GUIDELINES ON ‘KNOW YOUR CUSTOMER’ NORMS AND ANTI- MONEY LAUNDERING MEASURES
Pursuant to RBI Notification vide Circular DNBS.(PD).CC.No.285/03.10.42/2012-13 dated July 2, 2012 read with Circular DNBS.(PD).CC.No.321/03.10.42/2012-13 dated February 27, 2013, issued to Non-Banking Financial Companies (NBFCs), the Board of Directors have adopted the ‘Know Your Customer’ (KYC) and Anti-Money Laundering measures for Gurudev Savings and Hire Purchase (India) Private Limited (“Company”).
The KYC and Anti-Money Laundering measures, as adopted below, are in conformity with the guidelines as contained in the aforesaid RBI Circulars.
The Company endeavors to frame a proper policy framework on ‘Know Your Customer’ (KYC) and Anti- Money Laundering measures. 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. The Company shall 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 inconformity with the guidelines issued in this regard. Any other information from the customer will be sought separately with his /her consent and after effective rendering of services.
The Company policy is to treat all the clients consistently and fairly. The employees of the Company will offer assistance, encouragement and service in a fair, equitable and consistent manner. The Company will also communicate its KYC norms to its customers by uploading the same on its website.
The Company will ensure that the implementation of the KYC norms is the responsibility of the entire organisation. The Company’s fair lending practices shall apply across all aspects of its operations including marketing, loan origination, processing, and servicing and collection activities.
The Company’s Board of Directors and the management team are responsible for implementing the KYC norms hereinafter detailed, and also to ensure that its operations reflect its initiatives to prevent money laundering activities.
The Reserve Bank of India (RBI) has issued guidelines on ‘Know Your Customer’ (KYC) Guidelines – Anti Money Laundering Standards for Non Banking Finance Companies (NBFCs) thereby setting standards for prevention of money laundering activities and corporate practices while dealing with their customers. 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 may be advised by RBI from time to time.
For the purpose of KYC policy, a ‘Customer’ may be defined as:
- A person or entity that maintains and/or has a business relationship with the Company;
One on whose behalf such relationship is maintained (i.e. the beneficial owner);
- Beneficiaries of transactions conducted by professional intermediaries, such as Chartered Accountants, Solicitors etc. as permitted under the law; and
- Any person or entity connected with a financial transaction which can pose significant reputation or other risks to the Company, say, a wire transfer or issue of a high value demand draft as a single transaction.
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. The Company hereunder frames its KYC policies incorporating the following four key elements:
- Customer Acceptance Policy
- Customer Identification Procedures;
- Monitoring of Transactions; and
- Risk management
CUSTOMER ACCEPTANCE POLICY (CAP)
The guidelines for Customer Acceptance Policy (CAP) for the company are given below:
- No account is opened in anonymous or fictitious/ benami name(s).
- The company shall classify customers into various risk categories and based on risk perception decide on acceptance criteria for each customer category.
- Accept customers after verifying their identity as laid down in customer identification procedures.
- While carrying out due diligence the company will ensure that the procedure adopted will not result in denial of services to the genuine customers.
- For the purpose of risk categorisation of customer, company shall obtain the relevant information from the customer at the time of account opening.
CUSTOMER IDENTIFICATION PROCEDURE (CIP)
The policy approved by the Board of the Company 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 will 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 will 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 will:
- verify the legal status of the legal person/ entity through proper and relevant documents;
- 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; and
- understand the ownership and control structure of the customer and determine who are the natural persons who ultimately control the legal person.
Customer identification requirements in respect of a few typical cases, especially, legal persons requiring an extra element of caution are given in Annexure-I for guidance of Company.
The Company has framed its own internal guidelines based on their experience of dealing with such persons/entities, normal lender’s prudence and the legal requirements as per established practices. The Company will take reasonable measures to identify the beneficial owner(s) and verify his/her/their identity in a manner so that it is satisfied that it knows who the beneficial owner(s) is/are. An indicative list of the nature and type of documents/information that may be relied upon for customer identification is given in the Annexure-I.
Documentation requirements and other information shall be collected in respect of different categories of customers depending on perceived risk and keeping in mind the requirements of PML Act, 2002 and guidelines issued by Reserve Bank of India from time to time. Necessary checks wherever and to the extent possible, shall be conducted 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.
The document requirements would be reviewed periodically as and when required for updation keeping in view the emerging business requirements. Senior Official(s) in charge of the Policy are empowered to make amendments to the list of such documents required for customer identification in consultation with the sales and distribution channels and compliance.
Customer Identification Procedure is to be carried out at the following stages:
- while establishing a business relationship; or
- carrying out a financial transaction; or
- where the company has a doubt about the authenticity/veracity; or
- inadequacy of the previously obtained customer identification data if any; or
- 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 of Policy section should 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.
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 will depend on the risk sensitivity attached with the client. The Company will pay special attention to all complex, unusually large transactions and all unusual patterns which have no apparent economic or visible lawful purpose.
The Company may 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 ensures that its branches continue to maintain proper record of all cash transactions. The internal monitoring system will have an inbuilt procedure for reporting of such transactions and those of suspicious nature to controlling/ head office on a fortnightly basis.
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”..
All transactions of suspicious nature shall be reported. The Principal Officer of the Company shall ensure that such reporting system is in place and shall monitor receipt of the reports.
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.
The necessary documents, information and records would be maintained and preserved for the period prescribed under PML Act, 2002 would be maintained.
The Board of Directors of the Company ensures that an effective KYC programme is put in place by establishing appropriate procedures and ensuring their effective implementation. It will 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 that the Company’s policies and procedures are implemented effectively. The Company may, in consultation with their boards, 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 have an important role in evaluating and ensuring adherence to the KYC policies and procedures. As a general rule, the compliance function provides an independent evaluation of the Company’s own policies and procedures, including legal and regulatory requirements. The Company ensure that its audit machinery is staffed adequately with individuals who are well-versed in such policies and procedures. Concurrent/ Internal Auditors should 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 may be put up before the Audit Committee of the Board on quarterly intervals.
The Company have an ongoing employee training programme so that the members of the staff are adequately trained in KYC procedures. Training requirements will have different focuses for frontline staff, compliance staff and staff dealing with new customers. It is crucial that all those concerned fully understand the rationale behind the KYC policies and implement them consistently.
Implementation of KYC procedures requires the Company to demand certain information from customers which may be of personal nature or which have hitherto never been called for. This can sometimes lead to a lot of questioning by the customer as to the motive and purpose of collecting such information. The Company will prepare specific literature/ pamphlets etc. so as to educate the customer of the objectives of the KYC programme. The front desk staffs needs to be specially trained to handle such situations while dealing with customers.
INTRODUCTION OF NEW TECHNOLOGIES
The Company will pay special attention to any money laundering threats that may arise from new or developing technologies including internet transactions that might favour anonymity, and take measures, if needed, to prevent their use in money laundering schemes. Many Companies are engaged in the business of issuing a variety of Electronic Cards that are used by customers for buying goods and services, drawing cash from ATMs, and can be used for electronic transfer of funds. Further, marketing of these cards is generally done through the services of agents. The Company ensures that appropriate KYC procedures are duly applied before issuing the cards, if any, in future to the customers. It is also desirable that agents are also subjected to KYC measures.
APPLICABILITY TO BRANCHES AND SUBSIDIARIES OUTSIDE INDIA
The above guidelines shall also apply to the branches and majority owned subsidiaries located abroad, especially, in countries which do not or insufficiently apply the FATF Recommendations, to the extent local laws permit. When local applicable laws and regulations prohibit implementation of these guidelines, the same should be brought to the notice of Reserve Bank.
APPOINTMENT OF PRINCIPAL OFFICER
The Company has a senior management officer to be designated as Principal Officer. 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 will 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.
ANNEXURE – I
CUSTOMER IDENTIFICATION PROCEDURE FEATURES TO BE VERIFIED AND DOCUMENTS THAT MAY BE OBTAINED FROM CUSTOMERS
IDENTITY PROOF (INDIVIDUAL)
• Photo PAN card;
• Voter’s Identity Card;
• Laminated Driving license – Permanent;
• Employee ID card (MNCs / PSUs / Public Limited Companies/Other Government companies and not Pvt. Ltd. Co);
• ID card issued by all govt. departments.
• Aadhar card
ADDRESS PROOF (INDIVIDUAL)
• Telephone Bill;
• Post paid Piped gas connection bill showing consumption and full address;
• Electricity Bill;
• Ration Card;
• Voter’s Identity Card;
• Driving license – Permanent;
• Leave & License agreement if the applicant is staying on rent & the agreement is registered / notarized. Wherever notarized Leave & License agreement is taken, the notarization shall be in original & the agreement shall be executed on a stamp paper as per the respective State Stamp Act Applicable to lease deed also; subject to: availability of permanent address proof. Plus landlord’s electricity or water bill.
• Post Paid Mobile Bills;
• Bank Passbook/ Latest Bank Account Statement (first page of the same with full address mentioned which matches with the applicant’s address as per the Application form). In case of a Bank Passbook, the page showing the latest banking transaction shall be taken on record;
• Municipality Water Bill;
• Office Identity card mentioning the address only govt dept.(MNCs/PSUs/Public Limited Companies/Other Government companies) OR letter from employer if the applicant stays in the company provided accommodation); or
• Aadhar card
SIGNATURE VERIFICATION (INDIVIDUAL)
• Laminated Driving license – Permanent;
• PAN Card;
• Bankers Verification;
• Photo Debit Card with scanned signatures;/li>
• Government ID card for govt. Employees;
PROOF OF LEGAL EXISTENCE AND REGISTERED OFFICE ADDRESS
Entities (Self Proprietorship / Partnership / Companies)
• For Partnership firms, Partnership Deed or Certificate of Registration from Registrar of firms in case the firm is registered;
• For Companies, Certificate of Incorporation. In case of Public Limited Company, Certificate of Commencement of Business also to be taken;
• PAN Card of partnership firm or companies can be taken as proof of existence. (In this case separate proof of registered address needs to be taken);
• Sales tax registration Certificate;
• Shop & Establishment Certificate;/li>
• Latest Bank Account Statement in the name of the Entity with full address mentioned which matches with the entity’s address as per the Application form along with Banker’s Verification of the Authorized Signatory of the entity;
PROOF OF OPERATING
• Telephone Bill / Electricity Bill in the name of the entity;
• Leave & License agreement in the name of the entity if the entity is operating its business from a rented premises & the agreement is registered / notarized. Wherever notarized Leave & License agreement is taken, the notarization shall be in original & the agreement shall be executed on a stamp paper as per the respective State Stamp Act (mail already circulated to all in the past on the same); subject to: availability of permanent address proof. Plus landlord’s electricity or water bill.
• Factory Registration Certificate;
• SSI Registration Certificate;
• Importer – Exporter Code Certificate;
• VAT / Service Tax Registration Certificate; or;
• Latest Bank Account Statement in the name of the Entity with full address mentioned which matches with the entity’s address as per the Application form along with Banker’s Verification of the Authorized Signatory of the entity.
• Certificate of registration, if registered; or
• Trust Deed/ Constitutional Documents of the trust / Society.