2. TRADE FINANCE & BANKING An Introduction to Banking BRANCH BANKING OPERATIONS

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4. Banking Operations Zahid Husain MBA;MA;LL.B Certification in Islamic Banking Deputy General Manager -HBL Banking Operations Zahid Husain MBA;MA;LL.B Certification in Islamic Banking Deputy General Manager -HBL

5. After completing the program, participants are expected to understand: LEARNING OBJECTIVES The account opening process for various types of customers. - Personal Checks - Banker Checks - Crossing and endorsements, process of collecting and paying Processing & settlement of money transfers.

6. Account Opening And Operations Learning & Development Account Opening And Operations Learning & Development

7. Basic Considerations in Account Opening & Its Operations The account is opened in the name of the beneficial owner only and is operated by him or under his validly delegated authority. The account must be operated for legal & lawful purposes. Specifically, the account must not be used for laundering money or for supporting illegal business activities. 1

8. The Account Opening Risk Model Contractual Relationship Bank Authority Customer Identity Risks DocumentsInstructions 2

9. The Account Opening Process Model Request Customer Banker Documents Deposit Cash Request for Cheque Book Issue Cheque Book Establish Identity & Authority Process Documents Meet Customer Account Opened Send Letter of Thanks 3

10. Account Opening Form – The Basic Document General Information Customer(s) Request Terms & Conditions Account Title Account Type Customer Type Currency HBL – Branch Details of other Accounts Identity Information Beneficial Owner(s) Address & Contacts Nationality Residence Country CNIC / Passport No Profession/Institution Next of Kin Authority Information Operational Instructions Zakat Deduction Instruction (Affidavit) Other Instruction(s) AOF must be signed by the account holder or competent person in the presence of the Bank’s representative. Operational instructions are also obtained on Specimen Signature Card signed by the account holder and authorised Person(s) 4

11. Classifications of Accounts Single Joint Individuals with Infirm Signatures Illiterate Minor Senior citiz en Non-resident Single Joint Individuals with Infirm Signatures Illiterate Minor Senior citiz en Non-resident Personal Proprietorship Partnership Limited Company Trust Club & Association Proprietorship Partnership Limited Company Trust Club & Association Organisational Current Saving Term Current Saving Term Product Type 5

12. Common Documents for Account Opening 6

13. Additional Documents for Account Opening 7

14. Account TypeDocumentsPurpose Limited Companies Certificate of incorporation Establishing “Legal Entity” of the company Memorandum of association Ensuring company name Knowing purpose & scope of business Articles of association Knowing Powers of the directors Knowing internal operating rules & regulations List of directors with signatures and photocopy of CNIC attested by company secretary or chief executive Establishing identity of directors Board Resolution regarding opening and operation of the account Establishing legal identity of the account in the name of the company and authority to operate the account Certificate of Commencement of Business Ensuring Legality of business operations Additional Documents for Account Opening 8

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16. Payment & Settlement Learning & Development Payment & Settlement Learning & Development

17. The Payment & Settlement Process Beneficiary’s Bank Processes Check Clearing House Beneficiary Beneficiary’s Bank Claims Settlement for Payment to be made 1

18. COLLECTION SETTLEMENT PAYMENT INSTRUMENT PROCESSING PHASES IN PAYMENT & SETTLEMENT PROCESS 2

19. 4 Payment Concept Model Banker Beneficiary Pays Cash at Counter Presents Payment Instrument Credit Accounts

20. 5 Payment Laws Holder in due Course Any person who for consideration becomes the possessor of an instrument before it becomes overdue and without knowledge of any defect in the previous title. Holder in due Course Any person who for consideration becomes the possessor of an instrument before it becomes overdue and without knowledge of any defect in the previous title. Payment in due Course Payment in accordance with: Apparent Tenor In Good Faith Without Negligence To Holder in Due Course Protection to paying banker available only if payment made is “Payment in due course”. Otherwise, the banker will have to bear the loss Payment in due Course Payment in accordance with: Apparent Tenor In Good Faith Without Negligence To Holder in Due Course Protection to paying banker available only if payment made is “Payment in due course”. Otherwise, the banker will have to bear the loss

21. An unconditional order in writing by one person to another person who is the banker signed by the person giving it, requiring the banker to pay on demand a certain sum of money to the specified person or the bearer. CHECK 6

22. PARTIES TO A CHECK 7

23. Adil Ahmed Ten Thousand Only 10,000/- April 3, 2009 1 1 2 2 7 7 5 5 4 4 6 6 REQUISITES OF CHECK 1.Instrument in writing 2.Drawn on specified banker 3.Pay on demand 4.To specified person or bearer 5.Signed by the drawer 6.Unconditional Order 7.Certain sum of money 8.Date 8 8 8 Muhammad Anwar

24. Kainat Mirza Ten Thousand Only 10,000/- July 23, 2011 CHECK 8 Muhammad Anwar

25. BANKERS CHECKS PAY ORDERS DEMAND DRAFTS TRAVELLER S CHECKS PERSONAL CHECKS OPEN CHECK ORDER CHECK BEARER CHECKS CROSSED CHECK GENERAL CROSSING SPECIAL CROSSING TYPES OF CHECKS 9

26. CROSSED CHEQUE Where a check bears across its face two parallel lines is classified as crossed check. A crossed check should not be paid at the counter. The proceeds should be disposed off as per the instructions of the crossing 10

27. Types of Crossings 11 GENERALGENERAL GENERALGENERAL GENERALGENERAL GENERALGENERAL GENERALGENERAL GENERALGENERAL SPECIALSPECIAL SPECIALSPECIAL Account Payee Payee Account Only Not Negotiable And Company & Company Habib Bank Ltd HBL - Karachi HBL- Nazimabad Branch.-Karachi

28. 12 4. Restricted 3. Conditional 5. Partial 1. Blank 2. Full An instruction on the back of the check through which the holder transfers the title to the instrument to another person Endorsement Further Indorsement is Restricted Transferee is not mentioned. Indorsement makes the instrument bearer Transferee is mentioned. He can further endorse Transfer of title is Contingent to an Event Title is transferred to two or more Indorsees. Negotiation not Possible

29. 13 Who Can Endorse ? PayeeIndorser Individual - Payee - Endorsee - Holder Joint Individuals - All Payees (Individually) - One of them under authority from rest Sole proprietorship - Sole proprietor as the owner Partnership - Authorized partner on behalf of the Partnership Joint Stock Company -Individual authorized under a resolution of the Board

30. NIFT Clearing Process NIFT CLEARING AND SETTLEMENT NIFT CLEARING AND SETTLEMENT HBL Branch A HBL Branch A Check Cleared Cleared check to Paying Branch Check for Collection HBL Branch B Other Bank Cleared check to Paying Branch Check for Collection 18

31. 19 NIFT Settlement of Accounting and Cash Positions NIFT Clearing and Settlement NIFT Clearing and Settlement HBL CENTRAL PROCESSING UNIT HBL CENTRAL PROCESSING UNIT STATE BANK 1 1 2 2 3 3 4 4 HBL REGIONS SETTLEMENT CASH & ACCOUNTING POSITIONS 1 1 2 2 3 3 4 4 OTHER BANKS HBL REGIONS SETTLEMENT OF CASH POSITION Advise Position Disburse Cash Settles Cash Position Settles Cash & Accounting Position

32. 1 What was called “Remittance” in the past, is now called “Money Transfer”. It may be defined as the process which enables a “Remitter” to transfer money to a “Beneficiary” at another destination. Money Transfer Concept

33. 2 The Basic Considerations The money being transferred is legal and would be used for lawful purposes only. Specifically, the transaction must not be for the purpose of money laundering or financing terrorism, or purchases of illegal arms, or similar activities

34. 3 Money Transfer Risk Model Money Laundering Errors Fraud Technology & Process Failure Wrong Payment Exchange Rates Financial Reputational Regulatory RISKSRISKS

35. 4 Money Transfer Risk Model Money Changers Non Government Organisations (NGOs) Non - Residents Trusts-Collection Accounts Non - Customer High Risk Transactions Foreign Nationals

36. 5 Beneficiary Money Transfer Involves a Series of Independent Relationships Paying Bank Remitter Remitting Bank

37. PROCESS SETTLEMENTPAYMENT APPLICATION Money Transfer Process 6

38. 7 General Information Identity of Applicant & Beneficiary  Applicants’ Request  Terms & Conditions  Cash / Debit to Account  Charge Account (If Different)  Currency  Amount (Words & Figures)  HBL – Branch  Name  Address  Telephone No  CNIC / Passport No  Account Type / No / Bank *  Business / Occupation  Purpose of Remittance  Relationship to Beneficiary * Modes of Money TransferPayment Instruction  Bankers Check  Local Funds Transfer  Foreign Demand Draft  SWIFT – Foreign Funds Transfer  *Advise & Pay  Advise & Credit Remittance Application must be signed by the Applicant(s) or Authrised person in presence of Banks representative Finally it should be signed by Bank’s authorised persons after processing Remittance Application – The Basic Document

39. General Purpose * Banker’s Check A check issued by a bank in favour of a beneficiary. This can be payable locally or in a foreign jurisdiction. Payorders, Demand Drafts &Travelers Check are various forms of Bankers' Check. Local / Foreign Funds Transfer A device used by HBL online branches to transfer funds from one account to other account within Pakistan. SWIFT Transfer A computerised, coded & safe device used by banks to transfer money internationally to a beneficiary having a banking relationship. Secured e-mail Transfer of funds to a beneficiary through an e-mail, electronically authorized. Fast Draft A Payment Instrument drawn on HBL bank’s branch within country issued by Centralised Inward Remittance Department of the Bank in favour of a Beneficiary having account with other bank to pay amount of a remittance received from UAE & Gulf regions. Fast Cash An instrument used by HBL UAE & Gulf for remitting a sum of money to a beneficiary who is a non–HBL customer to be paid in cash by HBL-MISYS Branches coupled with SMS Advice facility. Fast Direct Credit A device used by HBL-UAE to instantly credit any account at an HBL-branch in Pakistan with SMS & Centralised Advice facilities to the beneficiary. UAE Specific 8 Money Transfer Products