest electricity / water bill ( Address should be same in both documents) Registered title deed supported by positive FI report Latest Life insurance premium receipt with policy Bond of any insurer (Policy should be minimum 12 months in force) Utility bill which is not more than 60 days old of any service provider (Electricity, Telephone, original post-paid mobile phone, Piped gas, Water bill, latest pre-paid Gas receipt). Original written and attested confirmation from banks regarding the residence of the customer (Not older than 30 days) Signature Proof for Individual/s DOB Proof for Individual/s Relationship Proof Pan Card Indian Passport Driving License (Booklet Form Not Accepted) Original Bankers Verification (not older than 30 days) Copy of any cheque issued in favor of HFCL (Subject to cheque must be cleared) Identity card with applicant's photograph & sign issued by Central/State Government Departments PAN Card Indian Passport Driving License (Booklet Form Not Accepted) LIC policy bond with latest premium paid receipt (Minimum 12 months in force) Birth Certificate/ Corporation Certificate (Should have name mentioned on it) Aadhaar Card with complete date of birth Voter ID card with complete date of birth High school mark sheet / certificate Senior citizen id card issued by Government body Registered marriage Certificate PAN Card Ration Card Indian Passport Voter ID Card Birth Certificate Driving license 16

17 Aadhaar Card 17 Identity Proof / Address Proof for Companies Features Accounts of companies Name of the company Mailing address of the company Legal existence Name of the company Address proof of the company Legal existence Documents List of documents mentioned below PAN Card Registration Certificate GSTIN Registration certificate GST Assessment order Importer / Exporter code certificate Certificate of Incorporation and Memorandum & Articles of Association Utility Bill (Not older than 60 days) Certificate of Incorporation and Memorandum & Articles of Association Bank account statement in the name of company (transactions not older than 90 days) PAN Intimation Letter Tax Identification Number (TIN) Municipality Water Bill Municipality Tax Receipt / Property Tax Receipt GSTIN Registration Certificate Importer / Exporter Code Certificate Certificate of Incorporation / Commencement issued by Registrar of Companies Notarized/Registered rent agreement with utility bill (not older than 60 days) issued to landlord (Communication address should match) Shop and Establishment Certificate PAN Card GSTIN registration Certificate GST Return duly acknowledged by the department with seal and date Importer / Exporter Code Certificate

18 Certificate of Incorporation and Memorandum & Articles of Association Shop and Establishment Certificate Identity Proof / Address Proof for Partnership Firm Features Accounts of partnership firms Legal name Address Names of all partners and their addresses Documents List of documents mentioned below Legal Name Address Names of all partners and their addresses PAN Card Certificate of Registration from registrar of firms in case the firm is registered / Registered Partnership Deed Importer / Exporter Code Certificate Bank account statement in the name of the partnership firm (transactions not older than 90 days) GST Assessment Order Latest Water / Electricity / Municipal tax bill in the name of the firm GSTIN / Registration Certificate GST return duly acknowledged by the department with seal and date Shop and Establishment Certificate Registration certificate issued by registrar of firms with address Registered Partnership Deed Utility bill (Not older than 60 days) Bank account statement in the name of Firm (transactions not older than 90 days) PAN Intimation letter Tax Identification No (TIN) Municipality water bill Municipality tax receipt / property tax receipt GSTIN registration certificate Importer / Exporter code certificate All documents required as in individual category 18

19 Identity Proof / Address Proof for Proprietorship Firm Features Accounts of proprietorship firms Legal name Address Documents List of documents mentioned below 19

20 Proof of the name, address and activity of the concern (Any two of the given documents would suffice. These documents should be in the name of the proprietary concern) 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 GSTIN/ Registration certificate Certificate/registration document issued by Professional Tax authorities GST Assessment order Bank account statement in the name of the firm (transactions not older than 90 days) License issued by the Registering authority like Certificate of Practice issued by Institute of Chartered Accountants of India, Institute of Cost Accountants of India, Institute of Company Secretaries of India, Indian Medical Council, Food and Drug Control Authorities, registration/licensing document issued in the name of the proprietary concern by the Central Government or State Government Authority/ Department, etc. Banks may also accept IEC (Importer Exporter Code) issued to the proprietary concern by the office of DGFT as an identity document for opening of the bank account etc. 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. Utility bills such as electricity, water, and landline telephone bills in the name of the proprietary concern. Note: Separate KYC documents should be collected for individual proprietor. 20

21 Legal Existence Proof / Address Proof for Club / Trust / Society Features Accounts of Club/Trust/Society Legal name Address Documents List of documents mentioned below 21 Legal Name Address Certificate of registration with registrar of Trusts / Charity Commissioner / Societies (Applicable for all public trusts) Trust Deed, Constitutional document of Trust PAN Card /GSTIN / registration certificate GST return duly acknowledged by the Department with seal and date Registration under Shop and Establishment Act IT/ / GST assessment Order Certificate of Tax Exemption (Applicable to Trusts Latest water bill / Electricity/ Municipal Tax bill in the same of the Trust / Society / Club (Not older than 60 days) TDS certificate in the name of entity issued by Scheduled Commercial Banks, FI & FIIs, MFs, PSUs (Central & State), Govt. Department, Local Self Government (Municipal Corporation etc.) and Government Bodies Certificate of registration with registrar of Trusts / Charity Commissioner / Societies (Applicable for all public trusts) Registered Trust Deed Certificate of Tax Exemption (Applicable to Trusts PAN intimation letter Latest water bill / Electricity/ Municipal Tax bill in the name of the Trust / Society / Club (Not older than 60 days) Passbook / Account Statement of bank except Non-Scheduled Co-op. banks. The account should be active and operative account (transactions not older than 90 days)

22 GSTIN registration certificate Registration under Shop and Establishment Act Importer / Exporter code certificate Registered / Notarized rent agreement with utility bill (not older than 60 days) issued to landlord (communication address should match) Tax Identification No. (TIN) Legal Existence Proof / Address Proof for HUF Accounts of HUF firms Legal name Address Features Documents List of documents mentioned below Legal Name PAN Card Photo ID proof of the Karta from the list provided under Individual category. Address PAN intimation letter Utility bill in the name of firm (Not older than 60 days) Bank statement in the name of firm (transactions not older than 60 days) Latest water bill / Electricity/ Municipal Tax bill in the name of firm. Registered / Notarized Rent Agreement with latest electricity / water bill ( Address should be same in both documents) Ownership proof Electricity Bill Water Bill Latest House Tax receipt Sale Deed copy along with positive FI 22

23 Guidelines for collection of application forms & KYCs i. Duly completed application forms signed by the applicants/guarantor ii. Cross sign on all Individual applicants/guarantors photograph iii. Latest passport size colored photograph of all applicants and guarantors iv. Any corrections/overwriting on the application form should be countersigned by the respective applicants v. In some of cases, wherein the relationship between applicant and co-applicant & guarantor is not clearly established & they are blood relatives, HFCL may take a declaration on HFCL approved format from the applicant regarding the same. Declaration should be stamped as per the applicable stamp law vi. All documents provided by the customer should be sighted in original and verified by the sales executive, DSA or Digital Channel. OSV (Original seen & verified) stamp to be affixed along with name, signature & employee id (if HFCL employee) of the verifier. Bio-metric check can also be considered in lieu of OSV vii. All documents should be self-attested by the respective applicants/guarantor. viii. Requirement of fresh KYC and income documents from an existing customer would be at sole discretion of HFCL ix. Aadhaar card / E-Aadhaar to be taken as a mandatory KYC document x. GSTIN Registration certificate to be taken as a mandatory KYC document xi. Ration card not to be accepted as address proof xii. Expired KYC document at the time of Disbursement will not be considered as valid KYC document xiii. If company/firm registered & current address is different than valid address proof of both addresses would be required xiv. If property is on rent then we can t consider the property papers as valid address proof xv. If customer is depositing BSV / Gazetted officer letter / Banker letter then original letter would be considered as valid KYC document Dual Name Affidavit: There are cases, where there are mismatches in the names on the application form and the identity proof due to A. Mistake occurred/committed by the issuing authority of the ID proof B. Change of surname after marriage C. Same individual having different name mentioned in application form and KYC documents submitted (usage of title) D. Elaboration of initials detailing applicant s first/ middle name & surname. In such scenario, the declaration for dual name should be obtained on stamp paper with applicable stamp duty. The declaration should be in HFCL format only. Dual Signature Affidavit: In case, where customer has two different signatures on two different documents (as per the list given above under signature proof doc) then in such cases, one of the signatures should match with the signature on application form & other loan documents. A dual sign affidavit should be obtained on stamp paper with applicable stamp duty. The declaration should be in HFCL format only. No signature proof affidavit: 23

24 This Affidavit can be taken in case any co-applicant / Guarantor does not have any kind of Signature proof provided- 1. He / She is not primary Applicant 2. His / Her income is not considered while giving loan facility The declaration should be in HFCL format only. Dual Date of Birth Affidavit: In case, where customer has two different date of birth on two different documents (as per the list given above under DOB proof doc) then in such cases, one of the DOB should match with mentioned DOB on application form & same DOB should be captured on system. A dual DOB affidavit should be obtained on stamp paper with applicable stamp duty. The declaration should be in HFCL format only. Relationship Proof Affidavit: In case, where co-borrower doesn t have address proof (as per the list given above under address proof docs) & relationship proof also (as per list given above under relationship proof docs) and submitted document is in the name of a relative (father/ mother/ spouse/ blood relative), it may be accepted subject to submission of a declaration from the relative that the applicant is a relative and is staying with him/ her. The declaration should be in HFCL format only. # Stamp paper for all above mentioned affidavits should be purchased in the name of declaring person only & affidavit should be notarized. Stamp duty will be applicable as per state law. * Notwithstanding the list of documents as stated above, in case of change, if any, in the regulations as notifies by RBI from time to time, the list of documents as prescribed by RBI shall prevail over the above. ** In case of proprietary concern, the documents shall be in the name of the concern. Note: 1. All the applicants shall have valid ID proof as prescribed above. 2. Simplified measures may be applied in the case of Low risk customers taking into consideration the type of customer, business relationship, nature and value of transactions based on the overall money laundering and terrorist financing risks involved. In respect of low risk category of customers, where simplified measures are applied, it would be sufficient to obtain any of the documents mentioned below for the purpose of A. Proof of identity - i) 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 ii) letter issued by a gazetted officer, with a duly attested photograph of the person B. Proof of address - The following documents shall be deemed to be officially valid documents for low risk customers for the limited purpose of proof of address where customers are unable to produce any officially valid document for the same: 24