KYC Norms & AML Standards Guidelines Group Members:- Sajala Maharjan Aditya Shrestha Ankur Goel Gaurav Prasad Gaur Ashish Bhatta

Introduction KYC : Know Your Customer PURPOSE : To Identify the Clients WHERE IT IS USED : Bank and other financial institutions. WHY IT IS USED : - Monitor the financial transactions - Risk Management - Customer Identification

KYC Policy’s Key Elements Customer Acceptance Policy Customer Identification Procedure Monitoring of Transaction Risk Management

Customer Identification Policy Every bank should develop a Customer identification policy laying down explicit criteria for acceptance of customer. No account is opened in anonymous or factious / benami name parameters are clearly defined in terms of nature of business Documentation requirement and other information to collect in respect of different customer depending of risk. Circumstances in which customer is permitted to act on behalf of another person should be clearly defined. Banks should prepare profile for each new customer based on risk categorization profile may contain information relating to customer identity, social/financial status.

Risk categorization EX :- salaried employees and people belonging to lower economic strata Non resident customers High net worth individuals Trusts, charities , NGOS and organization receiving donation Companies having close family , shareholding or beneficial relationship Firms with sleeping partners Politically exposed person of foreign origins Non face to face customers Those with dubious reputation as per public info available

Customer Identification Procedure Legal name and any other name used Correct permanent address Accounts of individuals Name of company Principal place of business Mailing address of company Telephone , fax no Accounts of company Legal name Address Name of all partners and their address Telephone no of firms and partners Accounts of partnership firms

Customer Identification Requirement Trustee/ nominee of fiduciary A/c Accounts of companies and firms Client A/c opened by professional intermediaries Accounts of politically exposed person Accounts of non face to face customers Accounts of proprietary concerns Accounts of salaried employees Accounts for foreign students studying in India Walk in customers Accounts of foreign portfolio Investors

Monitoring of Transactions Extend of monitoring will depend on risk sensitivity of account. Risk involved in cash intensive business High risk associated accounts or suspicious accounts Updation of risk category Risk Management BOD must ensure appropriate procedure which cover proper management oversight, system and controls, segregation of duties and other related matters Banks internal audit and compliance. National Money laundering / financing of terror assessment committee

Money Laundering Money laundering is the practice of engaging in financial transactions in order to conceal the identity, source, and/or destination of money, and is a main operation of the underground economy. Another Definition Money laundering is a process whereby the origin of funds generated by illegal means is concealed (drug trafficking, gun smuggling, corruption, etc.)  

Typologies/ Techniques Employed Deposit structuring Connected Accounts Payable Through Accounts Investment Banking and the Securities Sector Insurance and Personal Investment Products Companies Trading and Business Activity Correspondent Banking Lawyers, Accountants & other Intermediaries Misuse of Non-Profit Organizations.

Monitoring of Transactions Ongoing monitoring is an essential element of effective KYC procedures Bank should pay special attention to all complex transactions and unusual pattern Large amount of inconsistent cash should attract the attention of the bank Key indicators should be set by every bank for very high account turnover inconsistent with the size of balance Categorization of customer should be carried out periodically not less than 6 months High risk associated accounts should be taken into account by banks to identify and report in Suspicious Transaction Report

Closure of Account All accounts should be subject to minimum KYC standard to establish the identity of the natural/ legal person and the beneficiary person. When bank is not able to apply KYC measures due to no- furnishing of information by the customer, the account should be terminated after issuing the show cause notice to the customer

Introduction of New Technologies Special attention to money laundering threats from new or developing technologies. Banks engaged in issuing of electronic cards should fully comply with KYC/AML/CFT guidelines Banks should ensure that appropriate KYC procedures are duly applied before issuing the cards to the customers.

Wire Transfer Wire transfer is a transaction carried out on behalf of an originator person through the bank by electronic means to make amount available to a beneficiary person to the bank Cross border transfer Domestic wire transfer Cross border transaction must contain name and address of the originator Record should be maintained for cross border transactions above Rs 5 lakhs as per PML Rules Domestic transfer of Rs fifty thousand and above must include all the information of the originator Necessary information should be included in the making of payment through debit card or credit card Inter bank transfer and settlement should be excluded from above.

Parties Involved in Wire Transfer Ordering Bank Intermediary Bank Beneficiary Bank

Authorized Persons for KYC/AML Principal Officer Designated Director

Requirements for an Effective KYC Implementation Maintenance of Records of Transaction Information to be Maintained Maintenance & Preservation of Records Reporting to FIU-IND

Reporting Formats Cash Transaction Report (CTR) Summary Electronic File Transfer- CTR Suspicious Transaction Report (STR) Electronic File Transfer- STR Counterfeit Currency Report (CCR) Electronic File Transfer- CCR Non-Profit Org. Transaction Report (NTR)

Role of Financial Institutions Customer Education Employee’s Training Employees Hiring