OVERVIEW AND REGULATORY FRAME WORK

Transcription

1 Annexure 2 Annexure 2 OVERVIEW AND REGULATORY FRAME WORK In India, there had been laws and regulations for quite some time to address certain aspects of money laundering prevention, like Criminal Law Amendment Ordinance 1944 for attachment of proceeds of certain crimes or Reserve Bank of India (RBI) instructions regarding identification requirements for opening of the bank/fi accounts. However, a consolidated anti-money laundering specific legislation, Prevention of Money Laundering Act, 2002 (PMLA), came in to effect with the Government of India Gazette notification on 1st July What is Money Laundering? As per the Prevention of Money Laundering Act 2002, the offence of Money Laundering is defined as: 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. "proceeds of crime" means any property derived or obtained, directly or indirectly, by any person as a result of criminal activity relating to a scheduled offence or the value of any such property. Money laundering is the process by which criminals attempt to hide and disguise the true origin and ownership of the proceeds of their criminal activities, thereby avoiding prosecution, conviction and confiscation of the criminal funds. The proceeds of crime laundered by criminals often are generated in very heinous crimes like drug trafficking, trafficking in women and children, child pornography, extortion, murder, etc. Money Laundering Prevention, therefore, is not only a statutory or regulatory requirement but also a moral responsibility for all the bank/fi s employees as any facilitation of money laundering indirectly supports these criminal activities. Terrorist Financing Terrorists use similar methods as Money Launderers for moving their funds. Some of the terrorist groups also indulge in criminal activities for generating funds for their activities and some of them are even known to have strong relationships with criminal gangs. The two major differences between terrorist financing and money laundering are: Terrorist funding can happen from legitimately obtained income whereas the source of money in money laundering is always from illegal source, and More often terrorist activities require small amounts and hence it is increasingly difficult to identify terrorist funding transactions.

2 KYC, AML and CFT Principles of BTCXINDIA Principles Senior management of a BTCXINDIA fully committed to establishing appropriate policies and procedures for the prevention of money laundering and terrorist financing and ensuring their effectiveness and compliance with all relevant legal and regulatory requirements. The BTCXINDIA will: Regularly review the policies and procedures on the prevention of money laundering and terrorist financing to ensure their effectiveness. Further, in order to ensure the effectiveness of policies and procedures, the person doing such a review should be different from the one who has framed such policies and procedures; Adopt client acceptance policies and procedures which are sensitive to the risk of money laundering & terrorist financing and also client due diligence measures, including requirements for proper identification; Undertake client due diligence ( CDD ) measures to an extent that is sensitive to the risk of money laundering and terrorist financing depending on the type of client, business relationship or transaction; Develop staff members awareness and vigilance to guard against money laundering and terrorist financing and Communication of group policies relating to prevention of money laundering and terrorist financing to all management and relevant staff that handle account information, securities transactions, money and client records etc. whether in Regd office or franchisees; Maintenance of records; Co-operation with the relevant law enforcement authorities, including the timely disclosure of information; Role of internal audit or compliance function to ensure compliance with the policies, procedures, and controls relating to the prevention of money laundering and terrorist financing, including the testing of the system for detecting suspected money laundering transactions, evaluating and checking the adequacy of exception reports generated on large and/or irregular transactions, the quality of reporting of suspicious transactions and the level of awareness of front line staff, of their responsibilities in this regard. Note: In this draft, client and/or customer as being interchangeable.

3 Know Your Customer (KYC) policies framed by BTCXINDIA Know Your Customer (KYC) Guidelines -Anti Money Laundering (AML) Standards - RBI Circular dated November 29, 2004.Based on these guidelines, BTCXINDIA has framed self regulated KYC policies as par with banks/fi KYC policies. 'Customer' has been defined as: o o o A person has a business relationship with the BTCXINDIA An entity (proprietary, partnership, Pvt limited, limited, Corporation, HUF and Society) has a business relationship with the BTCXINDIA A person or an entity has a business relationship with the partner of BTCXINDIA BTCXINDIA has framed self regulated guidelines to prevent money laundering through: KYC policies and procedures specifying the objective of KYC framework, i.e. appropriate customer identification. The KYC policies should incorporate the following four key elements: o o o o Customer Acceptance Policy Customer identification procedures Monitoring of transactions Risk Management Customer Acceptance Policy BTCXINDIA has developed a clear Customer Acceptance Policy laying down explicit criteria for acceptance of customers. The usual elements of this policy should include the following. BTCXINDIA, for example, should not open an account in anonymous or fictitious/ benami name(s). Nor should any account be opened where the BTCXINDIA due diligence exercises relating to identity has not been carried out. KYC officer o fbtcxindia has to ensure that the identity of the new or existing customers does not match with any person with known criminal background. If a customer wants to act on behalf of another, the reasons for the same must be looked into. The adoption of customer acceptance policy and its implementation is strictly following due to unregulated sector.

4 Customer Identification Procedures Customer identification means identifying the customer and verifying his/her identity by using reliable, independent source documents, data or information. For individual customers, BTCXINDIA will obtain sufficient identification data to verify the identity of the customer, his address, his PAN Number and a recent photograph. For customers who are legal persons, BTCXINDIA will scrutinize their legal status through relevant documents, examine the ownership structures and determine the natural persons who control the entity. Monitoring of Transactions Ongoing monitoring is an essential element of effective KYC procedures. BTCXINDIA have effectively control and reduce our risk by an understanding of the normal and reasonable activity of the customer so that they have the means of identifying the transactions that fall outside the regular pattern of activity. BTCXINDIA pays special attention to all complex, unusually large transactions and all unusual patterns which have no apparent economic or visible lawful purpose. BTCXINDIA has prescribed threshold limits for a particular category of accounts and pay particular attention to the transactions which exceed these limits. BTCXINDIA ensures that any withdrawal of funds(inr) to the customers and deposit of the funds( INR) to ours by way of bank transfer through IMPS/Neft/RTGS. Risk Management BTCXINDIA is in consultation with our boards, devise procedures for creating risk profiles of our existing and new customers and apply various anti-money laundering measures keeping in view the risks involved in a transaction, account or banking/ business relationship. BTCXINDIA prepares a profile for each new customer based on risk categorization. The customer profile may contain information relating to customer's identity, social/ financial status, nature of business activity, information about his clients' business and their location etc. Customers may be categorised into low, medium and high risk. For example, individuals (other than high net worth individuals) and entities whose identities and sources of wealth can be easily identified and transactions in whose accounts by and large conform to the known transaction profile of that kind of customers may be categorised as low risk. Salaried employees, government owned companies, regulators etc fall in this category. For this category of customers, it is sufficient to meet just the basic requirements of verifying identity.

5 Wire Transfers Money is transferred between company and customer accounts through wire( net banking) transfers. It s allowed within the country (India) For wire transfers, BTCXINDIA has stipulated the following: Information accompanying all domestic wire transfers and must include complete originator information i.e. name, address and account number etc., unless full originator information can be made available to the beneficiary bank by other means. If a BTCXINDIA has reason to believe that a customer is intentionally structuring wire transfer with small denominations to several transactions in order to avoid reporting or monitoring, the BTCXINDIA will insist on complete customer identification before effecting the transfer. In case of no cooperation from the customer, efforts should be made to block the customer to do transaction. BTCXIndia will allowed only INR denomination net transfers through IMPS/NEFT/ RTGS and BTCXIndia doesn t allowed cross border transactions. Customer Identity and Due Diligence Identity generally means a set of attributes which together uniquely identify a natural or legal person. The attributes, which help establishing the unique identity of a natural or legal person, are called 'identifiers'. Name (in full) Father' Name Date of birth/ Date of Incorporation PAN number, CIN etc are unique identifiers available which help establishing the identity of a natural or legal person. These are termed as 'primary identifiers' as they help in uniquely establishing the identity of a natural or legal person. Addresses / location and nationality and other such identifiers may serve as secondary identifiers' as they help further refine the identity though they may not directly help uniquely identify a natural or legal person. Customer Due Diligence (CDD) has been defined as any measure undertaken by a BTCXINDIA to collect and verify information and positively establish the identity of a customer.

6 Client Registration Client registration formalities are to be completed, before commencing Bitcoin transactions with a client. Depending on the nature of client status there are minor changes in documentation. The following are the mandatory documents for the clients in BTCXIndia: KYC Form ( Annexure 1) This includes complete details of Client information / Status, Bank and Bitcoin wallet Account details, Financial details of the the client, Investment/ Trading experience, References, ROC documents (for Non Individual Constituents) and Signature of client/authorized person. Photograph of the client/authorized person, Proof of identity and address, and Board Resolution for non individuals permitting transacting Bitcoins in BTCXIndia. Name and address of the applicant mentioned in the KYC form has to match with the documentation provided. Sole proprietor must make the application in his individual name & capacity. The segments in which a client wants to transact are selected and marked by the client clearly. Terms and Conditions As part of the T&C, the client is made aware that certain basic risks are involved in trading in Bitcoins. Client acknowledgement has to be taken on terms and conditions. Some of the documentation requirements, applicable to both individual and institutional clients, are as follows: A. Proof of Identity (POI): - List of documents admissible as Proof of Identity: 1. Unique Identification Number (UID) (Aadhaar)/ Passport/ Voter ID card/ Driving license. 2. PAN card with photograph. 3. Identity card/ document with applicant s Photo, issued by any of the following: Central/State Government and its Departments, Statutory/Regulatory Authorities, Public Sector Undertakings, Scheduled Commercial Banks, Public Financial Institutions, Colleges affiliated to Universities, Professional Bodies such as ICAI, ICWAI, ICSI, Bar Council etc., to their Members; and Credit cards/debit cards issued by Banks.

7 If any proof of identity or address is in a foreign language, then translation into English is required. B. Proof of Address (POA):- List of documents admissible as Proof of Address: (*Documents having an expiry date should be valid on the date of submission.) 1. Passport/ Voters Identity Card/ Ration Card/ Registered Lease or Sale Agreement of Residence/ Driving License/ Flat Maintenance bill/ Insurance Copy. 2. Utility bills like Telephone Bill (only land line), Electricity bill or Gas bill - Not more than 3 months old. 3. Bank Account Statement/Passbook -- Not more than 3 months old. 4. Self-declaration by High Court and Supreme Court judges, giving the new address in respect of their own accounts. 5. Proof of address issued by any of the following: Bank Managers of Scheduled Commercial Banks/Scheduled Co-Operative Bank/Multinational Foreign Banks/ Gazetted Officer/Notary public/elected representatives to the Legislative Assembly/ Parliament/Documents issued by any Govt. or Statutory Authority. 6. Identity card/document with address, issued by any of the following: Central/ State Government and its Departments, Statutory/Regulatory Authorities, Public Sector Undertakings, Scheduled Commercial Banks, Public Financial Institutions, Colleges affiliated to Universities and Professional Bodies such as ICAI, ICWAI, ICSI, Bar Council etc., to their Members. C. PAN Card: - Permanent Account Number (PAN) is mandatory for all entities/ persons who wish to transact in the Bitcoin trading. It is the sole identification number for all participants transacting in the Bitcoin/crypto trading, irrespective of the amount of transaction. PAN may not be insisted in the case of Bitcoin transactions undertaken on behalf of Central Government and State Government, and by the officials appointed by the courts e.g. Official liquidator, Court receiver etc. (under the category of Government). In the case of institutional clients, the Custodian/Notary agent has to verify the PAN details and provide the verified details, duly certified. Institutional clients include FIs, Mutual Funds (MFs), Venture Capital Funds (VCFs), Scheduled Commercial Banks, Multilateral and

8 Bilateral Development Financial Institutions, State Industrial Development Corporations, Insurance Companies registered with Insurance Regulatory & Development Authority (IRDA) and Public Financial Institution as defined under section 4A of the Companies Act, In the case of Hindu Undivided Family (HUF), Association of Persons (AoP), Partnership Firm, unregistered Trust etc., beneficiary ownership would be in the name of natural persons. PAN of the respective HUF, AoP, Partnership Firm, Unregistered Trust, etc is to be obtained. For Registered Trust and Corporate Bodies, PAN of the respective entities is to be obtained when accounts are opened in their respective names. BTCXIndia following the procedural requirements regarding verification of PAN: Collect self-attested copies of PAN cards issued by the Income Tax Department to existing as well as new clients. Maintain the same in the records after verifying with the original. Cross-check the PAN details collected from the clients with the details on the website of the Income Tax Department i.e. enterpanforchallan.jsp. Upload details of PAN to the Exchange as part of unique client Code. Additional Requirements for non-individuals The list of acceptable documents for different categories of non-individuals D. In case of Non-Individuals, additional documents to be obtained from nonindividuals, over & above the POI & POA, as mentioned below: Types of entity Documentary requirements Corporate Copy of latest share holding pattern including list of all those holding control, either directly or indirectly, in the company in terms of SEBI takeover Regulations, duly certified by the company secretary/whole time director/md (to be submitted every year). Photograph, POI, POA, PAN and DIN numbers of whole time directors/two directors in charge of day to day operations. Photograph, POI, POA, PAN of individual promoters holding control - either directly or indirectly. Copies of the Memorandum and Articles of Association and certificate of incorporation. Copy of the Board Resolution for investment in securities

9 market. Authorised signatories list with specimen signatures. Partnership Copy of the balance sheets for the last 2 financial years (to be firm submitted every year). Certificate of registration (for registered partnership firms only). Copy of partnership deed. Authorised signatories list with specimen Types of entity Documentary requirements Trust signatures. Photograph, POI, POA, PAN of Partners. Certificate of registration (for registered trust only). Copy of Trust deed. List of trustees certified by managing trustees/ca. Photograph, POI, POA, PAN of Trustees. HUF PAN of HUF. Deed of declaration of HUF/ List of coparceners. Bank pass-book/bank statement in the name of HUF. Photograph, POI, POA, PAN of Karta. E. Unique Client Code BTCXIndia mandates to use a Unique Client Code for each client. The trading member has to verify the documents with respect to the unique code and retain a copy of the document. Changes in Client Information Change of Address In the case of individuals, the following documents are required: Application for change of address To be signed by the client. Proof of address for the new address Proof of identity of the holder visiting the office of the BTCXIndia with the application for address change. Non-individuals need to comply with the following: Application for change, signed by authorised signatories Proof of address for the new address Proof of identity of the signatory visiting the office of the intermediary with the application for address change. If the holder / authorised signatory cannot personally visit, then an authorised

10 representative can visit, along with proof of identity of the representative. After the change, intimation is to be sent to both, the new address and the old address. Change in Bank Details Application for change should be given by the signatory / signatories along with a bank account proof. Change in Signatory This normally happens for non-individuals. Application for change should be given by the signatory / signatories along with photograph and specimen signature of the new signatory. Changes would need to be backed by Resolution of the Board of Directors / Trustees. Designated Individuals & Entities An updated list of individuals and entities which are subject to various sanction measures such as freezing of assets/accounts, denial of financial services etc., as approved by the Security Council Committee established pursuant to various United Nations Security Council Resolutions can be accessed at its website athttp:// consolist.shtml. Registered intermediaries are required to ensure that accounts are not opened in the name of anyone whose name appears in said list. BTCXIndia continuously 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. Record Keeping BTCXINDIA will maintain such records as are sufficient to permit reconstruction of individual transactions (including the amounts and types BTC or INR, if any) so as to provide, if necessary, evidence for prosecution of criminal behavior. BTCXINDIA s Obligation of Secrecy The BTCXINDIA has an obligation to maintain secrecy of the details of the account-holder, not only when he has a relationship with the BTCXINDIA, but also after the account is closed. This right of the customer to expect secrecy is limited in the following situations: Disclosure under Law Various legislations impose an obligation on the BTCXINDIA to disclose details of the customer. These legislations prevail over the customer s right to secrecy. The legislations include:

11 Income Tax Act, 1961 Companies Act, 1956 Reserve Bank of India Act, 1934 Foreign Exchange Management Act, 1999 The anti-money laundering legislations have increased the responsibility on the BTCXINDIA to disclose information about their customer, even without informing the customer about the information being shared. Disclosure based on customer s consent The customer may authorize the BTCXINDIA to share its view on the customer s BTCXINDIA affairs with the customer s customer. He may also authorize the BTCXINDIA to issue a certificate on the balance held in his wallet/ account on a particular day or during a period. The consent of the customer to disclosure of his information may be express, or implied by the circumstances. Disclosure with Business Correspondent / Business Facilitator (BC/BF) The nature of their role makes it necessary to share customer information. Here again, BTCXINDIA will take the precaution of getting a sign off from the customer for the sharing of information, in their standard documentation. Disclosure in BTCXINDIA s Interest There are situations when the BTCXINDIA has to disclose information in order to protect the BTCXINDIA s own interest. For example, sharing information with a lawyer in order to fight a case; or with a guarantor in order to invoke a guarantee, where the customer has defaulted. Even when the information is shared on the above grounds, BTCXINDIA will take certain precautions. They restrict the sharing information to facts. Opinions are subjective and can expose the BTCXINDIA to huge damages. They mention the obligation of secrecy and the grounds on which the information is being made available to the other person and re-iterate that the receiver of the information needs to respect the customer s right to secrecy.

12 INSTRUCTIONS/CHECK LIST FOR FILLING KYC FORM 1. PAN card is mandatory for all clients, including Promoters/ Partners/Karta/Trustees and whole time directors and persons authorized to deal in securities on behalf of company/firm/others. 2. Copies of all the documents submitted by the applicant should be self-attested and accompanied by originals for verification. In case the original of any document is not produced for verification, then the copies should be properly attested by entities authorized for attesting the documents, as per the below mentioned list. 3. If any proof of identity or address is in a native/mother language, then translation into English is required. 4. Name & address of the applicant mentioned on the KYC form, should match with the documentary proof submitted. 5. If correspondence & permanent address are different, then proofs for both have to be submitted. 6. Sole proprietor must make the application in his individual name & capacity.

13 Annexure 1 For Individual Passport Size Photo

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15 For Non-Individual A. Company Details Authorised Person Photo 1. Name of Company : Dreamajax Technologies Pvt Ltd 2. a. Date of Incorporation : b. Place of Incorporation : Bangalore 3. a. Subsidiary (if applicable) : 4. a. PAN : AACCD8766B b. Registration no (CIN) : U72900KA2008PTC Status : Pvt Ltd 6. Address for correspondence : No. 40, Level 2, East Lokamanya Street, R S Puram, Coimbatore State : TAMILNADU Country : India Pin : Contact Details: Tel (office) : Mobile : info@dreamajax.com FAX : B. Identity Details of Director/Authorized person 1. Name of the Authorized Person : Ram Kumar R Date of Birth : 14/05/1982 PAN : AHQPR4801D DIN( if applicable) : C. Verifications submitted 1. Incorporation Certificate : 2. MOA 3. AOA : : 4.Proof of address (If not the same as registered address) : 5. Authorized person ID proof : 6. Authorized person address Proof : P 1

16 D. Bank Account Details Bank Name : ICICI Bank Ltd Bank Branch : R S Puram Bank Account No : A/C Type : Current Account IFSC : ICIC E. Other Details 1. Gross Annual Income Range : Laks 2. Nature of Business : IT Declaration I hereby declare that the above details are true and correct to the best of my knowledge. Signature of the Authorized person with seal Date : Client Code allotted: BTCX4005 For office use only Documents verified by Client Interview by In person verified by Name of the Employee Employee Code Designation of the Employee Date Signature ( ) Self certified copies verified Signature of the authorized signature Seal/Stamp P 2

17 [To be executed on Company s letterhead] Certified copy of the resolution passed at the meeting of the Board of Directors of ( company name ) held on _( Date ) at its registered office ( address ) RESOLVED THAT the company do avail the BTCXIndia s Bitcoin exchange Service for the accounts opened / to be opened with BTCXIndia at their online platform and the company accepted all terms and conditions of BTCXIndia and further do accept such terms, regulations, conditions, stipulations laid down by BTCXIndia from time to time for the purpose. Copy of the existing Terms and Conditions is placed by BTCXIndia on its website. Modification of such Rules placed by BTCXIndia on its website is sufficient and valid notice to the company. RESOLVED FURTHER THAT the following official be hereby authorized to accept sign, execute, deliver and complete all documentation, agreements, accounts opening forms and accept and abide by the modifications and / or variations in any or all the terms and conditions from time to time and, in order to apply for and avail and operate the Bitcoin exchange service facility provided by the BTCXIndia. Shri ( Initiator /Approver /Director / Senior executive ) Any change in the above mandate shall be by a fresh resolution passed by company s Board and by intimating the same to BTCXIndia. RESOLVED FURTHER THAT BTCXIndia be and hereby authorized to accept all instructions given or initiated through the Bitcoin exchange service Corporate either singly or jointly from all or any of the above instructions by the above signatories in the manner provided here in above. FURTHER RESOLVED THAT a copy of this resolution be and hereby be submitted to BTCXIndia duly certified by company secretary of the company. For Director For Director

18 Contact For queries /grievances on KYC/AML and Compliance Mr. Sudagoni Suresh Kumar KYC/AML officer Dno:1-55/6A/184/MH/101, SAI PRITHVI ENCLAVE, KALAJYOTHI PRINTERS ROAD, KONDAPUR, HYDERABAD BTCXINDIA, A division of S capital Solutions Pvt Ltd, Dno:1-55/6A/184/MH/101, SAI PRITHVI ENCLAVE, KALAJYOTHI PRINTERS ROAD, KONDAPUR, HYDERABAD