Know Your Customer Policy (KYC)

Version 1 – 2019-20

Contents

  1. Background.. – 3
  2. Objective, Scope, and Applicability of the policy. – 3
  3. KEY WORDS: – 3
  4. Customer Acceptance Policy. – 5
  5. Categorization of Clients. – 6
  6. Customer identification.. – 7
  7. Monitoring of Transactions. – 9
  8. Risk Management. – 9
  9. Internal Control System.. – 9
  10. Training Programme: – 9
  11. Record Keeping.. – 10
  12. Appointment of Principal Officer: – 11
  13. Reporting to Financial Intelligence Unit – India: – 11
  14. GENERAL: – 11
  15. Annexures. – 13

1. Background

The Reserve Bank of India (RBI) has issued comprehensive ‘Know Your Customer’ (KYC) Guidelines to all Non-Banking Financial Companies (NBFCs) in the context of the recommendations made by the Financial Action Task Force (FATF) and Anti Money Laundering (AML) standards and Combating Financing of Terrorism (CFT) policies as these being used as the International Benchmark for framing the stated policies, by the regulatory authorities.. In view of the same, Selfin India (“Company”) has adopted the said KYC guidelines with suitable modifications depending on the activity undertaken by it. The Company has ensured that a proper policy framework on KYC and AML measures are formulated in line with the prescribed RBI guidelines and duly approved by its Loan & Risk Committee (“Committee”).

2. Objective, Scope and Applicability of the policy

The objective of KYC guidelines is to prevent the Company from being used, intentionally or unintentionally, by criminal elements for money laundering activities or terrorist financing activities.

KYC procedures shall also enable the Company to know and understand its Customers and its financial dealings better which in turn will help it to manage its risks prudently. Thus, the KYC policy

has been framed by the Company for the following purposes:

  1. To prevent criminal elements from using Company for money laundering activities;
  2. To enable Company to know and understand its Customers and their financial dealings

better which, in turn, would help the Company to manage risks prudently;

  1. To put in place appropriate controls for detection and reporting of suspicious activities in

accordance with applicable laws/laid down procedures;

  1. To comply with applicable laws and regulatory guidelines;
  2. To ensure that the concerned staff are adequately trained in KYC/AML/CFT procedures. This

KYC Policy is applicable to all branches/offices of the Company and is to be read in

conjunction with related operational guidelines issued from time to time. This Policy includes

nine (9) key elements:

  1. a) Customer Acceptance Policy (CAP);
  2. b) Customer Identification Procedures (CIP);
  3. c) Monitoring of Transactions;
  4. d) Risk Management;

3. KEY WORDS:

Customer/Client

  • a person or entity that maintains or is desirous of maintaining an account and/or has a business relationship with company;
  • one on whose behalf an account is maintained (i.e. the beneficial owner);
  • beneficiaries of transactions conducted by professional intermediaries, such as Stock Brokers, Chartered Accountants, Solicitors, etc. as permitted under the law, and
  • any person or entity connected with a financial transaction which can pose significant reputational or other risks to the company, say, a wire transfer or issue of a high value demand draft as a single transaction.

A “transaction” means a purchase, sale, loan, pledge, gift, transfer, delivery or the arrangement thereof and includes-

  • Opening of an account for the purpose of availing a loan / having a financial arrangement;
  • Deposits, withdrawal, exchange or transfer of funds in whatever currency, whether in cash or by cheque, payment order or other instruments or by electronic or other non-physical means;
  • Entering into any fiduciary relationship;
  • Any payment made or received in whole or in part of any contractual or other legal obligation;
  • Any payment made in respect of playing games of chance for cash or kind including such activities associated with casino; and
  • establishing or creating a legal person or legal arrangement.

APPLICABILITY:

It may be noted that KYC – AML policy as stated in this document shall prevail over anything else contained in any other document / process/circular/letter/instruction in this regard (KYC-AML). This policy shall be applicable to all verticals/products of the Company whether existing or rolled out in future.

Officially valid document (OVD)

OVD is defined to mean any one of the following:

  • the passport,
  • the driving license,
  • the Permanent Account Number (PAN) Card,
  • the Voter’s Identity Card issued by Election Commission of India,
  • job card issued by NREGA duly signed by an officer of the State Government,
  • the letter issued by the Unique Identification Authority of India containing details of name, address and Aadhaar (Including E-Aadhaar) number or any other document which may be specified by Government/ Regulator.

No other document will be accepted as OVD for ID proof. An OVD having record of present address if submitted by a client, he/she shall not be insisted for additional address proof, provided he resides in the address as mentioned in the OVD.

However, for customers belong to priority sector/affordable housing sector category, Election photo identity card and driving license shall also be treated as OVD for identity/address proof and ration card as address proof.”

Periodical Updation of KYC documents:

Based on the risk profile of a client, clients shall be asked to update his/her kyc documents periodically. Full KYC exercise will be required to be done

  1. a) at least every two years for high risk individuals and entities. (Definition of Risk category of client are mentioned below in customer acceptance policy)
  2. b) at least every ten years for low risk and
  3. c) at least every eight 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 updations.
  4. d) Fresh photographs will be required to be obtained from minor customer on becoming major.

It is the duty of the client to advise immediately any change of his registered address. In case a client is found not residing in his recorded address, he/she shall be asked to submit updated KYC documents along with current address proof at the earliest.

4. Customer Acceptance Policy

  • The Customer Acceptance Policy of the company is aimed at ensuring that explicit guidelines are in place on the following aspects of customer relationship:
  • No account is opened in anonymous or fictitious/benami name(s);
  • Parameters of risk perception are clearly defined in terms of the location of customer and his clients and mode of payments, volume of turnover, social and financial status, etc. to enable categorization of customers into low, medium and high risk. These parameters will be defined by RMC (Risk Management Committee) and reviewed periodically
  • Documentation requirements and other information which is 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 Act 2002 as amended by PMLA 2009 and subsequent amendments, (hereinafter referred to as PMLA), rules framed there under and guidelines issued from time to time by regulators;
  • Not to 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 co-operation of the customer or non reliability of the data/information furnished.
  • Circumstances, in which a customer is permitted to act on behalf of another person/entity, should be in conformity with the established law and practices, and the customer should be able to explain satisfactorily the reason/ occasion why an account is required to be operated by a mandate holder or where an account may be opened by an intermediary in a fiduciary capacity; and
  • 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.
  • A profile is required to be prepared for each new customer based on risk categorization. The customer profile may contain information relating to the customer’s identity, social/financial status, nature of business activity, information about his clients’ business and their location, etc. The nature and extent of due diligence will depend on the risk perceived. While preparing customer profile the care is to be taken to seek only such information which is relevant to the risk category and is not intrusive. Any other information from the customer should be sought separately with his/her consent and after opening the loan account. The customer profile is a confidential document and details contained therein shall not be divulged for cross selling or any other purposes.
  • For the purpose of risk categorization, individuals (other than High Net Worth) and entities whose identities and sources of wealth can be easily identified and transactions in whose accounts by and large conform to the known profile, are to be categorized as low risk. Illustrative examples of low risk customers could be salaried employees whose salary structures are well defined, people belonging to lower economic strata of the society whose accounts show small balances and low turnover, Government departments & Government owned companies, regulators and statutory bodies, etc. In such cases, only the basic requirements of verifying the identity and location of the customer are to be met.
  • Customers that are likely to pose a higher than average risk may be categorized as medium or high risk depending on customer’s background, nature and location of activity, country of origin, sources of funds and his client profile, etc. In such cases enhanced due diligence measures are required to be applied based on the risk assessment, thereby requiring intensive ‘due diligence’ for higher risk customers, especially those for whom the sources of funds are not clear. Examples of customers requiring higher due diligence may include

(a) Non-resident customers,

(b) High net worth individuals,

(c) Trusts, charities, NGOs and organizations receiving donations,

(d) Companies having close family shareholding or beneficial ownership,

(e) Firms with ‘sleeping partners’,

(f) Politically exposed persons (PEPs) of foreign origin,

(g) Non-face to face customers, and

(h) Those with dubious reputation as per public information available, etc.

As regards the accounts of PEPs it is advised that in the event of an existing customer or the beneficial owner of an existing account subsequently becoming a PEP, the Company would obtain senior management approval in such cases to continue the business relationship with such person, and also undertake enhanced monitoring as specified in Annexure – A.

5. Categorization of Clients

While accepting and executing a client relationship the Company has adopted a risk based approached as under:

ParticularsLow RiskMedium Risk High Risk
Definition(a) Customers like Salaried people– wherein all their income and expenses details are transparent and well structured. (b) Wherein only customers basic requirements of verifying the identity and location are to be metCustomers those are less risky in nature as compare to high risk customers – can be categorised as Medium Risk.Customers that are likely to pose a higher than average risk may be categorized as medium or high risk depending on customer's background, nature and location of activity, country of origin, sources of funds and his client profile, etc.
List of Customers as per Risk category(a) Salaried employees whose salary structures are well defined,
(b) People belonging to lower economic strata of the society whose accounts show small balances and low turnover,
(c)Government departments & Government owned companies, regulators and statutory bodies, etc.
(d)Micro/Small/Medium enterprises filing regular ITR, good banking relationship, existing trade records with any Financial institutions etc.
(a) Client with over investment of Rs. 50 Lakh where identity and sources of wealth are not supported by public documents like income returns, registered conveyance deeds etc.
(b) Clients with sudden spurt in volumes or investment without apparent reasons.
(c) Clients who trade in derivatives.
(d) Customers having speculative income. (e)Person in business/industry or trading activity where scope or history of unlawful trading / business activity dealings is more, etc.
(a)Non-resident customers,
(b) High net worth individuals,
(c) Trusts, charities, NGOs and organizations receiving donations, (d) Companies having close family shareholding or beneficial ownership,
(e)Firms with 'sleeping partners', (f)Politically exposed persons (PEPs) of foreign origin,
(g) Non-face to face customers, and
(h) Those with dubious reputation as per public information available, etc.
(i) NPA customers

It is important to bear in mind that the adoption of Customer Acceptance Policy and its implementation should not become too restrictive and must not result in denial of the company’s services to general public, especially to those, who are financially or socially disadvantaged. Customer Identification Procedure

6. Customer identification

Identifying the customer and verifying his/ her identity by using prescribed documents, data or information. Rule 9 of the Prevention of Money-Laundering (Maintenance of Records of the Nature and Value of Transactions, The Procedure and Manner of Maintaining and Time for Furnishing information and Verification and Maintenance of Records of the Identity of the Clients of the Banking Companies, Financial Institutions and Intermediaries) Rules, 2005 (hereinafter referred to as PML Rules), requires the Company to:

(a) At the time of commencement of an account–based relationship, identify its clients, verify their identity and obtain information on the purpose and intended nature of the business relationship, and

(b) In all other cases, verify identity while carrying out:

(i) Transaction of an amount equal to or exceeding rupees fifty thousand, whether conducted as a single transaction or several transactions that appear to be connected, or

(ii) Any international money transfer operations.

In terms of proviso to rule 9 of the PML Rules, the relaxation, in verifying the identity of the client within a reasonable time after opening the account/ execution of the transaction, stands withdrawn. Also, as directed in Rule 9 the officials shall identify the beneficial owner and take all reasonable steps to verify his identity. As required in this Rule the officials have to exercise ongoing due diligence with respect to the business relationship with every client and closely examine the transactions in order to ensure that they are consistent with their knowledge of the customer, his business and risk profile.

Therefore, the Customer Identification Policy approved by the Board has to be strictly adhered to at different stages, i.e. while establishing a 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.

The Company needs to obtain sufficient information necessary to establish, to their satisfaction, the identity of each new customer, whether regular or occasional and the purpose of the intended nature of relationship. Rule 9 (Maintenance of Records) of the PML Rules and RBI and NHB directives provide for the documents/information to be obtained for identifying various types of customers i.e. individuals, companies, partnership firms, trusts, unincorporated association or a body of individuals and juridical persons. All staff and officials of the company are advised to take note of the provisions of the above rule and ensure compliance. Customer identification requirements keeping in view the provisions of the said rule are given in Annex-A for guidance of the officials

A list of the nature and type of documents/information that may be relied upon for customer identification is given in the Annex-B. Officials have to follow these guidelines based on their experience of dealing with such persons/entities, normal prudence and the legal requirements as prescribed here and as amended from time to time by regulators and laws.

– In addition to the due diligence requirements, under KYC norms, company is required by law to obtain Permanent Account Number (PAN) or General Index Register (GIR) Number or alternatively declaration in Form No. 60 or 61 as specified under the Income Tax Act / Rules.

Explanation:

  • Form 60 is required when a Borrower do not have PAN but have entered into transactions where quoting of PAN is mandatory.
  • Form 61 is required when the Borrower has agricultural income and is not in receipt of any other income chargeable to income-tax.
  • Prior to 1972, a tax-payer (assessee) of the Income tax Department was identified by a number called General Index Register Number (GIR No.).

7. Monitoring of Transactions

Ongoing monitoring is an essential element of effective KYC procedures. The officials have to effectively control and reduce the risk by having 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 of each account. Officials should 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 accounts 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 should particularly attract the attention of the officials. Very high account turnover inconsistent with the means of the customer may indicate that funds are being ‘washed’ through/into the account. High-risk accounts have to be subjected to intensified monitoring. The Company should put in place a system of periodical review of risk categorization of accounts and the apply enhanced due diligence measures wherever required.

8. Risk Management

The aim of this policy is to ensure that an effective KYC Programme is in place by establishing appropriate procedures and ensuring their effective implementation. Officials involved with day to day functioning and interaction with the clients including those at administrative offices supervising them need to have proper management oversight, systems and controls, segregation of duties, training and other related matters to ensure statutory compliance with the KYC program. Responsibility should be explicitly allocated within the Company for ensuring that the policies and procedures are implemented effectively. Accordingly, company has detailed, through its Credit Risk management and Policy, the Underwriting criteria, that are enhanced due diligence and customer identification and acceptance procedure.

9. Internal Control System

The Company’s Internal Audit and Compliance functions will evaluate and ensure adherence to the KYC Policies and procedures. As a general rule, the compliance function will provide an independent evaluation of the Company’s own policies and procedures, including legal and regulatory requirements. The Management of the Company under the supervision of the Committee shall ensure that the audit function is staffed adequately with skilled individuals. Internal Auditors will 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 Committee along with their normal reporting frequency. Further, the Company shall have an adequate screening mechanism in place as an integral part of their recruitment/ hiring process of personnel so as to ensure that person of criminal nature/ background do not get an access, to misuse the financial channel.

10. Training Programme:

Company shall have an ongoing employee training programs so that the members of the staff are adequately trained in KYC/ AML/ CFT procedures. Training requirements shall have different focuses for front line staff, compliance staff and officer/ staff dealing with new Customers so that all those concerned fully understand the rationale behind the KYC Policies and implement them consistently.

11. Record Keeping

  1. Maintenance of records of transactions: The Company shall maintain proper record of the transactions as required under Section 12 of the PMLA read with Rule 3 of the Prevention of Money Laundering Rules, 2005 (PML Rules) as mentioned below:
  2. a) All cash transactions of the value of more than Rupees Ten Lakhs (Rs. 10, 00, 000/-) or its equivalent in foreign currency, though by policy the Company neither accept cash deposits nor in foreign currency.
  3. b) All series of cash transactions integrally connected to each other which have been valued below Rupees Ten Lakhs (Rs. 10,00,000/-) or its equivalent in foreign currency where such series of transactions have taken place within a month.
  4. c) All transactions involving receipts by non-profit organizations of Rupees ten lakhs or its equivalent in foreign currency.
  5. d) 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; any such transactions.
  6. e) All suspicious transactions whether or not made in cash and in manner as mentioned in the PML Rules framed by the Government of India under PMLA. An Illustrative List of suspicious transaction pertaining to financial services is given in Annexure C.
  7. Records to contain the specified information The Records referred to above in Rule 3 of PML Rules to contain the following information:
  8. a) the nature of the transactions;
  9. b) the amount of the transaction and the currency in which it was denominated;
  10. c) the date on which the transaction was conducted;
  11. d) the parties to the transaction.
  12. Maintenance and preservation of records Section 12 of PML Act requires the Company to maintain records as under: a) records of all transactions referred to in clause

(a) of sub-section (1) of Section 12 read with Rule 3 of the PML Rules is required to be maintained for a period of Ten (10) years from the date of transactions between the customers and Company.

  1. b) records of the identity of all Customers of Company are required to be maintained for a period of Ten (10) years from the date of cessation of transactions between the Customers and Company.
  2. c) Company shall take appropriate steps to evolve a system for proper maintenance and preservation of information in a manner (in hard and/or soft copies) that allows data to be retrieved easily and quickly whenever required or as/ when requested by the competent authorities.

12. Appointment of Principal Officer:

Company shall designate a senior employee as ‘Principal Officer’ (PO) who shall be located at the Head/Corporate office and shall be responsible for monitoring and reporting of all transactions and sharing of information as required under the law. PO shall maintain close liaison with enforcement agencies, NBFCs and any other institution which are involved in the fight against money laundering and CFT

13. Reporting to Financial Intelligence Unit – India:

In the event the Principal Officer arrives at a conclusion that any transaction, or a series of transactions integrally connected are of suspicious nature, he must furnish a Suspicious Transaction Report (“STR”) within 7 working days of the same and must record his reasons for treating any transaction or a series of transactions as suspicious.
The Company shall also report all such attempted transactions in STRs, even if not completed by Customers, irrespective of the amount of the transaction.
The Company is also directed to make STRs if they have reasonable ground to believe that the transaction involve proceeds of crime (irrespective of the amount of transaction).
The Principal Officer will report information relating to suspicious transaction to the Director, FIU-IND as per the terms of the PML Rules, in the prescribed formats as designed and circulated by RBI at the following address:

Director,

FIU-IND,

Financial Intelligence Unit-India,

6th Floor, Hotel Samrat,

Chanakyapuri, New Delhi – 110021

1.1 The Principal Officer shall also ensure that it retains a copy of such information for the purposes of official record.

The employees of Company shall maintain strict confidentiality of the fact of furnishing/ reporting details of suspicious transactions.

  1. GENERAL:
  2. Customer Education:

Company shall educate Customers on the objectives of the KYC programme so that Customer understands and appreciates the motive and purpose of collecting such information. The Company shall prepare specific literature/ pamphlets, terms and conditions etc. so as to educate the Customer about the objectives of the KYC programme. The front desk staff shall be specially trained to handle such situations while dealing with Customers.

  1. Introduction of new technologies:

Company shall pay special attention to any money laundering threats that may arise from new or developing technologies including online transactions that may favor anonymity, and take measures, if needed, to prevent their use in money laundering. Company shall ensure that any remittance of funds by way of demand draft, mail/telegraphic transfer or any other mode for any amount is affected by cheques and not against cash payment.

  • Applicability to Branches and Subsidiaries outside India:

This Policy shall also be applicable 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 as and when the Company opens overseas branches. When local applicable laws and regulations prohibit implementation of these guidelines, the same will be brought to the notice of RBI.

  1. Closure of Accounts/Termination of Financing/Business Relationship:

Where Company is unable to apply appropriate KYC measures due to non-furnishing of information and/or non-operation by the Customer, Company shall terminate Financing/Business Relationship after issuing due notice to the Customer explaining the reasons for taking such a decision. Such decision shall be taken with the approval of Chairman & Managing Director or key managerial persons authorized for the purpose.

  1. KYC for the Existing Accounts:

While the KYC Policy will apply to all new Customers, the same would be applied to the existing Customers on the basis of materiality and risk. However, transactions with existing Customers would be continuously monitored for any unusual pattern in the operation of the accounts.

  1. Updation in KYC Policy of Company

PO shall, after taking the due approval from the Committee, make the necessary amendments/modifications in the KYC/ AML/ CFT Policy or such other related guidance notes of Company, to be in line with RBI or such other statutory authority’s requirements/updates/ amendments from time to time.

 

  • Consequences of breach/ default
1.2 The Director, FIU-IND is empowered to impose a fine in case of failure to comply with the obligations of maintenance of records, furnishing information and verifying the identity of the Customers. In such case, the amount of fine may vary from Rs. 10,000 to Rs. 1,00,000 for each failure.
1.3      In case the Company is found in contravention of any KYC guideline set out by the RBI specifically, it shall be penalised in terms of Section 58G of the RBI Act, 1934.
1.4      Given that the regulatory authorities seek to curb the offence of money-laundering wherein it involves any attempt, directly or indirectly, to indulge or knowingly assist or knowingly be a party or be actually involved in any process or activity connected with the proceeds of crime including its concealment, possession, acquisition or use and projecting or claiming it as untainted property, any such concealment or act of disguising the true origins of tainted proceeds so that the proceeds appear to have derived from legitimate origins or constitute legitimate assets, is punishable. As such, whoever commits the offence of money-laundering is punishable with rigorous imprisonment for a term which shall not be less than three years but which may extend to seven years and shall also be liable to fine.
1.5      In addition, failure to report suspected money laundering (including attempted transactions even if not completed by the Customer, irrespective of the amount of the transaction and/or threshold limit envisaged for predicate offences) may result in comparable fines and terms of imprisonment.

15. Annexures

Annex – A

CUSTOMER IDENTIFICATION REQUIREMENTS – – INDICATIVE GUIDELINES

Particulars Guidelines
Trust/Nominee or Fiduciary AccountsThere exists the possibility that trust/nominee or fiduciary accounts can be used to circumvent the customer identification procedures. Officials should determine whether the customer is acting on behalf of another person as trustee/nominee or any other intermediary. If so, Officials may insist on receipt of satisfactory evidence of the identity of the intermediaries and of the persons on whose behalf they are acting, as also obtain details of the nature of the trust or other arrangements in place. While opening an account for a trust, Officials should take reasonable precautions to verify the identity of the trustees and the settlors of trust (including any person settling assets into the trust), grantors, protectors, beneficiaries and signatories. Beneficiaries should be identified when they are defined. In the case of a 'foundation', steps should be taken to verify the founder managers/directors and the beneficiaries, if defined. If the Official decides to accept such accounts in terms of the Customer Acceptance Policy, the company shall 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
Trust/Nominee or Fiduciary Accounts
Accounts of companies and firms
Officials will be vigilant against business entities being used by individuals as a ‘front’ for maintaining accounts with the Company. Officials shall verify the legal status of the legal person / entity through proper and relevant documents. Official shall verify that any person purporting to act on behalf of the legal / juridical person/entity is so authorized and identify and verify the identity of that person. Officials shall examine the control structure of the entity, determine the source of funds and identify the natural persons who have a controlling interest and who comprise the management. These requirements may be moderated according to the risk perception, e.g. in the case of a public company it will not be necessary to identify all the shareholders.
Client accounts opened by professional intermediariesWhen the Official has knowledge or reason to believe that the client account opened by a professional intermediary is on behalf of a single client, that client must be identified. Officials may hold 'pooled' accounts managed by professional intermediaries on behalf of entities like mutual funds, pension funds or other types of funds. Where the Officials rely on the 'customer due diligence' (CDD) done by an intermediary, they shall satisfy themselves that the intermediary is regulated and supervised and has adequate systems in place to comply with the KYC requirements. It shall be understood that the ultimate responsibility for knowing the customer lies with the Company
Accounts of Politically Exposed Persons (PEPs) resident outside IndiaPolitically exposed persons are 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/judicial/military officers, senior executives of state-owned corporations, important political party officials, etc. Officials should gather sufficient information on any person/customer of this category intending to establish a relationship and check all the information available on the person in the public domain. Officials should verify the identity of the person and seek information about the sources of funds before accepting the PEP as a customer. The decision to open an account for PEP should be taken at a senior level. Officials should also subject such accounts to enhanced monitoring on an ongoing basis. The above norms may also be applied to the accounts of the family members or close relatives of PEPs.
Accounts of non-face-to face customersIn the case of non-face-to-face customers, apart from applying the usual customer identification procedures, additional safeguards are necessary to mitigate the higher risk involved. Certification of all the documents presented may be insisted upon and, if necessary, additional documents may be called for. In the case of cross-border customers, there is the additional difficulty of matching the customer with the documentation and the Official may have to rely on third party certification/introduction. In such cases, it must be ensured that the third party is a regulated and supervised entity and has adequate KYC systems in place.
                                                                        

Annex – B

Customer Identification Procedure

Documents that may be obtained from customers

Customers/ClientsDocuments (Certified copy of any one of the following officially valid document)
Accounts of individualsa) *Passport;
b) PAN Card;
c) Voter’s Identity Card;
d) Driving License;
e) Identity card (subject to the Company’s satisfaction);
f) Aadhar Card;
g) Letter from a recognized public authority or public servant verifying the identity and residence of the Customer to the satisfaction of the Company.
a. Telephone bill;
b. Bank Account Statement;
c. Letter from any recognized public authority;
d. Electricity bill;
e. Letter from employer (subject to the Company’s satisfaction).

Any one document which provides Customer information to the satisfaction of the Company will suffice.

One recent photograph except in case of transactions referred to in Rule 9 (1) (b) of the PML Rules.
Accounts of Companies
– Name of the company.
– Principal place of business.
– Mailing address of the company.
– Telephone/Fax Number.
a) Certificate of incorporation and Memorandum & Articles of Association;
b) Resolution of the board of directors to open an account and identification of those who have authority to operate the account;
c) Power of attorney granted to its managers, officers or employees to transact business on its behalf;
d) an officially valid document in respect of managers, officers or
employees holding an attorney to transact on its behalf;
e) Copy of PAN allotment letter;
f) Copy of telephone bill
Accounts of Partnership firmsa) Registration certificate, if registered;
b) Partnership deed;
c) Power of attorney granted to a partner or an employee of the firm to transact business on its behalf;
d) Any officially valid document identifying the partners and the persons holding the Power of attorney and their addresses;
e) Telephone bill in the name of firm/partners.
Accounts of Trusts and foundations – Names of trustees, settlers, beneficiaries and signatories.a) Certificate of registration, if registered;
b) Trust Deed;
c) Power of attorney granted to transact business on its
behalf;
d) Any officially valid document to identify the trustees, settlers, beneficiaries and those holding power of attorney,
founders/ managers/ directors and their addresses;
e) Resolution of the managing body of the foundation/association;
f) Telephone bill.
Accounts of unincorporated association or a body of individualsa) Resolution of the managing body of such association or body of individuals;
b) power of attorney granted to him to transact on its behalf;
c) an officially valid document in respect of the person holding an attorney to transact on its behalf and such other information as may be required by Company to collectively establish the legal existence of such as association or body of individuals.
Accounts of Proprietorship Concerns Proof of the name, address and activity of the concernApart from Customer identification procedure as applicable to the proprietor any two of the following documents in the name of the proprietary concern would suffice
(a) Registration certificate (in the case of a registered concern)
(b) Certificate/licence issued by the Municipal authorities under Shop & Establishment Act,
(c) Sales and income tax returns
(d) CST/VAT certificate
(e) Certificate/registration document issued by Sales Tax/Service Tax/Professional Tax authorities
(f) Licence/certificate of practice issued in the name of the proprietary concern by any professional body incorporated
under a statute. 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.

In cases where the Company is satisfied that it is not possible to furnish two such documents, it would have the discretion to accept only one of those documents as activity proof. In such cases, the
Company, however, would have to undertake contact point verification, collect such information as would be required to establish the existence of such firm, confirm, clarify and satisfy
themselves that the business activity has been verified from the address of the proprietary concern.

*compulsory in case of non resident individuals.

If any of the above documents are in any language other than English, it shall be translated into English along with a certificate from translator / notary public.

Annex – C

ILLUSTRATIVE LIST OF SUSPICIOUS TRANSACTIONS PERTAINING TO LOANS:

  1. Customer is reluctant to provide information, data, documents;
  2. Submission of false documents, data, purpose of loan, details of accounts;
  3. Refuses to furnish details of source of funds by which initial contribution is made, sources of funds is doubtful etc;
  4. Reluctant to meet in person, represents through a third party/Power of Attorney holder without sufficient reasons;
  5. Approaches a branch/office of the company which is away from the customer’s residential or business address provided in the loan application, when there is the company branch/office nearer to the given address;
  6. Unable to explain or satisfy the numerous transfers in the statement of account/ multiple accounts;
  7. Initial contribution made through unrelated third party accounts without proper justification;
  8. Availing a top-up loan and/or equity loan, without proper justification of the end use of the loan amount;
  9. Suggesting dubious means for the sanction of loan;
  10. Where transactions do not make economic sense;
  11. There are reasonable doubts over the real beneficiary of the loan and the flat to be purchased;
  12. Encashment of loan amount by opening a fictitious bank account;
  13. Applying for a loan knowing fully well that the property/dwelling unit to be financed has been funded earlier and that the same is outstanding;
  14. Sale consideration stated in the agreement for sale is abnormally higher/lower than what is prevailing in the area of purchase;
  15. Multiple funding of the same property/dwelling unit;
  16. Request for payment made in favour of a third party who has no relation to the transaction;
  17. Usage of loan amount by the customer in connivance with the vendor/builder/developer/broker/agent etc. and using the same for a purpose other than what has been stipulated.
  18. Multiple funding / financing involving NGO / Charitable Organisation / Small / Medium Establishments (SMEs) / Self Help Groups (SHGs) / Micro Finance Groups (MFGs)
  19. Frequent requests for change of address;
  20. Overpayment of installments with a request to refund the overpaid amount.