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Consolidated guidelines on KYC norms & AML standards for 2015-16 of 140

Policy/Guidelines on Know Your Customer (KYC) norms/ Anti-Money Laundering (AML) standards/ Combating Financing of

Terrorism (CFT)/ Obligations of banks under PMLA, 2002 for 2015-’16

(Updated up to 30.11.2015)

ALLAHABAD BANKHEAD OFFICE, AML & KYC CELL

INDEX

Paragraph Particulars Page No.

Chapter -1 :: Introduction1.1 Definition of Customer 8

1.1.1 Definition of Person 91.2 Definition of Transactions 9

1.3 Definition of Officially Valid Document (OVD) 9

1.3.1 Simplified Measures for Proof of Identity 101.3.2 Simplified Measures for Proof of Address 10

1.4 Designated Director 111.5 Principal Officer 111.6 Some Important Guidelines on AML & KYC Compliance 12

a) Customer Identification Procedure & KYC updation 12b) Verification of Genuineness of PAN 12c) KYC for sale of Third Party Products 12d) Risk Categorization of Accounts 13e) Monitoring & Reporting of Transactions 13f) Issuing of Demand Draft / Banker’s Cheque / Inter Office

Instrument for Rs 50.000 and above 13

g) Structuring of transactions with value just below threshold limits 13h) Customer’s transactions through BGL Accounts 14i) Transactions through NRE/NRO Accounts, Liberised Remittance

Scheme and Import of gold under consignment basis14

j) Acceptance of Cash Deposits 14k) Management Overview and Compliance Culture 14l) Internal Audit and Concurrent Audits 14

1.7 KYC Policy 15Chapter - 2 :: Customer Acceptance Policy (CAP)

2.1 Customer Acceptance Policy 162.2 Customer Profile 17

2.3 Risk Cartegorisation 17

2.4 Guidelines 18Chapter - 3 :: Customer Identification Procedure (CIP)

3.1 Procedure to be adopted in Customer identification 19

a) Introduction to customer identification procedure 19b) Customer Identification Procedure to be carried out at different

stages 19

c) Mandatory Information required for KYC purposes 20d) Customer Identification requirement in respect of typical cases 20



3.2Customer Due Diligence requirements (CDD) while opening accounts 20

3.2.1 Accounts of Individuals 20

(i) Obtaining Officially Valid Document 20

(ii) E-KYC service of Unique Identification Authority of India(UIDAI)

20(iii) Introduction – Identification through Introductory Reference 21(iv) Simplified Measures for Proof of Identity 22

(v) Simplified Measures for Proof of Address 22

(vi) Small Accounts 22(vii) KYC procedure 24(viii) Proof of Address 24(ix) Alternate proof of Address of Relative 24(x) Shifting of bank accounts to another branch – proof of

address 24

(xi) Relaxation in case of Low Risk Category customer 25

(xii) Accounts of non-face-to-face customers 25

(xiii) Procedure to be followed in respect of foreign students 25

(xiv) Accounts of Politically Exposed persons (PEPs) resident outside India

26

(xv) Accounts of High net-worth individuals(HNI) 27(xvi) Officially Valid Documents (OVDs) for change in name on

account of marriage or otherwise 28

3.2.2 Accounts of persons other than individuals 28

(i) Company 28(ii) Partnership Firm 29

(iii) Trust/Nominee or Fiduciary Accounts 29

(iv) Unincorporated Association or a Body of Individuals 29

(v) Proprietary Concerns 30

(vi) Simplified KYC norms for Foreign Portfolio Investors (FPIs) 30

(vii) The client accounts are opened by professional Intermediaries 32

3.2.3 Beneficial Ownership 33

3.2.4 Introduction of New Technologies – Credit cards/Debit cards/Smart cards etc. 34

3.2.5 Periodic Updation of KYC 34

(i) CDD requirements for Periodic Updation 34

(ii) Freezing and closure of accounts 36



3.2.6 Miscellaneous 36

3.2.6.1 Walk-in Customers 36

3.2.6.2 Salaried Employees 37

3.2.6.3 Simplified norms for SHGs 37

3.2.6.4 Correspondent banking and Shell Bank 37

(a) Correspondent bank 37

(b) Correspondent relationship with a “Shell Bank” 38

(c) At-par cheque facility availed by co-operative banks 39

3.2.6.5 Operation of Bank accounts & Money Mules 39

3.2.6.6 Unique Customer Identification Code (UCIC) 40

3.2.6.7 Payment of Cheque etc. 40

3.2.6.8 Some Important Guidelines on Operating of Account 41

(a) Mandatory meeting between the bank official and the customer

41

(b) Following Branch Instruction Manual 41

(c) Verification of account opening form 41

(d) Verification of Documents 41

(e) Applicability of Guidelines 42

(f) Photograph 42

(g) Obtaining PAN/GIR or alternatively Form 60 / Form 61 43

(h) Independent confirmation of the address 45

(i) Suspicion of money laundering – action proposed 45

(j) Aadhaar linkage 46

(k) Pradhan Mantri Jan Dhan Yojana (PMJDY) 46

4.0 Chapter - 4 :: Monitoring of Transactions 49

4.1 Monitoring of New Accounts 49

4.1.1 Monitoring of Operation of New Account 49

4.2 Monitoring Transactions of Suspicious Nature 50

4.2.1 Ongoing Monitoring of Transactions 50(a) Complex/unusual pattern of transaction 50

(b) High Value transaction & transactions in HNI A/cs 50

(c) Ongoing Due Diligence 50

(d) Accounts of Multi level marketing (MLM) concerns 50



4.2.2 Monitoring of Alerts 52

4.2.2 A. Transactions monitoring (Alerts generated through AML Software) 52

4.2.2 B. Off-line Transaction Monitoring 52

4.2.3 Ceiling and Monitoring of Cash Transactions & Issuance of Demand Drafts (DDs) / Inter-Office Instruments (IOIs) / Banker’s cheque etc.

53

4.2.4 Payment of Cheque etc. 54

4.2.5 White-listing of Accounts for AML System 54

4.3 Combating financing of Terrorism (CFT) 55

4.4 Freezing of assets under section 51A of Unlawful Activities Prevention ACT, 1967 56

4.5Jurisdictions that do not or insufficiently apply the Financial Action Task Force (FATF) recommendations 59

4.6 Adherence to Foreign Contribution Regulation Act (FCRA),1976 60

4.7 Anti-money laundering Focus 61

4.8 Wire transfer 61

4.8 A. Cross-border wire transfers 62

4.8 B. Domestic wire transfers 634.9 Closure of accounts 64

4.10 Preservation and reporting of Customer Account Information 64

4.10.1 Maintenance of Records of Transactions 64

4.10.2 Information to be preserved 66

4.10.3 Maintenance and Preservation of Records 67

4.10.4 Reporting to Financial Intelligence Unit –India (FIU-IND) 68

(i) Cash Transaction Report (CTR) 69

(ii) Counterfeit Currency Report (CCR) 70

(iii) Suspicious Transaction Report (STR) 70

(iv) Non-Profit Organisation Transaction Report (NTR) 73

(v) Cross-border Wire Transfer Report (CWTR) 74

4.10.5 Screening of Cash withdrawals and deposits for the purpose of CTR

75

(i) Action points for Branches 76

(ii) Action points for Zonal Offices 76



5 Chapter - 5 :: Risk Management 77

5.1 Maintenance of Customers’ Risk Profile 77

5.2 Management of Customer Risk Profile 78

5.2. (i) Low risk customers 79

5.2. (ii) Medium risk customers 80

5.2. (iii) High risk customers 80

6 Chapter - 6 :: General Guidelines 82

6.1 Roles & responsibilities of Bank’s Officers and Staff 82

6.2 Duties / Responsibilities of Officers/staff 83

6.3 Evaluation of KYC Guidelines by Internal Audit and Inspection System 85

6.4 Training to Officers / staff 85

6.5 Confidentiality of customer information 85

6.6 Avoiding hardship to customers 85

6.7 Sensitising the customers 85

6.8 KYC for the Existing Accounts 86

6.9 Applicability to Branches and Subsidiaries Outside India 86

6.10 Technology requirements 86

6.11 Penalty for Non-adherence of KYC norms 86



Appendix -I Indicative list of High/Medium Risk Customers 88

Appendix -II Customer Risk Profile & Business Risk Profile 92

Appendix-III Foreign Portfolio Investors (FPIs) categorized by SEBI 94

Appendix-IV KYC documents prescribed by RBI for FPIs 95

Appendix-VCustomer identification procedure : Features to be verified and documents that may be obtained from customers 96

Appendix-VISimplified account opening form for opening of accounts under Pradhan Mantri Jan Dhan Yojana (PMJDY) 100

Appendix-VIIList of firms advised by RBI posing as Multi Level Marketing (MLM) Agencies

102

Appendix-VIIICompanies/Individuals identified/suspected of carrying out MLM activities 109

Appendix-IXAlert scenarios indicated by IBA study for detection of suspicious transactions 110

Appendix-X Offline alert indicators provided by IBA study for detection of suspicious transactions at branches

116

Appendix-XI An Indicative list of suspicious activities 118

Appendix-XIIGovt. of India, Ministry of Home Affairs Notification No.17015/10/2002-IS-VI dated 27.08.2009 on Procedure for Implementation of Section 51A of the Unlawful Activities (Prevention) Act, 1967

121

Appendix-XIII An illustrative Check-list covering Money laundering Activities 128

Appendix-XIV List of Circulars on Know Your Customer (KYC) Guidelines issued from 1st July 2014

130

Appendix-XVChanges incorporated in the current consolidated guidelines vis-à-vis guidelines issued in terms of last Policy vide IC No. 13347 dated 10.10.2014

132

GLOSSARY -- Page No. 136


Revised Policy/Guidelines on Know Your Customer (KYC) norms/ Anti-Money Laundering (AML) standards/ Combating Financing of Terrorism (CFT)/ Obligations of banks under PMLA, 2002 for 2015-’16 (updated up to 30.11.2015)

CHAPTER - 1

INTRODUCTION

The objective of KYC/AML/CFT guidelines is to prevent banks from being used, intentionally or unintentionally, by criminal elements for money laundering or terrorist financing activities. KYC procedures also enable banks to know/understand their customers and their financial dealings better which in turn help them manage their risks prudently.

1.1 Definition of Customer

For the purpose of KYC policy, a ‘Customer’ is defined as :

a person who is engaged in a financial transaction or activity with a reporting entity and includes a person on whose behalf the person who is engaged in the transaction or activity, is acting;

• a person or entity that maintains an account and/or has a business relationship with the bank;

• one on whose behalf the account is maintained (i.e. the beneficial owner);

[‘Beneficial Owner' means the natural person who ultimately owns or controls a client and or the person on whose behalf a transaction is being conducted, and includes a person who exercise ultimate effective control over a juridical person]

• 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 bank, say, a wire transfer or issue of a high value demand draft as a single transaction.


1.1.1 Person

In terms of PML Act a ‘person’ includes :-

(i) an individual,(ii) a Hindu undivided family, (iii) a company,(iv) a firm,(v) an association of persons or a body of individuals, whether incorporated or not,(vi) every artificial juridical person, not falling within any one of the above persons (i to v),

and(vii) any agency, office or branch owned or controlled by any of the above persons (i to vi).

1.2 Definition of Transactions

"Transaction" means a purchase, sale, loan, pledge, gift, transfer, delivery or the arrangement thereof and includes :-

(i) opening of an account;(ii) 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;

(iii) the use of a safety deposit box or any other form of safe deposit;(iv) entering into any fiduciary relationship;(v) any payment made or received in whole or in part of any contractual or other legal

obligation;(vi) any payment made in respect of playing games of chance for cash or kind

including such activities associated with casino; and(vii) establishing or creating a legal person or legal arrangement.'

1.3 Definition of Officially Valid Document (OVD)

Government of India has notified the “Prevention of Money-Laundering (Maintenance of Records) Amendment Rules, 2013” (Rules) and have published the same in the extraordinary official gazette vide G.S.R. No. 576 (E) dated August 27, 2013. In terms of the notification, “Officially Valid Document (OVD)” means 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 (UIDAI) containing details of name, address and Aadhaar number or any document as notified by the Central Government in consultation with the regulator.


In terms of the above notification, only the documents mentioned in the rule or any other document as notified by the Central Government in consultation with the Regulator would be ‘Officially Valid Document’. The discretion given to banks earlier stands withdrawn.

The Government of India has since amended the Prevention of Money Laundering (Maintenance of Records) Rules, 2005 vide gazette notification GSR 288(E) dated 15.04.2015 providing additional relaxations for the purpose of proof of address in addition to the relaxations in proof of identity under ‘simplified measures’ as contained in paragraph 2(d) of PML Rules.

1.3.1 Simplified Measures for Proof of Identity

Provided that where ‘simplified measures’ are applied, i.e. for Low risk customers, for verifying the identity of the clients, the following documents shall be deemed to be OVD :-

a) Identity card with applicant’s Photograph issued by Central/State Government Departments, Statutory/ Regulatory Authorities, Public Sector Undertakings, Scheduled Commercial Banks, and Public Financial Institutions.

b) Letter issued by a Gazetted Officer, with a duly attested photograph of the person.

1.3.2 Simplified Measures for Proof of Address

Provided further that where ‘simplified measures’ are applied for verifying for the limited purpose of proof of address, the following additional documents are deemed to be OVDs :-

(a) Utility bill which is not more than two months old of any service provider (electricity, telephone, postpaid mobile phone, piped gas, water bill);

(b) Property or Municipal Tax receipt;(c) Bank account or Post Office savings bank account statement;(d) Pension or family pension payment orders (PPOs) issued to retired employees by

Government Departments or Public Sector Undertakings, if they contain the address;(e) Letter of allotment of accommodation from employer issued by State or Central

Government departments, statutory or regulatory bodies, public sector undertakings, scheduled commercial banks, financial institutions and listed companies. Similarly, leave and license agreements with such employers allotting official accommodation; and

(f) Documents issued by Government departments of foreign jurisdictions and letter issued by Foreign Embassy or Mission in India.


1.4 Designated Director

Bank is required to nominate a Director on their Boards as “Designated Director”, as per the provisions of the Prevention of Money Laundering (Maintenance of Records) Rules, 2005 (Rules), to ensure overall compliance with the obligations under the Act and Rules. The name, designation and address of the Designated Director is to be communicated to the Director, Financial Intelligence Unit - India (FIU-IND).

Designated Director" means a person designated by the reporting entity (bank, financial institution etc.) to ensure overall compliance with the obligations imposed under chapter IV of the Act and the Rules and includes :-

a. the Managing Director or a whole-time Director duly authorized by the Board of Directors if the reporting entity is a company,

b. the managing partner if the reporting entity is a partnership firm,c. the proprietor if the reporting entity is a proprietorship concern,d. the managing trustee if the reporting entity is a trust,e. a person or individual, as the case may be, who controls and manages the affairs of the

reporting entity if the reporting entity is an unincorporated association or a body of individuals, and

f. such other person or class of persons as may be notified by the Government if the reporting entity does not fall in any of the categories above.

Explanation. - For the purpose of this clause, the terms "Managing Director" and "Whole-time Director" shall have the meaning assigned to them in the Companies Act, 1956 (1 of 1956).

In addition, it shall be the duty of every reporting entity, its Designated Director, officers and employees to observe the procedure and manner of furnishing and reporting information on transactions referred to in Rule 3 of the Prevention of Money-laundering (Maintenance of Records) Rules, 2005, through submission of CTR, NTR, CWTR, CCR & STR to FIU-IND.

1.5 Principal Officer

Bank should appoint a senior management officer to be designated as Principal Officer. Bank should ensure that the Principal Officer is able to act independently and report directly to the senior management or to the Board of Directors. Principal Officer shall be located at the head/corporate office of the bank 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 Further, the role and responsibilities of the Principal Officer should include overseeing and ensuring overall compliance with regulatory guidelines on KYC/AML/CFT issued from time to time and obligations under the Prevention of Money Laundering Act, 2002, rules and regulations made there under, as amended form time to time. The Principal Officer will also be responsible for timely submission of CTR, STR and reporting of


counterfeit notes and all transactions involving receipts by non-profit organisations of value more than Rupees Ten Lakh or its equivalent in foreign currency to FlU-IND. With a view to enabling the Principal Officer to discharge his responsibilities effectively, the Principal Officer and other appropriate staff should have timely access to customer identification data and other CDD information, transaction records and other relevant information.

1.6 Some important guidelines

Branches are advised to note the following important guidelines for meticulous compliance, in view of the importance attached for adherence to the KYC & AML policy :-

a) Customer identification procedure & KYC updation

(i) The identity of the proposed customer and the beneficial owner should be established to the satisfaction of the bank before permitting the opening of accounts.

(ii) The identity of the existing customer also needs to be re-verified while activating dormant/in-operative accounts.

(iii) The identification requirements in respect of walk-in-customers should be met and records to be preserved, wherever applicable.

b) Verification of Genuineness of Permanent Account Number (PAN)

Branches should verify genuineness of the Pan provided through NSDL site. Branches must not enter any Junk/ Invalid PAN as this situation is not only fraught with risk with facilitating the customer with less deduction of tax but also makes the branch Managers personally responsible.

c) KYC for sale of Third party products

When banks sell third party products as agents, the responsibility for ensuring compliance with KYC/AML/CFT regulations lies with the third party. However, to mitigate reputational risk to banks and to enable a holistic view of a customer’s transactions, branches must follow the appended guidelines :

(i) Even while selling of third party products as agents, banks should verify the identity and address of the walk-in-customer.

(ii) Banks should also maintain transaction details with regard to sale of third party products and related records.


(iii) Sale of third party products by banks as agents to customers, including walk-in-customers, for Rs.50,000 and above must be made (a) by debit to customers’ accounts or against cheques, and (b) obtention & verification of the PAN given by the account based as well as walk-in-customers. This instruction would also apply to sale of bank’s own products, payment of dues of credit cards/sale and reloading of prepaid/travel cards and any other product for Rs. 50,000 and above.

d) Risk Categorization of Accounts

Risk categorization in respect of the accounts should be assigned ab initio at the time of opening of the accounts. Periodical reviews of all accounts regarding its risk categorization have to be carried out at the prescribed intervals. We have since introduce system-based risk categorization of the customers, through integration of AML software with B@ncs24, based on set domain parameters viz. occupation, line of business, entity type, country, resident status etc.

e) Monitoring & Reporting of Transactions

(i) The coverage and intensity of monitoring of transactions should be in commensurate with the risk categorization of the customers and should meet all the obligations of the bank under PMLA 2002. Moreover, monitoring of transactions of walk-in customers should also be subjected to the same rigour as that applicable to the bank’s own customers for monitoring purposes.

(ii) It is observed that some branches were using internal accounts as a parking account for own customers’ / walk-in customers’ cash transactions which involved purchase of DDs, sale of gold coin etc. for amounts above Rs.50,000. This is strictly prohibited under extant policy guidelines. In such cases, the transactions effected were not being captured for the purposes of monitoring and reporting under CTR/STR. It is, therefore, advised to put a stop to this practice forthwith, and in case any violation is found later on, personal accountability will be fixed on the erring officials. .

f) Issuing of Demand Draft/Banker’s Cheque/Inter Office Instrument for Rs.50,000 and above

Branches must not accept cash for issuing of Demand Drafts(DD) / Banker’s Cheque(BC) / Inter-Office-Instrument (IOI) of Rs.50,000 and above to customers / walk-in customers.

g) Structuring of transactions with value just below threshold limits

Structured transactions involving multiple cash deposits, DD/IOI/Banker’s Cheque purchases and sale of gold coins, with the individual transactions of values just below the


threshold limit of Rs.50,000 i.e. in the range of Rs.40,000 to Rs.49,999 (i.e. less than thresh hold limit of Rs.50,000) to the same purchaser (favouring same beneficiary) on a single day (aggregate of such drafts issued exceeds Rs.50,000), indicating accommodating them by splitting of amounts, is against the spirit of PMLA guidelines and must be avioded.

h) Customer’s transactions through BGL Accounts

Branches/offices must desist from initiating transactions on behalf of the customers through BGL accounts viz. sundry, suspense, internal accounts etc. in violation of extant guidelines. All the field functionaries should note that in case any such instance comes to notice, the concerned officials would be held personally responsible and would be subjected to Disciplinary Action.

i) Transactions through NRE/NRO Accounts, Liberised Remittance Scheme and Import of gold under consignment basis

Branches must ensure strict adherence to the extant FEMA, 1999 regulations on permissible transactions and upper limits for transactions in NRE & NRO accounts considering the aspect of repatriation of funds through such accounts. It may also be ensured that the transactions within the extant ceilings prescribed under Liberalised Remittance Scheme are put through only in case of resident individuals meeting all other conditions specified in the extant guidelines/instructions. It is reiterated that the facility should not be extended to non-individuals. Banks should not take part with advance payments on import of gold under consignment basis.

j) Acceptance of Cash Deposits in accounts

Branches are advised that there is no restriction regarding acceptance of cash deposits in the accounts of the customers provided PAN/Form 60/61 is obtained in case of deposits above Rs.50,000, and CTR reports are filed with FIU-IND for cash transactions above Rs.10,00,000 in aggregate during a month. However, attempts to structure transactions below the threshold limits of Rs.50,000 and/ or Rs.10,00,000 should attract the attention of the branches for further necessary action including reporting of such transactions under STRs to FIU-IND through their respective ZOs & HO.

k) Management Overview and Compliance Culture

Lackadaisical approach in ensuring KYC compliance will be detrimental to the interests of the banks in the long run, not only in the domestic front, but in the international market as well. A bank that knowingly / unknowingly participates in transactions intended to be used by customers to avoid regulatory or financial reporting requirements, evade tax liabilities or facilitate illegal conduct will be exposing itself to reputational risk.


l) Internal Audit and Concurrent Audits

Bank’s internal audit and compliance functions have an important role in evaluating and ensuring adherence to the KYC policies and procedures. Branches should take a proactive role to make optimum use of the management tools like internal audit and concurrent audit machinery by ensuring reporting of such cases of non-adherence to the KYC norms & AML measures.

1.7 KYC Policy

KYC policy incorporates the following four key parameters :-

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


CHAPTER – 2

CUSTOMER ACCEPTANCE POLICY (CAP)

2.1 In order to establish relationship with the intending customer, comprehensive information regarding the new customer should be obtained at the initial stage. The prospective customer should be interviewed by the Branch Manager/ Officer to understand customer’s intended relationship with the Bank.

Branch heads/officials, in the process of establishing relationship with the customer and/or permitting opening of the account, should protect the bank from the risks of doing business with any individual or entity whose identity cannot be determined or who refuses to provide information, or who have provided information that contains significant inconsistencies which cannot be resolved after due investigation.

The following guidelines should be taken into account while accepting a customer :

(i) No account is opened in anonymous or fictitious/benami name. Opening of or keeping any anonymous account or accounts in fictitious name or account on behalf of other persons whose identity has not been disclosed or cannot be verified should not be allowed.

(ii) Parameters of risk perception are clearly defined in terms of the nature of business activity, location of customer and his clients, mode of payments, volume of turnover, social and financial status etc. to enable categorisation of customers into low, medium and high risk. Customers requiring very high level of monitoring, e.g. Politically Exposed Persons (PEPs) should be categorized under high risk.

(iii) Documents and other information to be collected in respect of different categories of customers depending on perceived risk and keeping in mind the requirements of PML Act, 2002 and instructions/guidelines issued from time to time.

(iv) Account should not be opened where it is not possible to apply appropriate customer due diligence measures i.e. unable to verify the identity and /or obtain required documents due to non cooperation of the customer or non reliability of the data/information furnished to the bank. The branch may also consider closing an existing account under similar circumstances. It is, however, necessary to have suitable built in safeguards to avoid harassment of the customer. For example, decision by the branch to close an account in such cases should be taken at Zonal Office level after giving due notice to the customer explaining the reasons for such a decision.

(v) Circumstances, in which a customer is permitted to act on behalf of another person/entity, should be clearly spelt out in conformity with the established law and practice of banking as there could be occasions when an account is operated by a mandate holder or where an account is opened by an intermediary in fiduciary capacity.


(vi) Necessary checks should 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 such as individual terrorists or terrorist organisations etc or whose name appears in the sanction lists circulated by the RBI.

2.2 CUSTOMER PROFILE

A profile for each new customer should be prepared based on risk categorization taking the under noted points into consideration:

Identity of the customer Social/financial status Nature of business activity and location Information about his clients’ location of business Volume of turnover Mode of payment, sources of fund

The nature and extent of due diligence will depend on the risk perceived by the branch. However, while preparing customer profile care should be taken to seek only such information from the customer, which is relevant to the risk category and is not intrusive. The customer profile is a confidential document and details contained therein should not be divulged for cross selling or any other purposes.

2.3 RISK CATEGORISATION

The KYC guidelines go beyond merely establishing the identity of the person and satisfying about his/her credentials by obtaining an introductory reference from a known person. The due diligence expected under KYC involves a risk based approached (as noted in Appendix-I) going in to the purpose and reasons for opening the account, anticipated turnover in the account, source of wealth (net worth) of the person opening the account and sources of funds flowing into the account.

Branches should maintain “Customer Risk Profile” (format provided in Appendix-II) both for new as well as existing customers based on the declaration/ information furnished by the customer during the course of interview so as to understand customer’s intended relationship with the Bank.

The profile would give an idea as to what type of transactions / activities are expected in the account. This information is valuable for monitoring the activities in the account. Based upon the information given by the customer and recorded in the Customer Profile regarding his/ her occupation/ activity/ source of funds etc., a “threshold limit” in each particular account is to be determined.


Very high turnover in the account inconsistent with the size of the balance maintained requires intensified monitoring. If transactions of very high amount in variance with the profile are noticed, the account holder should be contacted for further details to the satisfaction of the Branch Manager. On the basis of assessment, the account should be reviewed and the profile should be re-classified according to the risk perceived and the nature and extent of monitoring required in future is to be determined accordingly.

Detailed guidelines on risk assessment are given in Chapter-5.

2.4 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 banking services to general public, especially to those, who are financially or socially disadvantaged.


CHAPTER – 3

CUSTOMER IDENTIFICATION PROCEDURE (CIP)

3.1 Procedure to be adopted in Customer Identification

a) Customer identification means undertaking client due diligence measures while commencing an account-based relationship including identifying and verifying the customer and the beneficial owner on the basis of one of the Officially Valid Documents (OVDs).

b) Customer Identification Procedure to be carried out at different stages, i.e.,(i) while establishing a banking relationship; (ii) while carrying out a financial transaction;(iii) when there is a doubt about the authenticity or adequacy of the customer

identification data it has obtained;(iv) when selling third party products as agents;(v) while selling banks’ own products, payment of dues of credit cards/sale and reloading of

prepaid/travel cards and any other product for more than Rs.50,000/-.(vi) when carrying out transactions for a non-account based customer, that is a walk-in

customer, where the amount involved is equal to or exceeds Rs.50,000/-, whether conducted as a single transaction or several transactions that appear to be connected.

(vii) when there is a reason to believe that a customer (account- based or walk-in) is intentionally structuring a transaction into a series of transactions below the threshold of Rs.50,000/-.

Branches need 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 banking relationship. Being satisfied means that the branch 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 banks 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, sufficient identification data should be obtained to verify the identity of the customer, his address/location, and also his recent photograph. For customers that are legal persons or entities, the branch should (i) verify the legal status of the legal person/entity through proper and relevant documents; (ii) verify that any person purporting to act on behalf of the legal person/entity is so authorised and identify and verify the identity of that person; (iii) understand the ownership and control structure of the customer and determine who are the natural persons who ultimately control the legal person.


c) Branches/offices have to seek ‘mandatory’ information required for KYC purpose which the customer is obliged to give while opening an account or during periodic updation. Other ‘optional’ customer details/additional information, if required may be obtained separately after the account is opened only with the explicit consent of the customer. The customer has a right to know what is the information required for KYC that she/he is obliged to give, and what is the additional information sought by the bank that is optional. Further, it is reiterated that bank should keep in mind that the information (both ‘mandatory’ - before opening the account as well as ‘optional’- after opening the account with the explicit consent of the customer) collected from the customer is to be treated as confidential and details thereof are not to be divulged for cross selling or any other like purposes.

d) Customer identification requirements in respect of a few typical cases, especially, legal persons requiring an extra element of caution are given in paragraph 3.3 below for guidance of field functionaries. Based on practical experience of dealing with such persons/entities, branches/ offices may apply normal bankers’ prudence within established legal framework and practices. If the bank decides to accept such accounts in terms of the Customer Acceptance Policy, the bank should 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.

3.2 Customer Due Diligence (CDD) requirements while opening accounts

3.2.1 Accounts of individ u als :

(i) For opening accounts of individuals, branches should obtain one certified copy of an 'Officially Valid Document (OVD)' (as mentioned at paragraph 1.3 above) containing details of identity and address, one recent photograph and such other documents pertaining to the nature of business and financial status of the customer as may be required by the bank/FI.

(ii) E-KYC service of Unique Identification Authority of India (UIDAI)

E-KYC service of Unique Identification Authority of India (UIDAI)should also be accepted as a valid process for KYC verification under Prevention of Money Laundering (Maintenance of Records) Rules, 2005. The information containing demographic details and photographs made available from UIDAI as a result of e-KYC process (“which is an electronic form and accessible so as to be usable for a subsequent reference”) is to be treated as an ‘Officially Valid Document’ under PML Rules.


Under e-KYC, the UIDAI transfers the data of the individual comprising name, age, gender, and photograph of the individual, electronically to the bank/business correspondents/business facilitators, which may be accepted as valid process for KYC verification. The individual user, however, has to authorize to UIDAI by explicit consent to release her/his identity/address through biometric authentication to the banks/business correspondents/business facilitator.

Banks may accept e-Aadhaar downloaded from UIDAI website as an officially valid document subject to the followings :-

a) If the prospective customer knows only his/her Aadhaar number, the bank has to print the prospective customer’s e-Aadhaar letter in the bank directly from the UIDAI portal; or adopt e-KYC procedure as mentioned in the circular referred above.

b) If the prospective customer carries a copy of the e-Aadhaar downloaded elsewhere, still the bank has to print the prospective customer’s e-Aadhaar letter in the bank directly from the UIDAI portal; or adopt e-KYC procedure or confirm identity and address of the resident through authentication service of UIDAI.

In view of the aforesaid RBI guidelines and recent Direct Benefit Transfer (DBT) initiative of the Government of India, all branches are advised to use Aadhaar as a KYC document for opening of bank accounts to the extent possible to ensure that the bank account can be automatically linked to Aadhaar.

In this connection reference is drawn on the order dated 15.10.2015 passed by the Hon’ble Supreme Court of India in the ‘Aadhaar’ matter which reads “… that the Aadhaar card Scheme is purely voluntary and it cannot be made mandatory till the matter is finally decided by this court one way or the other”.

(iii) Introduction - Identification through Introductory Reference

Introduction is not mandatory for opening an account. Since introduction is not necessary for opening of accounts under PML Act and Rules or Reserve Bank’s extant KYC instructions, branches should not insist on introduction for opening bank accounts of customers.

However, in case of accepting introduction the following guidelines should be adhered:-


(a) An existing account holder maintaining a satisfactory account for at least 12 months may introduce an account preferably by signing the account opening form in the presence of the branch officials. Implication of introducing an account should be made known to the introducer.

(b) With regard to introduction by staff members, if the depositor is well known to the officer/ staff of the Branch/Bank, the latter (officer / staff) may introduce the depositor under his/her full signature. It is advised that staff members should refrain from introducing parties who are not well known to them.

(c) For opening a Current Account, it may be introduced only by an officer of the Bank. For opening other accounts (excepting Current Account), these may be introduced by any member of staff of the Branch except sub-staff.

(d) In case where the Account Opening Forms bear the signatures of manager/officials of other branches/offices of the Bank for introduction, apart from verifying signatures of such introducers with the specimen signatures available on record, the branch concerned should obtain written confirmation of the introduction from the officials of other branches/offices who has introduced the account.

(iv) Simplified Measures for Proof of Identity

If an individual customer does not have any of the OVDs (as mentioned at paragraph 1.3.1 above) as proof of identity, then banks/FIs are allowed to adopt ‘S i mplifi e d Measures’ in respect of ‘Low ri s k’ custom er s , taking into consideration the type of customer, business relationship, nature and value of transactions based on the overall money laundering and terrorist financing risks involved. Accordingly, in respect of low risk category customers, where simplified measures are applied, it would be sufficient to obtain a certified copy of any one of the documents referred to at proviso to paragraph 1.3.1 above., which shall be deemed as an OVD for the purpose of proof of identity.

(v) Simplified Measures for Proof of Address

The additional documents mentioned at 1.3.2 above shall be deemed to be OVDs under ‘simplified measure’ for the ‘low risk’ customers for the limited purpose of proof of address where customers are unable to produce any OVD for the same.

(vi) Small Accounts

In terms of Government of India, Notification No. 14/2010/F.No.6/2/2007-E.S dated December 16, 2010, certain amendments have been made on 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. The amendments include inter alia introduction of the concept of ‘Small Account’.


If an individual customer does not possess either any of the OVDs or the documents applicable in respect of simplified procedure (as detailed at paragraph 1.3 above), then ‘Small Accounts’ may be opened for such an individual. In terms of Rule 2 clause (fb) of the Notification 'Small Account' means a savings account in a banking company where :-

• the aggregate of all credits in a financial year does not exceed rupees one lakh;

• the aggregate of all withdrawals and transfers in a month does not exceed rupees ten thousand and

• the balance at any point of time does not exceed rupees fifty thousand.

A ‘small account’ may be opened on the basis of a self-attested photograph and affixation of signature or thumb print.

Such accounts may be opened and operated subject to the following conditions :-

a) the designated officer of the bank, while opening the small account, certifies under his signature that the person opening the account has affixed her/his signature or thumb print, as the case may be, in her/his presence;

b) a small account shall be opened only at Core Banking Solution (CBS) linked branches or in a branch where it is possible to manually monitor and ensure that foreign remittances are not credited to the account and that the stipulated monthly and annual limits on aggregate of transactions and balance requirements in such accounts are not breached, before a transaction is allowed to take place;

c) a small account shall remain operational initially for a period of twelve months, and thereafter for a further period of twelve months if the holder of such an account provides evidence before the banking company of having applied for any of the officially valid documents within twelve months of the opening of the said account, with the entire relaxation provisions to be reviewed in respect of the said account after twenty four months;

d) a small account shall be monitored and when there is suspicion of money laundering or financing of terrorism activity or other high risk scenarios, the identity of the customer shall be established through the production of “officially valid documents”; and

e) foreign remittance shall not be allowed to be credited into a small account unless the identity of the customer is fully established through the production of “officially valid documents”.

In case above conditions are not maintained, the account should be treated as general savings bank account instead of ‘small account’, and accordingly relaxation on submission of OVDs would not be allowed anymore and necessary KYC documents as applicable should be obtained before allowing any further operation.


(vii) A customer is required to submit only one OVD for both proof of identity and for proof of address as part of KYC procedure. Thus, if the address on the document submitted for identity proof by the prospective customer is same as that declared by him/her in the account opening form, the document should be accepted as a valid proof for both identity and address.

If the OVD submitted for proof of identity does not have the proof of address (for e.g., PAN Card), then the customer is required to submit another OVD for proof of address.

(viii) Proof of Address

a) Norms for furnishing proof of address have been relaxed to allow submitting only one documentary proof of address (either current or permanent) while opening a bank account or while undergoing periodic updation. In case the proof of address furnished by the customer is neither the local address nor the address where the customer is currently residing, the branch should take a declaration from the customer of her/his local address on which all correspondence will be made by the branch with the customer. No proof is required to be submitted by the customer for such address. This address, however, should be verified by the bank through ‘positive confirmation’ such as acknowledgment of receipt of letter, cheque books, ATM cards; telephonic conversation; visits to the place; etc. In the event of any change in this address due to relocation or any other reason, customers should intimate the new address for correspondence to the bank within two weeks of such a change.

b) In case the address mentioned as per ‘proof of address’ undergoes a change, fresh proof of address is to be submitted to the bank/FI within a period of six months.

(ix) In case of close relatives, e.g. husband, wife, son, daughter and parents, etc. who live with their wife, husband, father/mother, daughter and son, who do not have officially valid document for address verification, then, in such cases, branches should obtain OVD for proof of address and identity of the relative with whom the prospective customer is living together with a declaration from the relative that the said person (prospective customer) proposing to open an account is a relative and is staying with her/him. Branches can use any supplementary evidence such as a letter received through post for further verification of the address. It should be kept in mind the spirit of instructions issued by the Reserve Bank and avoid undue hardships to individuals who are, otherwise, classified as low risk customers.

(x) Shifting of bank accounts to another centre - Proof of address :

Banks are not required to obtain fresh documents of customers when customers approach them for transferring their account from one branch of the bank to another


branch of the same bank. Banks are advised that KYC verification once done by one branch of the bank should be valid for transfer of the account within the bank if full KYC verification has been done for the concerned account and is not due for periodic updation. The customers should be allowed to transfer their accounts from one branch to another branch without restrictions, without insisting on fresh proof of address and/or identity and on the basis of a self-declaration from the account holder about his/her current address. Further, if an existing KYC compliant customer of a bank desires to open another account in the same bank, there should be no need for submission of fresh proof of identity and/or address. However, in such case procedure should be followed to obtain the local address or the address where the customer is currently residing, in line with the guidelines issued in point No. (viii) above.

(xi) In terms of the Government of India Notification dated 27.08.2013 on amendment of PML (Maintenance of Records) Rules and subsequent RBI directive dated 17.07.2014, where a customer, categorised as low risk, expresses inability to complete the documentation requirements on account of any reason that the bank considers to be genuine, and where it is essential not to interrupt the normal conduct of business, the bank may complete the verification of identity within a period of six months from the date of establishment of the relationship.

(xii) Accounts of non-face-to-face customers

With the introduction of phone and electronic banking, increasingly accounts are being opened by banks for customers without the need for the customer to visit the bank branch. In the case of non-face-to-face customers, apart from applying the usual customer identification procedures, there must be specific and adequate procedures to mitigate the higher risk involved. Certification of all the documents presented should be insisted upon and, if necessary, additional documents may be called for. In such cases, branches may also require the first payment to be effected through the customer's account with another bank which, in turn, adheres to similar KYC standards. In the case of cross-border customers, there is the additional difficulty of matching the customer with the documentation and the bank 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.

(xiii) Procedure to be followed in respect of foreign students

A foreign student studying in India would be considered a “Person Resident in India” as defined in Section 2 (v) of FEMA Act, 1999 and is eligible to open bank account without prior permission of RBI. Branches/ Offices can open accounts of foreign students studying in India after observing the normal KYC procedure. Closure of such accounts and repatriation of proceeds are also allowed as per FEMA notification No. 13/2000 dated 3rd May,2000 and amendments thereon from time to time. Detail of


documents based on which Bank can open an account, in the name of a foreign students studying in India, are as below :-

(i) Passport - as the document for proof of identity(ii) Valid Visa - a visa with photograph in it can also serve as an identity proof(iii) Proof of admission - usually a letter from the university or college(iv)Address proof - a letter from the college or hostel, certificate from embassy of the

country of origin or any appropriate legal authority, certified local address in India/rent agreement / certification of registration issued by Foreigner Registration Regional Office (FRRO).

It is observed that foreign student arriving in India are facing difficulties in complying with KYC norms while opening a bank account due to non-availability of any proof of local address. In view of the above, RBI has given guidelines on the following lines for opening accounts of foreign students who are not able to provide an immediate address proof while approaching for opening bank account :-

a) Banks may open a Non Resident Ordinary (NRO) bank account of a foreign student on the basis of his/her passport (with visa & immigration endorsement) bearing the proof of identity and address in the home country together with a photograph and a letter offering admission from the educational institution in India.

b) Within a period of 30 days of opening the account, the foreign student should submit to the branch where the account is opened, a valid address proof giving local address, as noted in Point No. (iv) above. Branches should accordingly obtain a declaration about the local address along with the proof within a period of 30 days of opening the account and verify the said local address.

c) During the 30 days period, the account should be operated with a condition of allowing foreign remittances not exceeding USD 1,000 or equivalent into the account and a cap of monthly withdrawal to Rs. 50,000/-, pending verification of address.

d) The account would be treated as a normal NRO account, and will be operated in terms of instructions contained in the Reserve Bank of India’s instructions on Non-Resident Ordinary Rupee (NRO) Account, and the provisions of Schedule 3 of FEMA Notification 5/2000 RB dated May 3, 2000.

e) Students with Pakistani and Bangladesh nationality will need prior approval of the Reserve Bank for opening the account.

(xiv) Accounts of Politically Exposed Persons (PEPs) resident outside India

a) Politically 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.


Sufficient information should be gathered on any person/customer of this category intending to establish a relationship and all the information available on the person in the public domain should be checked. Identity of the person should be verified and information about the sources of funds should be sought before accepting the PEP as a customer. The decision to open an account for PEP should be taken at a senior level not less than the Zonal Head. Branches 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.

b) In the event of an existing customer or the beneficial owner of an existing account, subsequently becoming a PEP, branches should obtain Zonal Head’s approval to continue the business relationship and subject the account to the CDD measures as applicable to the customers of PEP category including enhanced monitoring on an ongoing basis. These instructions are also applicable to accounts where PEP is the ultimate beneficial owner.

c) Further, branches should ensure appropriate ongoing risk management procedures for identifying and applying enhanced CDD to PEPs, customers who are close relatives of PEPs, and accounts of which a PEP is the ultimate beneficial owner.

(xv) Accounts of High Net-worth Individual (HNI) Customers

While mobilizing sizable business, it has been felt that there is a need to increase the penetration level to reach high valued accounts so that we can cross sell our products efficiently, promote e-products and make their connections useful for mobilizing additional business.Further, there is an imperative need to monitor transactions in these accounts. In this background, it was felt necessary to define High Net-worth Individuals (HNIs) so that whenever the account is opened, the system will flag the operations staff to notice the type of customer and accordingly render prompt and effective customer service and also monitor the transactions in these accounts.

Thus, the customers satisfying all or any one of the undernoted characteristics will be defined as HNI- Individuals having average monthly balance of more than Rs.10 lac in SB and Rs.25

lacs in CA account. Individuals enjoying borrowing facilities of more than Rs.5 crores. Individuals having Term Deposits (aggregate in single or joint names) of more than

Rs.50 lacs. Turnover in any individual account in excess of Rs.1 crore per annum. Individuals having annual income more than Rs.20 lacs.

The HNI customers are poised to High Risk and require close monitoring, as detailed in Chapter-5, para 5.2(iii).


(xvi) Officially Valid Documents (OVDs) for change in name on account of marriage or otherwise

In view of the problems faced by the persons who changed their names due to marriage or otherwise, in submitting an OVD while opening a new bank account or during periodic updation exercise or incorporating the name change in the existing accounts, Government of India has since amended the Prevention of Money Laundering (Maintenance of Records) Rules, 2005 and issued a gazette notification G.S.R.730(E) dated September 22, 2015 where, in terms of clause 2 of the PML third amendment rules, the Government has provided an explanation inserted in the clause (d) of Rule 2, Sub rule (1) which reads as under :-

“Explanation : For the purpose of this clause, a document shall be deemed to an ‘officially valid document’ even if there is a change in the name subsequent to its issuance, provided it is supported by a marriage certificate issued by the State Government or a Gazette notification, indicating such a change of name”

Accordingly, as notified by the RBI, branches/offices are advised to accept a copy of marriage certificate issued by the State Government or Gazette notification indicating change in name, together with a certified copy of the ‘Officially Valid Document’ (OVD) in the existing name of the person while establishing an account based relationship or while undergoing periodic updation exercise.

3.2.2 Accounts of persons other than individuals :

(i) Company

Where the customer is a company one certified copy each of the following documents are required for customer identification :-

(a) Certificate of incorporation;

(b) Memorandum and Articles of Association;

(c) A resolution from the Board of Directors and power of attorney granted to its

managers, officers or employees to transact on its behalf; and

(d) An officially valid document in respect of managers, officers or employees holding

an attorney to transact on its behalf.

Banks/FIs need to be vigilant against business entities being used by individuals as a ‘front’ for maintaining accounts with banks/FIs. Banks/FIs should 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.

(ii) Partnership Firm


Where the customer is a partnership firm, one certified copy of the following documents is required for customer identification :-

(a) registration certificate;

(b) partnership deed; and

(c) an officially valid document in respect of the person holding an attorney to

transact on its behalf.

(iii) Trust/Nominee or Fiduciary Accounts

Where the customer is a trust, one certified copy of the following documents is required for customer identification :-

(a) registration certificate;

(b) trust deed; and

(c) an officially valid document in respect of the person holding a power of

attorney to transact on its behalf.

There exists the possibility that trust/nominee or fiduciary accounts can be used to circumvent the customer identification procedures. It should be determined whether the customer is acting on behalf of another person as trustee/nominee or any other intermediary. If so, branches should 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, 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 should be taken. 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.

(iv) Unincorporated Association or a Body of Individuals

Where the customer is an unincorporated association or a body of individuals, one certified copy of the following documents is required for customer identification :-

(a) resolution of the managing body of such association or body of individuals;

(b) power of attorney granted to transact on its behalf;(c) an officially valid document in respect of the person holding an attorney to

transact on its behalf; and

(d) such information as may be required by the bank to collectively establish the legal existence of such an association or body of individuals.


(v) Proprietary concerns:

(1) For proprietary concerns, in addition to the OVD applicable to the individual (proprietor), any two of the following documents in the name of the proprietary concern are required to be submitted :-

(a) Registration certificate

(b) Certificate/licence issued by the municipal authorities under Shop and

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.

(g) 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.

(h) Utility bills such as electricity, water, and landline telephone bills.

(2) Though the default rule is that any two documents, mentioned above, should be provided as activity proof by a proprietary concern, in cases where the banks are satisfied that it is not possible to furnish two such documents, they would have the discretion to accept only one of those documents as activity proof. In such cases, the banks, 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.

(vi) Simplified KYC norms for Foreign Portfolio Investors (FPIs)

Reserve Bank of India in its first Bi-Monthly Monetary Policy Statement, 2014-15, has proposed to simplify the KYC related procedure for opening bank accounts by FPIs and accordingly issued guidelines of KYC norms for Foreign Portfolio Investors (FPIs).

Consequent to the Budget proposal for the year 2013-2014 and the recent amendments to the Prevention of Money Laundering (Maintenance of Records) Rules,


2005 (Rules), Securities and Exchange Board of India (SEBI) has rationalised the KYC norms for entry of FPIs. Accordingly, the matter has since been examined by RBI with the Government and it has been decided by RBI to simplify the KYC norms in the case of FPIs.

FPIs have been categorized by SEBI based on their perceived risk profile as detailed in Appendix-III. In terms of Rule 9 (14)(i) of the Rules, simplified norms have been prescribed for those FPIs have been duly registered in accordance with SEBI guidelines and have undergone the required KYC due diligence/verification prescribed by SEBI through a Custodian/Intermediary regulated by SEBI. Such eligible/registered FPIs may approach the branch for opening a bank account for the purpose of investment under Portfolio Investment Scheme (PIS) for which KYC documents prescribed by the Reserve Bank (as detailed in Appendix-IV) would be required. For this purpose, branches may rely on the KYC verification done by the third party (i.e. the Custodian/SEBI Regulated Intermediary) subject to the conditions laid down in Rule 9 (2) [(a) to (e)] of the Rules.

In this regard, Custodians/Intermediaries regulated by SEBI will share the relevant KYC documents with the banks concerned based on written authorization from the FPIs. Accordingly, a set of hard copies of the relevant KYC documents furnished by the FPIs to the Custodians/Regulated Intermediaries will be transferred to the concerned bank through their authorised representative. While transferring such documents, the custodian/Regulated Intermediary shall certify that the documents have been duly verified with the original or Notarised documents have been obtained, where applicable. In this regard, a proper record of transfer of documents, both at the level of the Custodian/Regulated Intermediary as well as at the bank, under signatures of the officials of the transferor and transferee entities, may be kept. While opening bank accounts for FPIs in terms of the above procedure, branches may bear in mind that they are ultimately responsible for the customer due diligence done by the third party (i.e. the Custodian/Regulated Intermediary) and may need to take enhanced due diligence measures, as applicable, if required. Further, branches are required to obtain undertaking from FPIs or a Global Custodian acting on behalf of the FPI to the effect that as and when required, the exempted documents as detailed in Annex II will be submitted.

It is further advised that to facilitate secondary market transactions, the branch may share the KYC documents received from the FPI or certified copies received from a Custodian/Regulated Intermediary with other banks/regulated market intermediaries based on written authorization from the FPI.

The provisions of this circular are applicable for both new and existing FPI clients. These provisions are applicable only for PIS by FPIs. In case the FPIs intend to use the bank account opened under the above procedure for any other approved activities (i.e. other than PIS), they would have to undergo KYC drill in terms of extant guidelines.


(vii) The client accounts are opened by professional intermediaries:

a) When the branch 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. There may be 'pooled' accounts managed by professional intermediaries on behalf of entities like mutual funds, pension funds or other types of funds. There may also be 'pooled' accounts managed by lawyers/chartered accountants or stockbrokers for funds held 'on deposit' or 'in escrow' for a range of clients. Where funds held by the intermediaries are not co-mingled at the bank and there are 'sub-accounts', each of them attributable to a beneficial owner, all the beneficial owners must be identified. Where such funds are co-mingled at the bank, the branch should still look through to the beneficial owners. Where the branches rely on the 'customer due diligence' (CDD) done by an intermediary, they should satisfy themselves that the intermediary is regulated and supervised and has adequate systems in place to comply with the KYC requirements. It should be understood that the ultimate responsibility for knowing the customer lies with the bank.

b) Under the extant AML/CFT framework, therefore, it is not possible for professional intermediaries like Lawyers and Chartered Accountants, etc. who are bound by any client confidentiality that prohibits disclosure of the client details, to hold an account on behalf of their clients. It is reiterated that branches should not allow opening and/or holding of an account on behalf of a client/s by professional intermediaries, like Lawyers and Chartered Accountants, etc., who are unable to disclose true identity of the owner of the account/funds due to any professional obligation of customer confidentiality. Further, any professional intermediary who is under any obligation that inhibits bank's ability to know and verify the true identity of the client on whose behalf the account is held or beneficial ownership of the account or understand true nature and purpose of transaction/s, should not be allowed to open an account on behalf of a client.

An indicative list of the nature and type of documents/information that may be relied upon for customer identification is given in Appendix-V. It is clarified that permanent correct address, as referred to in Appendix-V, means the address at which a person usually resides and can be taken as the address as mentioned in a utility bill or any other document accepted by the bank for verification of the address of the customer.

The indicative list furnished in Appendix-V should not be treated as an exhaustive list and no section of public should be denied access to banking services.


3.2.3 Beneficial Ownership :

Reference may be made to our Instruction Circular No. 12362/AML & KYC/2012-13/13 dated 21st March, 2013, wherein the procedure for determination of Beneficial Ownership, as advised by Government of India has been specified.

Rule 9(1 A) of the Prevention of Money Laundering Rules, 2005 requires that every banking company, and financial institution, as the case may be, shall identify the beneficial owner and take all reasonable steps to verify his identity. The term "beneficial owner" has been defined as the natural person who ultimately owns or controls a client and/or the person on whose behalf the transaction is being conducted, and includes a person who exercises ultimate effective control over a juridical person. Government of India has since examined the issue and has specified the procedure for determination of Beneficial Ownership.

Consequent upon Government of India Notification on “Prevention of Money-Laundering (Maintenance of Records) Amendment Rules, 2013” (Rules), published in the extraordinary official gazette vide G.S.R. No. 576 (E) dated August 27, 2013, and subsequent RBI guidelines, the amended procedure for Identification of Beneficial Owners is appended for strict adherence to the field functionaries.

(a) Where the client is a company, the beneficial owner is the natural person(s), who, whether acting alone or together, or through one or more juridical person, has a controlling ownership interest or who exercises control through other means.

Explanation.- For the purpose of this sub-clause :-

i. "Controlling ownership interest" means ownership of or entitlement to more than twenty-five percent of shares or capital or profits of the company

ii. "Control" shall include the right to appoint majority of the directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreements or voting agreements

(b) Where the client is a partnership firm, the beneficial owner is the natural person(s), who, whether acting alone or together, or through one or more juridical person, has ownership of/entitlement to majority more than fifteen percent of capital or profits of the partnership.

(c) Where the client is an unincorporated association or body of individuals, the beneficial owner is the natural person(s), who, whether acting alone or together, or through one or more juridical person, has ownership of or entitlement to more than fifteen percent of the property or capital or profits of such association or body of individuals.


(d) Where no natural person is identified under (a) or (b) or (c) above, the beneficial owner is the relevant natural person who holds the position of senior managing official;

(e) Where the client is a trust, the identification of beneficial owner(s) shall include identification of the author of the trust, the trustee, the beneficiaries with fifteen percent or more interest in the trust and any other natural person exercising ultimate effective control over the trust through a chain of control or ownership.

(f) Where the client or the owner of the controlling interest is a company listed on a stock exchange, or is a subsidiary of such a company, it is not necessary to identify and verify the identity of any shareholder or beneficial owner of such companies.

3.2.4 Introduction of New Technologies - Credit cards/ Debit cards/ Smart cards etc.

Branches should pay special attention to any money laundering threats that may arise from new or developing technologies including internet banking that might favour anonymity, and take measures, if needed, to prevent their use in money laundering schemes. Bank is engaged in the business of issuing 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.

Branches/offices is required to ensure full compliance with all KYC/AML/CFT guidelines issued from time to time, in respect of add-on/ supplementary cardholders also. Further, marketing of credit cards is generally done through the services of agents. Bank should ensure that appropriate KYC procedures are duly applied before issuing the cards to the customers. If agents are employed for marketing of these cards, KYC measures should be applied to agents also.

3.2.5 Periodic Updation of KYC

(i) CDD requirements for Periodic Updation

Branches should periodically update customer identification data (including photograph/s) after the account is opened. In the light of practical difficulties/ constraints in obtaining/submitting fresh KYC documents at frequent intervals, as the relative documents submitted earlier specially by low-risk customers have remained unchanged in most of the accounts, the undernoted guidelines should be meticulously followed :-

1. Branches/offices would need to continue to carry out on-going due diligence measures while commencing an account-based relationship. Such measures include –

(a) identifying and verifying the customer and beneficial owner on the basis of reliable and independent information and data or document; and


(b) ensuring that their transactions are consistent with the bank’s knowledge of the client, his business and risk profile and, wherever necessary, the source of funds.

2. Full KYC exercise will be required to be done at least every two years for high risk, every eight years for medium risk and at least every ten years for low risk customers. The time limits prescribed for such periodical updation would apply from the date of opening the account / last verification of KYC.

3. Full KYC may include all measures for confirming identity and address and other particulars of the customer that the bank may consider reasonable and necessary based on the risk profile of the customer.

4. Fresh photographs will be required to be obtained from minor customer on becoming major.

5. Further, the requirement of applying client due diligence measures to existing clients at an interval of two/eight/ten years in respect of high/medium/low risk clients respectively, would also continue taking into 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.

6. In order to further ease the difficulties in complying with the KYC requirements, within the overall framework of the Prevention of Money Laundering Act, 2002 (PMLA) and Rules (PMLR), it is clarified as under :-

a) Banks need not seek fresh proofs of identity and address at the time of periodic updation, from those customers who are categorized as ‘low risk’, in case of no change in status with respect to their identities and addresses. A self-certification by the customer to that effect should suffice in such cases. In case of change of address of such ‘low risk’ customers, they could merely forward a certified copy of the document (proof of address) by mail/post, etc. Banks should not insist on physical presence of such low risk customer at the time of periodic updation.

b) If an existing KYC compliant customer of a bank desires to open another account in the same bank, there should be no need for submission of fresh proof of identity and/or proof of address for the purpose.


(ii) Freezing and closure of accounts

1. In case of non-compliance of KYC requirements by the customers despite repeated reminders by the banks, RBI has advised that banks may impose ‘partial freezing’ on such KYC non-compliant in a phased manner.

2. During the course of such partial freezing, the account holders can revive their accounts by submitting the KYC documents as per instructions in force. Accordingly, in terms of the directions received from RBI, it is advised as under:–

a) While imposing ‘partial freezing’, branches/offices should ensure that the option of ‘partial freezing’ is exercised after giving due notice of three months initially to the customers to comply with KYC requirement and followed by a reminder for further period of three months.

b) Thereafter, branches/offices may impose ‘partial freezing’ by allowing all credits and disallowing all debits with the freedom to close the accounts.

c) If the accounts are still KYC non-compliant after six months of imposing initial ‘partial freezing’, branches/offices may disallow all debits and credits from/to the accounts, rendering them inoperative.

d) Further, it is open to the bank to close the account of such customers after issuing due notice to the customer explaining the reasons for taking such a decision. Such decisions of closure of account, however, need to be taken at a reasonably senior level, i.e. at Zonal Manager Level.

3. In the circumstances when the branch believes that it would no longer be satisfied about the true identity of the account holder, the branch should file a Suspicious Transaction Report (STR) with Financial Intelligence Unit – India (FIU-IND) under Department of Revenue, Ministry of Finance, Government of India through their respective Zonal Offices stating the details of the status of the account and specific reasons for filing of STR.

3.2.6 Miscellaneous

1) Walk-in Customers


In case of transactions carried out by a non-account based customer, that is a walk-in customer, where the amount of transaction is equal to or exceeds Rs.50,000/- (Rupees fifty thousand), whether conducted as a single transaction or several transactions those appear to be connected, the customer's identity and address should be verified. However, if there is reason to believe that a customer is intentionally structuring a transaction into a series of transactions below the threshold of Rs.50,000/-, the branch should verify the identity and address of the customer and should consider filing a suspicious transaction report (STR) to FIU-IND through their respective Zonal Offices.

NOTE : In terms of Clause (b) (ii) of sub-Rule (1) of Rule 9 of the PML Rules, 2005 banks and financial institutions are required to verify the identity of the customers for all international money transfer operations

2) Salaried Employees

In case of salaried employees, it is clarified that with a view to containing the risk of fraud, certificate/letter of identity & address issued only from corporate and other entities of repute should be relied on and branch should be aware of the competent authority designated by the concerned employer to issue such certificate/letter. Further, in addition to the certificate/letter issued by the employer, at least one of the officially valid documents as provided in the Prevention of Money Laundering Rules (viz. passport, driving licence, PAN Card, Voter’s Identity card, etc.) or utility bills for KYC purposes for opening bank accounts of salaried employees of corporate and other entities should be obtained.

3) Simplified norms for Self Help Groups (SHGs)

In order to address the difficulties faced by SHGs in complying with KYC norms while opening savings bank accounts and credit linking of their accounts, Reserve Bank of India has prescribed simplified norms for SHGs.

As per RBI guidelines, KYC verification of all the members of SHG need not be done while opening the savings bank account of the SHG and KYC verification of all the office bearers would suffice. As regards KYC verification at the time of credit linking of SHGs, it is clarified that since KYC would have already been verified while opening the savings bank account and the account continues to be in operation and would be used for credit linkage, no separate KYC verification of the members or office bearers is necessary.

4) Correspondent banking and Shell Bank

a. Correspondent Bank

Correspondent banking is the provision of banking services by one bank (the “correspondent bank”) to another bank (the “respondent bank”). These services may include cash/funds management, international wire transfers, drawing


arrangements for demand drafts and mail transfers, payable-through-accounts, cheques clearing etc. Bank may take the following precautions while entering into a correspondent banking relationship :-

(a) Gather sufficient information to fully understand the nature of business of the other bank including information on management, major business activities, level of AML/CFT compliance, purpose of opening the account, identity of any third party entities that will use the correspondent banking services, and regulatory/supervisory framework in the other bank’s home country.

(b) Such relationships may be established only with the approval of the Board, or by a Committee headed by the Chairman/CEO with clearly laid down parameters for approving such relationships, as approved by the Board. Proposals approved by the Committee should be put up to the Board at its next meeting for post facto approval.

(c) The responsibilities of each bank with whom correspondent banking relationship is established should be clearly documented.

(d) In case of payable-through-accounts, the correspondent bank should be satisfied that the respondent bank has verified the identity of the customers having direct access to the accounts and is undertaking ongoing 'due diligence' on them.

(e) The correspondent bank should ensure that the respondent bank is able to provide the relevant customer identification data immediately on request.

(f) Banks should be cautious while continuing relationships with correspondent banks located in jurisdictions which have strategic deficiencies or have not made sufficient progress in implementation of FATF Recommendations.

(g) Banks should ensure that their respondent banks have KYC/AML policies and procedures in place and apply enhanced 'due diligence' procedures for transactions carried out through the correspondent accounts.

(h) Banks should not enter into a correspondent relationship with a “shell bank” (i.e., a bank which is incorporated in a country where it has no physical presence and is not affiliated to any regulated financial group).

(i) The correspondent bank should not permit its accounts to be used by shell banks.

b. Correspondent relationship with a “Shell Bank”

Bank should not enter into a correspondent relationship with a “shell bank” (i.e. a bank which is incorporated in a country where it has no physical presence and is unaffiliated


to any regulated financial group). Shell banks are not permitted to operate in India. Bank should not enter into relationship with shell banks and before establishing correspondent relationship with any foreign institution, bank should take appropriate measures to satisfy that the foreign respondent institution does not permit its accounts to be used by shell banks. Bank should be extremely cautious while continuing relationships with correspondent banks located in countries with poor KYC standards and countries identified as 'non-cooperative' in the fight against money laundering and terrorist financing. Bank should ensure that respondent bank has Anti Money Laundering (AML) policies and procedures in place and apply enhanced 'due diligence' procedures for transactions carried out through the correspondent accounts.

c. At-par cheque facility availed by co-operative banks

If any branch has arrangements with co-operative bank/s wherein the latter open current accounts and use the cheque book facility to issue ‘at par’ cheques to their constituents and walk-in- customers for facilitating their remittances and payments in the nature of correspondent banking arrangements, Zonal Office should monitor and review such arrangements to assess the risks including credit risk and reputational risk arising therefrom. For this purpose, bank retains the right to verify the records maintained by the client cooperative banks/societies for compliance with the extant instructions on KYC and AML under such arrangements.

In this regard, Urban Cooperative Banks (UCBs) are advised to utilize the ‘at par’ cheque facility only for the following purposes :-

(i) For their own use.(ii) For their account holders who are KYC complaint provided that all transactions

of Rs.50,000/- or more should be strictly by debit to the customer’s account.(iii) For walk-in customers against cash for less than Rs.50,000/- per individual.

In order to utilise the ‘at par’ cheque facility in the above manner, UCBs should maintain the following :-(i) Records pertaining to issuance of ‘at par’ cheques covering inter alia

applicant’s name and account number, beneficiary’s details and date of issuance of the ‘at par’ cheque.

(ii) Sufficient balances/drawing arrangements with the commercial bank extending such facility for purpose of honouring such instruments.

UCBs should also ensure that all ‘at par’ cheques issued by them are crossed ‘account payee’ irrespective of the amount involved.

5) Operation of Bank Accounts & Money Mules


a) It has been brought to our notice that “Money Mules” can be used to launder the proceeds of fraud schemes (e.g., phishing and identity theft) by criminals who gain illegal access to deposit accounts by recruiting third parties to act as “money mules.”

In some cases these third parties may be innocent while in others they may be having complicity with the criminals.

b) In a money mule transaction, an individual with a bank account is recruited to receive cheque deposits or wire transfers and then transfer these funds to accounts held on behalf of another person or to other individuals, minus a certain commission payment. Money mules may be recruited by a variety of methods, including spam e-mails, advertisements on genuine recruitment web sites, social networking sites, instant messaging and advertisements in newspapers. When caught, these money mules often have their bank accounts suspended, causing inconvenience and potential financial loss, apart from facing likely legal action for being part of a fraud. Many a times the address and contact details of such mules are found to be fake or not up to date, making it difficult for enforcement agencies to locate the account holder.

c) The operations of such mule accounts can be minimised if branches follow the guidelines on opening of accounts and monitoring of transactions. Branches are, therefore, advised to strictly adhere to the guidelines on KYC/AML/CFT issued from time to time and to those relating to periodical updation of customer identification data after the account is opened and also to monitoring of transactions in order to protect the interest of the Bank as well as the customers from misuse by such fraudsters.

6) Unique Customer Identification Code (UCIC)

The increasing complexity and volume of financial transactions necessitate that customers do not have multiple identities within a bank, across the banking system and across the financial system. This can be achieved by introducing a unique identification code for each customer. The Unique Customer Identification Code (UCIC) will help our bank to identify customers, track the facilities availed, monitor financial transactions in a holistic manner and enable us to have a better approach to risk profiling of customers. It would also streamline banking operations for the customers.

Banks have been advised by RBI to allot of UCIC while entering into new relationships with the individual customers as also to the existing customers.

7) Payment of Cheque etc.

With effect from April 1, 2012, bank is debarred from making payment of cheques/drafts/IOI/pay orders/banker’s cheques bearing that date or any subsequent date, if they are presented beyond the period of three months from the date of such


instrument. Therefore, branches/offices should not make payment of such instruments if they are presented beyond the period of three months from the date of such instrument.


8) Some Important Guidelines on Opening of Account

It would be rather impossible to detect/ prevent a fraudulent transaction if the persons whose true identity, source of funds, expected transactions and relationship with the Bank are not verified at entry level and thereafter the profile of the customers are updated.

Some major areas to consider in identification of customers and opening / operating of their accounts are appended :-

a) No account should normally be opened without a meeting between the bank official and the customer. Before opening of New Accounts, the prospective customer should be interviewed by the Branch Manager/ Officer to ascertain the purpose of opening the account, kind of transactions intended, nature of business activity and its location, address of the customer and his clients, social and financial status, source of funds etc. Particular care should be taken when dealing with accounts opened by post or where there is no face-to-face contact with the customers, so as to ensure that the identity of the customer is verified to the satisfaction of the Bank, as noted in Point No. 3.2.A(xii) above.

b) Branches should obtain appropriate forms and other related papers/ documents from the customers while opening a new account and follow the laid down procedures as detailed in Branch Instruction Manual.

c) The Account Opening Form duly filed in all respects and signed by both the prospective account holder and the introducer (wherever accepted) should only be accepted for opening an account. Among other things, it should be particularly ensured that complete postal address of both the account holder and the introducer is mentioned in the form.

The form should be thoroughly checked and the opening of new accounts should be authorised only by the Branch Manager/ Officer-in-Charge permitting the account to be opened. The responsibility for ensuring that all the accounts are opened in regular manner devolves upon Manager/ Dealing Officer. They should ensure that all the new accounts are introduced properly.

d) The Branches should ask their customers to establish their identity (true name, residential and mailing address). This may be done with the help of certain official documents in original. The verifying official, at the time of opening the account must scrutinize the documents submitted with their original and certify the KYC documents through seal as “Verified from original” and put his signature, name & PF number below his official signature.


Identification documents that can be easily obtained in any name should not be accepted as the sole means of identification. In case of doubt, the information furnished by the customer should also be corroborated from some other sources/ personal verification and bank should be satisfied in this regard.List of the documents (other than OVD for individual entity as noted in Point No. 1.3 above) that should be obtained from the different types of customers viz. Individuals, Companies, Partnership Firms, Trust, Unincorporated Association or Body of Individuals and Proprietorship Firms are detailed in Appendix-V.

e) The guidelines shall also apply to the branches and majority owned subsidiaries located outside India, specially, in countries which do not or insufficiently apply the Financial Action Task Force (FATF) recommendations, to the extent local laws permit. It is clarified that in case there is a variance in KYC/AML standards prescribed by the Reserve Bank of India and the host country regulators, branches/overseas subsidiaries of banks are required to adopt the more stringent regulation of the two.

f) Photograph

Two recent photographs (not more than of six months old) of the customer must be obtained. Photographs of the person/ persons authorised to operate the account should also be obtained invariably. On the face of the photographs, the signature of the respective customer/ authorised operators should be taken.

Stipulation of obtaining photographs would apply uniformly to both resident and non-resident account holder and all categories of deposits including Fixed/Recurring/ Cumulative Deposit accounts. Only Banks, Local Authorities and Government Departments (excluding Public Sector Undertakings and Quasi- Govt. Bodies) will be exempted from the requirement of photographs.

In case of joint account, photographs of all joint account holders who are authorised to operate the account should be obtained without exception.

In case of account to be operated by authorised persons, power of attorney holders, photographs of both the account holders and authorised persons should be obtained.

In respect of accounts in the names of minors, photograph of the guardian operating the account should be obtained.

The official, authorising opening of the account should attest photographs of the account holder(s).

Wherever a depositor is desirous of and/or maintaining Current Account, Savings, Fixed Deposits or other deposit accounts, only one set of photographs need be obtained and separate photographs should not be obtained for each category of deposit. Proper reference should be recorded in the applications for different types of deposit accounts.


In case of company accounts, partnership firms’ accounts and trust accounts, photographs of authorised signatories who will operate the accounts duly attested by the competent authority of the company / partnership firm / trust should be obtained.Members of staff / officer may be exempted from affixing photographs. In case of joint account with their family members who are not staff of the Bank, the photograph of such members should be obtained. Similarly, in case of any joint account of staff/officer with outsiders (not related to them and/or not a member of the family) photographs should be obtained from the non-family member of staff/ officer.

g) Obtaining PAN/GIR or alternatively Form 60 / Form 61

The Manager or Officer of the Branch at the time of opening an account shall ensure that Permanent Account Number (PAN) or General Index Register Number (GIR) of the customer concerned has been duly quoted in the relevant documents/ account opening form or alternatively declaration in Form No.60 or Form No.61 as the case may be is received without fail. Avoid accepting junk PAN and insist for valid PAN for applicable transactions.

In this connection, following points are reiterated for meticulous compliance :-

In terms of HO Instruction Circular No.11954/AML & KYC/2012-13/04 dated 29.06.2012 containing guidelines on KYC norms, PAN card is one of the documents included in the list of documents for KYC and is not a mandatory document for identification.

In terms of HO Instruction Circular No.11844 Gen A/Cs & Audit/IT/2012-13/1 dated 12.04.2012, every holder shall quote PAN in the following cases :

o A time deposit, exceeding fifty thousand rupees;

o Opening an account ( not being a time deposit referred to above ) with a banking company to which the Banking Regulation Act, 1949 applies (in case PAN is not available form 60/61 must be obtained);

o Deposit in cash aggregating fifty thousand rupees or more with a banking company to which the Banking Regulation Act, 1949 applies during any one day;

o Making an application to a banking company to which the Banking Regulation Act, 1949 applies, for issuance of a Debit Card (incl. prepaid card);

o Making an application to a banking company to which the Banking Regulation Act, 1949 applies, for issuance of a Credit Card;


o A contract of a value exceeding one lakh rupees for sale or purchase of securities.

o Payment in cash exceeding twenty-five thousand rupees for purchase of foreign currency in connection with travel to any foreign country.

o Payment of an amount aggregating fifty thousand rupees or more in a year as life insurance premium to an insurer as defined in clause (a) of Section 2 of Insurance Act, 1938 (4 of 1938).

o Payment to a dealer of an amount of five lacs rupees at any one time or against a bill for an amount of five lakhs rupees or more for purchase of bullion or jewellery.

o Payment of an amount of fifty thousand rupees or more to RBI, for acquiring bond issued by it.

o Payment of an amount of fifty thousand rupees or more to a Mutual Fund for purchase of its units or to a company or an instruction for acquiring bond or debenture issued by it.

In terms of HO Instruction Circular No. 12548/General A/Cs & Audit/2013-14/23 dated 10.07.2013, if the depositor / deductee does not provide PAN, Tax at Source (TAS) will be deducted @20%.

RBI has noticed that branches are filling Junk PAN / Invalid PAN to facilitate lesser deduction of Tax and when they remit the tax so deducted to the Income Tax authorities, the same is returned with remarks “PAN not matching”. This situation is not only fraught with risk but also makes the branch Managers personally responsible. The matter has since been taken up for verification of all existing PAN already entered, with NSDL database, and also for on-going verification of PAN for the new accounts with NSDL. In line with the above, CBSPO has since started verification of PAN, already entered, with NSDL database, and reports having details of PAN discrepancies are uploaded regularly in daily report folder of the branch under file name INVALID_PAN_REPORT.txt.

Branches/offices are, therefore, advised to ensure that corrective measures are initiated immediately on receipt of such report folder. Zonal Offices are advised to monitor the branches very strictly on daily basis so that Invalid/Junk/Incorrect PAN do not prevail any more in any of the branches.

In view of the seriousness of the matter, branches are advised as under :-


(i) No Junk / Invalid PAN should be entered in the system henceforth and if any Junk PAN is noticed, concerned official will be held personally responsible.

(ii) On receipt of information from CBS, Branches must issue a letter to all the customers whose Junk PAN has been deleted immediately on the lines of format provided in our earlier Instruction Circular No. 12713/AML & KYC/2013-14/10 dated 22.10.2013.

In case of account of a minor the PAN or GIR number of his/her father or mother or guardian as the case may be should be quoted in the documents pertaining to opening an account.

h) Independent confirmation of the address of the account holders in all cases should be done through sending of ‘Letter of Thanks’ to both the account holder as well as to the introducer as per laid down procedures given in Branch Instruction Manual.

Record should be maintained for the date of sending of letter of thanks to the new account holder and the introducer. Acknowledgements of the ‘Letter of Thanks’ from account holder and introducer should also be properly recorded. Response from the introducer i.e. confirmation/ contradiction (if any) should also be recorded.

For customers that are legal persons or entities, the branch should take the following steps :-

(i) Verify the legal status of the legal person/ entity through proper and relevant documents.

(ii) Verify that any person purporting to act on behalf of the legal person/ entity is so authorized and verify the identity of that person.

(iii) Understand the ownership and control structure of the customer and determine that who are the natural persons ultimately control the legal person.

i) Whenever there is suspicion of money laundering or terrorist financing or when other factors give rise to a belief that the customer does not, in fact, pose a low risk, full scale customer due diligence (CDD) should be carried out before opening an account.When there are suspicions of money laundering or financing of the activities relating to terrorism or where there are doubts about the adequacy or veracity of previously obtained customer identification data, due diligence measures should be reviewed including verifying again the identity of the client and obtaining information on the purpose and intended nature of the business relationship.In the circumstances when the branch believes that it would no longer be satisfied that it knows the true identity of the account holder, the branches should also file an STR with their respective Zonal Offices who will in turn report to Head office for reporting to FIU-IND.


j) Considering that the initiative is aimed at empowering the common man, all branches/offices should be proactive and ensure obtaining of Aadhaar details while opening of accounts (as noted in Point No. 3.2.A(ii) above) The following action points should be considered for linking the Aadhaar number in existing accounts during the campaign period :-

o Adequate display should be made in a prominent place of the branch premises requesting customers to provide their Aadhaar number in their existing Savings accounts to enable Aadhaar linkage, though it is voluntary and not madatory.

o The front-end officials should be sensitized to make customers aware of the advantages of Aadhaar linkage.

o In the exiting districts where Direct Benefit Transfer scheme is already in progress, the branch head should ensure opening of accounts of all the beneficiaries. Account opening campaigns may be conducted periodically at the identified wards/areas.

o Proper liaison should be maintained with the dealing govt. officials to keep aware of the latest developments on Direct Benefit Transfer.

Aadhaar linkage in the existing accounts as well as opening new accounts with Aadhaar as KYC provides an opportunity for the Bank to actively participate in the Cash Benefit Transfer Scheme, although its requirement is not mandatory and is voluntary in terms of the order dated 15.10.2015 passed by the Hon’ble Supreme Court of India, as noted earlier in Point No. 3.2.1(ii).

k) Pradhan Mantri Jan Dhan Yojana (PMJDY)

Under “Pradhan Mantri Jan Dhan Yojana”, action plan has been taken under the direction of Govt. of India for 100% Financial Inclusion of all the households across the country. The plan is proposed to be implemented as a Mission Mode Project which envisages a comprehensive coverage of all excluded households in the country by a six pillars approach :-

Universal access to banking facilities Providing Basic Banking Accounts with overdraft facility of Rs.5000 and RuPay

Debit card with inbuilt accident insurance cover of Rs.1 lakh Financial Literacy Programme Creation of Credit Guarantee Fund for coverage of defaults in overdraft A/Cs Micro Insurance Unorganized sector Pension schemes like Swavlamban


The approach under these pillars of the campaign would be interalia :-

a) Opening of SB account with zero balance. For ease of opening of accounts it is advised to take benefit of e-KYC approach, as details in Point No. 3.8 (B) above.

b) In order to cut down time on account opening, under the campaign, a one page account opening form has been designed, copy of which is reproduced vide Appendix-VI.

c) The account should be linked with Aadhaar number of the account holder as far as possible and would become the single point receipt of all Direct Benefit Transfers (DBT) from the Central Government/State Government/Local Bodies.

d) Convergence with the efforts of the National Rural Livelihoods Mission (NRLM) would sought in order to open bank accounts for the Self Help Group (SHG) members.[Govt. of India directives dated 09.07.2014]

Precaution on opening & operation of accounts under Actions Plan for Pradhan Mantri Jan Dhan Yojana (PMJDY)

In order to fulfill the commitments under PMJDY and to ensure 100% Financial Inclusion of all the households across the country within a time bound programme, simplified KYC norms is proposed for easy opening of bank accounts, as noted in our earlier circulars.

While opening a good number of accounts within a time bound manner, and particularly under simplified KYC norms, field functionaries should be more vigilant in some areas as noted below :-

I. Possibility of involvement of ‘Money Mules’ and thereby using an account in somebody else’s name to do illegal transactions should not be ignored. Precautions should be taken in line with instructions given in Chapter 3, Point No.3.6, Page 36 of Instruction Circular No. 13347/ AML&KYC/2014-15/16 dated 10.10.2014.

II. In case of Small Accounts, check points viz. aggregate credit of Rs.1 lac per annum, withdrawal of Rs.10,000/= in a month & balance of Rs.50,000/- at any point of time, should be taken care.

III. Customer due diligence, particularly post-facto verification of identity and address for these accounts as also scrutiny of transactions in these new accounts, should be ensured as per the extant guidelines. This will also help to prevent fraudulent activities through such accounts.


IV. As advised in our earlier circular, efforts should be made to link these accounts with Aadhaar numbers as far as possible of the respective account holders so that those would become the single point receipt of all Direct Benefit Transfers (DBT) from the Central Government/State Government/Local Bodies. This will also help to check any misuse of those accounts.


CHAPTER – 4

MONITORING OF TRANSACTIONS

4.1 MONITORING OF NEW ACCOUNTS :

Regular monitoring is an essential element of effective KYC procedures. Close watch should be kept over operations in newly opened accounts at least for first two quarters from the date of opening such accounts so as to guard against fraudulent or doubtful transactions taking place therein. Reasonable query should be made in case of suspicious and/or high value transactions in a newly opened account and if no convincing explanation is forthcoming, Branch should consider reporting such transactions to the Zonal Office/ Head Office.

4.1.1 Monitoring of Operation of New Account :

No cheque book should be issued and only cash transaction should be allowed in the new account till the independent confirmation of the address of the account holders is made and confirmation of the introducer is received.

Payment against collection of cheque / drafts etc. should not be released in the newly opened account till introductory reference like confirmation of identity and address of the account holder and introducer are completed satisfactorily.

All the cheque books issued upto six months should be stamped with words ‘New Account’.

Branches as a collecting banker should exercise abundant caution when drafts and other instruments for large amounts are lodged in newly opened accounts and such large amounts are sought to be withdrawn from these accounts shortly after collection of the relative instruments. They should also institute immediate enquiries to find out the bonafide of the account holders before sending the drafts / instruments in clearing or before allowing withdrawals of such amounts shortly after collection.

Collection of instruments of large amount immediately opening of an account should not be accepted without enquiring about its source, genuineness and purpose etc. with specific satisfaction of the branch official.

Mandate of the account holder for operation in the account must be recorded so that it may not be disputed later on.

Special caution should be exercised particularly when the instrument intended to be deposited in a newly opened account bears a date prior to the date of opening of account.

The address indicated on the dividend/interest warrants/refund orders must be independently verified with that recorded with the Branch to ensure genuineness of the instrument and the person in whose account it is deposited. In case, the address is not mentioned in such instruments, the depositor should be requested to produce the counterfoil thereof for verification of the genuineness of the address of the account holder.


The original certificates/ any other documents evidencing the ownership of the instrument may have to be called for in case of any doubt of deposit of high value dividend/interest warrants/refund orders etc. by the new account holder.

4.2 MONITORING TRANSACTIONS OF SUSPICIOUS NATURE :

4.2.1 Ongoing Monitoring of Transactions

a) Special attention should be paid to all complex, unusual large transactions and all unusual patterns of transactions, which have no apparent economic or visible lawful purpose. Significant business transaction should not be allowed in the account of the customers who fail to provide evidence of their identity or fail to provide satisfactory purpose of the significant banking transactions which may be unusual or unrelated to their normal banking transactions. However, the extent of monitoring will depend on the risk sensitivity of the account.

b) Banks may prescribe threshold limits for a particular category of accounts for paying specific 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 bank. Very high account turnover inconsistent with the size of the balance maintained may indicate that funds are being 'washed' through the account. High-risk accounts have to be subjected to intensified monitoring. Branches/offices have to set key indicators for such accounts, taking note of the background of the customer, such as the country of origin, sources of funds, the type of transactions involved and other risk factors. Bank has since set the key indicators of High Net-worth Individual (HNI) customers, details noted in Chapter-3 para 3.2.A(xv), and codified it in the CBS system which is visible through hot-key ‘F9’, as noted in Chapter-5 para 5.2(iii). Field functionaries are advised to ensure full utilization of this “F9” Hot-key and make it mandatory before proceeding for any type of banking operation of the customers in order to adherence of due diligence. High risk associated with accounts of bullion dealers (including sub-dealers) & jewelers are taken into account to identify suspicious transactions for filing Suspicious Transaction Reports (STRs) to Financial Intelligence Unit- India (FIU-IND).

c) Branches should exercise ongoing due diligence of their business relationship with every client and closely examine the transactions in order to ensure that they are consistent with their knowledge of the client, his business and risk profile and where necessary, the source of funds.

d) Accounts of Multi Level Marketing (MLM) concerns:

RBI has noticed that certain firms posing as Multi level Marketing (MLM) agencies for consumer goods and services have been actually mobilizing large amount of deposits from public with promise of high returns. The agents of these firms open accounts in CBS branches and lure common people to deposit in these accounts promising very high


returns and issued post dated cheques representing interest dues and repayment. Funds pooled into the principal account of MLM firms withdrawn for purposes apparently illegal or highly risky. So long money keeps coming into MLM company’s account from new depositors, the cheques are honoured but once the chain breaks, all such post-dated instruments are dishonoured. This results in fraud on the public and is a reputational risk for banks concerned.

Branches should closely monitor the transactions in accounts of marketing firms. In cases where a large number of cheque books are sought by the company, there are multiple small deposits (generally in cash) across the country in one bank account and where a large number of cheques are issued bearing similar amounts/dates, the branch should carefully analyse such data and in case they find such unusual operations in accounts, the matter should be immediately brought to notice of the Head Office for onward reporting to Reserve Bank and other appropriate authorities such as Financial Intelligence Unit India (FlU-IND) under Department of Revenue, Ministry of Finance. Caution is to be exercised in opening accounts of the MLM firms and issue of cheque books in such accounts. Also strict compliance of KYC and AML guidelines and Cheque issue guidelines should be ensured.

Some of the MLM firms which are based in Singapore like SpeakAsia, was operating in India through agents purportedly conducting online surveys. The typical modus operandi is to ask the prospective customers to deposit Rs.11,000/- or so in a designated account to gain access to portal and password and download a survey form. For each survey form filled in and uploaded, one gets Rs. 500/- and those who have filled in surveys will have to multiply the users to get back their deposit. The agents are opening accounts with various banks and have collected large sums of money. These proceeds are aggregated into a central pooling account and remitted overseas as subscription charges.

The names of some of the firms provided by RBI were circulated for exercising caution while opening and operating the accounts. (List enclosed as Appendix-VII). It has now come to the notice of RBI that the companies/individuals mentioned in Appendix-VIII enclosed, too have been identified/suspected of carrying out MLM activities.

Branches/Offices are once again advised to be cautious in opening and operating accounts for such schemes especially in view of the type of business and inherent risk associated with such activity. Branches/offices are also advised to mark the account as MLM under the customer type Non-Personal MLM companies - 020504 or Personal - MLM Professionals - 010128 respectively as and when such activity is noticed.


4.2.2 Monitoring of Alerts

A. Transaction monitoring (Alerts generated though AML Software)

Bank was following two tier processing of system generated suspicious transaction alerts (STR alerts) involving Zonal Office and Head Office. The STR alerts generation has since been centralized by delinking of the Zonal users with effect from 01.01.2013 for processing only at Head Office level.

Bank is using different scenarios to identify “Suspicious Transaction” for reporting to Financial Intelligence Unit, Government of India (FIU-IND). Ministry of Finance felt in July 2010 the need to form a “Working Group” consisting of selective banks, RBI, IBA and FIU-IND to evolve standard parameters for generation of suspicious transaction alerts. Accordingly a list of commonly used 61 alert indicators for detection of suspicious transactions as provided by IBA is enclosed as Appendix-IX for awareness of the field functionaries. These alert indicators are likely to be related to following sources :-

o Watch list (WL) – The customer details matched with watch lists (eg. UN list, Interpol list etc)

o Transaction monitoring (TM) – Transaction monitoring alert (e.g. unusually large transaction, increase in transaction volume etc.)

o Typology (TY) – Common typologies of money laundering, financing of terrorism or other crimes (e.g. Structuring of cash deposits etc.)

o Risk Management System (RM) – Risk management system based alert (e.g. high risk customer, country, location, source of funds, transaction type etc.)

B. Offline Transaction Monitoring

There are certain types of transactions which can be identified at the branch/offices themselves. The identification of such suspicious transactions is more likely to be related with following sources.

o Customer verification (CV): Detected during customer acceptance, identification or verification (eg. Use of forged id, wrong address etc,)

o Law Enforcement Agency Query (LQ): Query or letter received from law enforcement agency (LEA) or intelligence agency (e.g. Blocking order received, transaction details sought etc.)

o Media Reports (MR): Adverse media reports about customer. (e.g. newspaper reports)

o Employee Initiated (EI): Employee raised alert (e.g. behavioral indicators such as customer had no information about transaction, attempted transaction etc.)

o Public Complaint (PC): Complaint received from public (e.g. abuse of account for committing fraud etc.)


o Business Associates (BA): Information received from other institutions, subsidiaries or business associates (e.g. cross-border referral, alert raised by agent etc.)

The list of 27 commonly used off-line alert indicators for detection of suspicious transactions at branches/offices is given in Appendix - X

In order to fulfill obligations under PMLA, 2002, Bank has to report these suspicious transactions to FIU-IND. Branches / Controlling Offices are advised to report such identified/attempted transactions to Head Office, AML & KYC Cell , by providing detail of the incident through e-mail to [email protected] to review the case for reporting under STR. All field functionaries are required to be vigilant to detect and report such offline alerts.

It should be ensured by branches that any offline alert detected/noticed by them is immediately reported to the controlling office/Head Office. (Eg. Customer did not complete transaction after queries such source of funds etc.). Detailed list of offline alert scenarios is provided vide Appendix - X.

Branches/Offices are also advised to contact the nodal officers at Zonal Offices for their guidance while deciding on reporting of offline alerts. The Nodal Officers at Zonal Offices are advised to effectively monitor and guide the branches in reporting offline alerts.

Role of branch officials in reporting offline alerts for identifying suspicious transactions is very important. Dealing officer/employee in the front desk should be well aware of such identified/attempted transactions which could not be captured by the system. As such all field functionaries are required to be vigilant and keep themselves aware of the alert indicators and indicative suspicious activities, to detect and report them immediately to Head Office, AML &KYC Cell as detailed in the instructions. An indicative list of suspicious activities is provided in Appendix - XI

4.2.3 Ceiling and Monitoring of Cash Transactions & Issuance of Demand Drafts (DDs) / Inter-Office Instruments (IOIs)/Banker’s Cheque etc.

In order to curb the misuse of banking channels for violation of fiscal laws and evasion of taxes, Demand Drafts(DDs)/Inter-Office Instruments (IOIs)/Banker’s Cheque etc. for Rs.50,000/- and above should be issued only by debiting the customer’s account or against cheques or other instruments tendered by the customer and not against cash payment . Similarly, payments of such type of instruments for Rs. 50,000/- and above should be made through banking channels and not in cash.

The applicants (whether customers or not) for the above transactions i.e. for issuance of drafts/mail transfers/telegraphic transfers/travelers cheque etc. for amount exceeding Rs. 50,000/= should affix Permanent (Income Tax) Account Number on the applications.


In case of transactions carried out by a non-account based customer, that is a walk-in customer, where the amount of transaction is equal to or exceeds rupees fifty thousand, whether conducted as a single transaction or several transactions that appear to be connected, the customer's identity and address should be verified. However, if there is reason to believe that a customer is intentionally structuring a transaction into a series of transactions below the threshold of Rs.50,000/- identity and address of the customer should be verified and filing a suspicious transaction report (STR) to FIU-IND should also be considered.

In order to ensure monitoring of structuring of cash transactions below the threshold limit of Rs.50,000/-, a new system of real-time alert generation has been introduced with effect from 03.06.2014 on the following lines :-

a) Real-time generation of alert through Pop-up for issuance of Demand Draft (DD) / Banker’s Cheque (BC) / Inter-Office-Instrument (IOI) / other remittances in cash below the threshold limit i.e. within the range of Rs.40,000/- to Rs.49,000/-

b) Generation of Exceptional Report for DD/BC/IOI/other remittances issued in cash above Rs.40,000/- and pushing of such report to branch report folder daily [ RBI observation on Thematic Review on adherence to AML & KYC issues of our Bank]

4.2.4 Payment of Cheque etc.

Branches/offices should not make payment of cheques/drafts/IOI/banker’s cheques if they are presented beyond the period of three months from the date of such instrument.

4.2.5 White-listing of Accounts for AML System

Accounts eligible for white-listing are those of Government department/ undertaking, Schedule Bank, RBB, Co-Operative Bank, various funds managed/regulated by the Government/ Quasi-Government bodies where the scope of suspicious transaction is negligible.

The accounts for white-listing should be screened by the controlling offices in consultation with the branch keeping records at the Zonal Office for future reference. All such selected accounts are to be reported by the Zonal Head under his/her signature to Head Office (AML & KYC Cell) for ‘white listing’ giving proper reason in each case maintaining top secrecy.

White-listing of accounts is not applicable for impersonal accounts like Sundry Creditors etc. which are prone to operational risk through fraudulent means. Therefore, field level functionaries should monitor those accounts to avoid unnecessary routing of transactions through it.


4.3 COMBATING FINANCING OF TERRORISN (CFT) :

Lists of terrorist entities notified by Government of India as received through Reserve Bank of India are circulated to the Branches / Offices by Head Office, to exercise caution if any transaction is detected with such entities. The Instruction Circulars issued pertaining to the list of banned/ terrorist organization should be properly preserved by the Branches. In case the name of any banned organization appears as payee/endorsee/applicant, reporting of such transactions as and when detected is to be done by the Branch to Head Office through respective Zonal Office. Head Office in turn will report the matter to RBI/appropriate authority designated by Govt. In terms of Prevention of Money Laundering Act, 2002, suspicious transaction should include, inter-alia, transactions which give rise to a reasonable ground of suspicion that these may involve financing of the activities relating to terrorism.

As and when list of terrorist individuals and entities, approved by Security Council Committees established pursuant to various United Nations’ Security Council Resolutions (UNSCRs) are received from RBI, the same is circulated to the branches/offices which should ensure to update the consolidated list of such individuals and entities.

The UN Security Council has adopted Resolutions 1988 (2011) and 1989 (2011) which have resulted in splitting of the 1267 Committee's Consolidated List into two separate lists, namely:

i) “Al-Qaida Sanctions List”, which is maintained by the 1267 / 1989 Committee. This list shall include only the names of those individuals, groups, undertakings and entities associated with Al-Qaida. The updated Al-Qaida list is available at http://www.un.orq/sc/committees/1267/aq sanctions list.shtml

ii) “1988 Sanctions List”, which is maintained by the 1988 Committee. This list consists of names previously included in Sections A (“Individuals associated with the Taliban”) and B (“Entities and other groups and undertakings associated with the Taliban”) of the Consolidated List. The Updated 1988 Sanctions list is available at http://www.un.orq/sc/committees/1988/list.shtml

It may be noted that both “Al-Qaida Sanctions List” and “1988 Sanctions List” are to be taken into account for the purpose of implementation of Section 51A of the Unlawful Activities (Prevention) Act, 1967.

Branches /Offices should ensure that before opening any new account, the name/s of the proposed customer does not appear in the list. Branches should 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. Full details of accounts bearing resemblance with any of the individuals/entities should immediately be reported to Head Office through Zonal office for intimation to RBI and FIU-IND, Govt. of India.


http://www.un.orq/sc/committees/1988/list.shtml

http://www.un.orq/sc/committees/1267/aq%20sanctions%20list.shtml

The requirement to report transactions which according to the reporting official/employee is suspicious or has reason to suspect with regard to :

Involvement of funds of illegal activity ; or Intended to hide or disguise assets derived from illegal activities ; or Is designed to evade money laundering guidelines ; or Has no business or apparent lawful purpose ; or Is the sort in which the particular customer is normally expected to engage in and

for which, after examining available facts, satisfactory linkage is not obtained.

Besides Prevention of Terrorism Act (POTA), 2002, the Security Council Sanctions Committee of the United Nations has decided vide Security Council Resolution 1390 that the accounts of certain individuals and entities listed by them should be immediately frozen.

The list of entities and individuals included in the Resolution as received from Reserve Bank of India is circulated to the Branches/Offices. In case there is any account of such individuals/entities, Branches/Offices should suspend operation in such accounts forthwith under intimation to, AML & KYC Cell, Head Office.

It should be ensured that KYC norms /AML standards/CFT measures are put in place so that criminals are not allowed to misuse the banking channels. It is therefore necessary that adequate screening mechanism is put in place by the bank as an integral part of their recruitment/hiring process of personnel.

4.4 FREEZING OF ASSETS UNDER SECTION 51A OF UNLAWFUL ACTIVITIES (PREVENTION) ACT, 1967 :

Branches are advised to adhere to the guidelines on Freezing of Assets under Section 51 A of Unlawful activities (Prevention) Amendment Act, 2008 as detailed hereunder and contact the Zonal Office/Head Office immediately on occurrence of any such incidence.

i) The Unlawful Activities (Prevention) Act, 1967 (UAPA) has been amended by the Unlawful Activities (Prevention) Amendment Act, 2008. Government has issued an Order dated August 27, 2009 detailing the procedure for implementation of Section 51A of the Unlawful Activities (Prevention) Act, 1967 relating to the purposes of prevention of, and for coping with terrorist activities. In terms of Section 51A, the Central Government is empowered to freeze, seize or attach funds and other financial assets or economic resources held by, on behalf of or at the direction of the individuals or entities Listed in the Schedule to the Order, or any other person engaged in or suspected to be engaged in terrorism and prohibit any individual or entity from making any funds, financial assets or economic resources or related services available for the benefit of the individuals or entities Listed in the Schedule to the Order or any other person engaged in or suspected to be engaged in terrorism.


ii) Branches are required to strictly follow the procedure laid down in the UAPA Order dated August 27, 2009 (Appendix - XII) and ensure meticulous compliance to the Order issued by the Government.

iii) On receipt of the list of individuals and entities subject to UN sanctions (referred to as designated lists) from RBI, as circulated through HO IC, branches should ensure expeditious and effective implementation of the procedure prescribed under Section 51A of UAPA in regard to freezing/unfreezing of financial assets of the designated individuals/entities enlisted in the UNSCRs and especially in regard to funds, financial assets or economic resources or related services held in the form of bank accounts.

iv) In terms of Para 4 of the Order, in regard to funds, financial assets or economic resources or related services held in the form of bank accounts, the RBI would forward the designated lists to the banks requiring them to :-

a) Maintain updated designated lists in electronic form and run a check on the given parameters on a regular basis to verify whether individuals or entities listed in the schedule to the Order (referred to as designated individuals/entities) are holding any funds, financial assets or economic resources or related services held in the form of bank accounts with them.

b) In case, the particulars of any of their customers match with the particulars of designated individuals/entities, the banks shall immediately, not later than 24 hours from the time of finding out such customer, inform full particulars of the funds, financial assets or economic resources or related services held in the form of bank accounts, held by such customer on their books to the Joint Secretary (IS.I), Ministry of Home Affairs (MHA), at Fax No.011-23092569 and also convey over telephone on 011-23092736. The particulars apart from being sent by post should necessarily be conveyed on e-mail.

c) Banks shall also send by post a copy of the communication mentioned in (b) above to the UAPA nodal officer of RBI, Chief General Manager, Department of Banking Operations and Development, Central Office, Reserve Bank of India, Anti Money Laundering Division, Central Office Building, 13th Floor, Shahid Bhagat Singh Marg, Fort, Mumbai-400 001 and also by fax at No.022-22701239. The particulars apart from being sent by post/fax should necessarily be conveyed on e-mail id: [email protected].

d) Banks shall also send a copy of the communication mentioned in (b) above to the UAPA nodal officer of the State/UT where the account is held as the case may be and to FIU-India.

e) In case, the match of any of the customers with the particulars of designated individuals/entities is beyond doubt, the banks would prevent designated persons from conducting financial transactions, under intimation to Joint Secretary (IS.I), Ministry of Home Affairs, at Fax No. 011-23092569 and also convey over telephone on


011-23092736. The particulars apart from being sent by post should necessarily be conveyed on e-mail id : [email protected] .

f) Banks shall also file a Suspicious Transaction Report (STR) with FIU-IND covering all transactions in the accounts covered by paragraph (b) above, carried through or attempted, as per the prescribed format.

v) Freezing of financial assets

a) On receipt of the particulars as mentioned in paragraph iv(b) above, IS-I Division of MHA would cause a verification to be conducted by the State Police and /or the Central Agencies so as to ensure that the individuals/ entities identified by the banks are the ones listed as designated individuals/entities and the funds, financial assets or economic resources or related services, reported by banks are held by the designated individuals/entities. This verification would be completed within a period not exceeding 5 working days from the date of receipt of such particulars.

b) In case, the results of the verification indicate that the properties are owned by or held for the benefit of the designated individuals/entities, an order to freeze these assets under section 51A of the UAPA would be issued within 24 hours of such verification and conveyed electronically to the concerned bank branch under intimation to Reserve Bank of India and FIU-IND.

c) The order shall take place without prior notice to the designated individuals/entities.

vi) Implementation of requests received from foreign countries under U.N. Security Council Resolution 1373 of 2001

a) U.N. Security Council Resolution 1373 obligates countries to freeze without delay the funds or other assets of persons who commit, or attempt to commit, terrorist acts or participate in or facilitate the commission of terrorist acts; of entities or controlled directly or indirectly by such persons; and of persons and entities acting on behalf of, or at the direction of such persons and entities, including funds or other assets derived or generated from property owned or controlled, directly or indirectly, by such persons and associated persons and entities.

b) To give effect to the requests of foreign countries under U.N. Security Council Resolution 1373, the Ministry of External Affairs shall examine the requests made by the foreign countries and forward it electronically, with their comments, to the UAPA nodal officer for IS-I Division for freezing of funds or other assets.

c) The UAPA nodal officer of IS-I Division of MHA, shall cause the request to be examined, within five working days so as to satisfy itself that on the basis of applicable legal principles, the requested designation is supported by reasonable


grounds, or a reasonable basis, to suspect or believe that the proposed designee is a terrorist, one who finances terrorism or a terrorist organization, and upon his satisfaction, request would be electronically forwarded to the nodal officers in RBI. The proposed designee, as mentioned above would be treated as designated individuals/entities.

d) Upon receipt of the requests from the UAPA nodal officer of IS-I Division, the list would be forwarded to banks and the procedure as enumerated at paragraphs [(iii), (iv) and (v)] shall be followed.

e) The freezing orders shall take place without prior notice to the designated persons involved.

vii) Procedure for unfreezing of funds, financial assets or economic resources or related services of individuals/entities inadvertently affected by the freezing mechanism upon verification that the person or entity is not a designated person

Any individual or entity, if it has evidence to prove that the freezing of funds, financial assets or economic resources or related services, owned/held by them has been inadvertently frozen, they shall move an application giving the requisite evidence, in writing, to the concerned bank. The banks shall inform and forward a copy of the application together with full details of the asset frozen given by any individual or entity informing of the funds, financial assets or economic resources or related services have been frozen inadvertently, to the nodal officer of IS-I Division of MHA as per the contact details given in paragraph (iv)(b) above within two working days. The Joint Secretary (IS-I), MHA, being the nodal officer for (IS-I) Division of MHA, shall cause such verification as may be required on the basis of the evidence furnished by the individual/entity and if he is satisfied, he shall pass an order, within fifteen working days, unfreezing the funds, financial assets or economic resources or related services, owned/held by such applicant under intimation to the concerned bank. However, if it is not possible for any reason to pass an order unfreezing the assets within fifteen working days, the nodal officer of IS-I Division shall inform the applicant.

viii) Communication of Orders under section 51A of Unlawful Activities (Prevention) Act.

All Orders under section 51A of Unlawful Activities (Prevention) Act, relating to funds, financial assets or economic resources or related services, would be communicated to all banks through RBI.

4.5 JURISDICTIONS THAT DO NOT OR INSUFFICIENTLY APPLY THE FINANCIAL ACTION TASK FORCE (FATF) RECOMMENDATIONS

a) Branches/offices are required to take into account risks arising from the deficiencies in AML/CFT regime of the jurisdictions included in the FATF Statement. In addition to FATF Statements circulated by Reserve Bank of India from time to time,


branches/offices may also consider publicly available information for identifying countries, which do not or insufficiently apply the FATF Recommendations. Branches/offices should also give special attention to business relationships and transactions with persons (including legal persons and other financial institutions) from or in countries that do not or insufficiently apply the FATF Recommendations and jurisdictions included in FATF Statements.

b) Branches/offices should examine the background and purpose of transactions with persons (including legal persons and other financial institutions) from jurisdictions included in FATF Statements and countries that do not or insufficiently apply the FATF Recommendations. Further, if the transactions have no apparent economic or visible lawful purpose, the background and purpose of such transactions should, as far as possible be examined, and written findings together with all documents should be retained and made available to Reserve Bank/other relevant authorities, on request.

4.6 ADHERENCE TO FOREIGN CONTRIBUTION REGULATION ACT (FCRA), 1976

The provisions of the Foreign Contribution (Regulation) Act, 1976 regulates the receipt of foreign contribution in the country. While accepting such contributions, Branches may open accounts or collect cheques only in favour of associations, which are registered under the Foreign Contribution Regulation Act ibid. by Government of India. A certificate to the effect that the associations registered with the Government of India should be obtained from the concerned associations at the time of opening of the account or collection of cheques.

While granting registration or prior permission, the Ministry of Home Affairs, Government of India invariably endorses a copy thereof to the concerned branch. Branches should desist from opening accounts in the name of banned organisations and those without requisite registration. Branches / Offices may access the website of Government of India (http://mha.nic. in/fcra/fcra.html) which contains the names of associations registered with them u/s 6(1)(a) of FCRA, 1976. List of banned organisations as circulated by Head Office from time to time should be properly preserved and referred as and when required. The Branches / Offices should strictly comply with the requisite legal requirements. Failure to comply would have serious implications.

Branches / Offices should also comply with and follow at all times the procedures which apply in each of the day to day operations which broadly includes :

Identifying customers thoroughly when opening accounts moving money around between accounts recording transactions reporting suspicious transactions

The Branches maintaining accounts under the purview of FCRA, 1976 should ensure that mandatory annual statements statutory under the Act are submitted by the account holders to the


appropriate Govt. department. Failing compliance by the customer, credit against FC remittances may be withheld under advice to the customer/ beneficiary.

Branches should submit details of the foreign contributions credited to the accounts of Association / Organisation, if any, on a half-yearly (March / September) basis to the Zonal Office within 15 days from the closure of half-year in the prescribed format.

Zonal Offices in turn should submit the consolidated position to Foreign Department, Head Office within one month from the closure of the half-year.

4.7 ANTI-MONEY LAUNDERING FOCUS

Money laundering is the process by which criminals attempt to hide and disguise the true origin and ownership of the proceeds of criminal activities, thereby avoiding prosecution, conviction and confiscation of criminal funds.

Generally, the money laundering process involves three stages :

Placement : Physically disposing of cash derived from illegal activity. One way to accomplish this is by placing criminal proceeds into traditional financial institutions or non-traditional financial institutions such as currency exchanges, casinos or check – cashing services.

Layering : Separating the proceeds of criminal activity from their source through the use of layers of financial transactions. These layers are designed to hamper the audit trail, disguise the origin of funds and provide the anonymity. Some examples of services that may be used during this phase are :

i) Early surrender of an annuity with regard to penalties, ii) Fraudulent letter of credit transactions; and iii) Illicit use of bearer shares.

Integration : Placing the laundered proceeds back into the economy in such a way that they re-enter the financial system as apparently legitimate funds.

An illustrative check-list for covering Money Laundering activities is provided in Appendix – XIII

4.8 WIRE TRANSFER

Wire transfers are being used as an expeditious method for transferring funds between bank accounts. Wire transfers include transactions occurring within the national boundaries of a country or from one country to another. As wire transfers do not involve actual movement of currency, they are considered as a rapid and secure method for transferring value from one location to another.


i) The salient features of a wire transfer transaction are as under :

a) Wire transfer is a transaction carried out on behalf of an originator person (both natural and legal) through a bank by electronic means with a view to making an amount of money available to a beneficiary person at a bank. The originator and the beneficiary may be the same person.

b) Domestic wire transfer means any wire transfer where the originator and receiver are located in the same country. It may also include a chain of wire transfers that takes place entirely within the borders of a single country even though the system used to effect the wire transfer may be located in another country.

c) Cross-border transfer means any wire transfer where the originator and the beneficiary bank or financial institutions are located in different countries. It may include any chain of wire transfers that has at least one cross-border element.

d) The originator is the account holder, or where there is no account, the person (natural or legal) that places the order with the bank to perform the wire transfer.

ii) Wire transfer is an instantaneous and most preferred route for transfer of funds across the globe and hence, there is a need for preventing terrorists and other criminals from having unfettered access to wire transfers for moving their funds and for detecting any misuse when it occurs. This can be achieved if basic information on the originator of wire transfers is immediately available to appropriate law enforcement and/or prosecutorial authorities in order to assist them in detecting, investigating, prosecuting terrorists or other criminals and tracing their assets. The information can be used by Financial Intelligence Unit - India (FIU-IND) for analysing suspicious or unusual activity and disseminating the same. The originator information can also be put to use by the beneficiary bank to facilitate identification and reporting of suspicious transactions to FIU-IND. Owing to the potential terrorist financing threat posed by small wire transfers, the objective is to be in a position to trace all wire transfers with minimum threshold limits. Accordingly, branches must ensure that all wire transfers are accompanied by the following information :-

(A) Cross-border wire transfers

(i) All cross-border wire transfers must be accompanied by accurate and meaningful originator information.

(ii) Information accompanying cross-border wire transfers must contain the name and address of the originator and where an account exists, the number of that account. In the absence of an account, a unique reference number, as prevalent in the country concerned, must be included.

(iii) Where several individual transfers from a single originator are bundled in a batch file for transmission to beneficiaries in another country, they may be exempted from including full originator information, provided they include the originator’s account number or unique reference number as at (ii) above.


(B) Domestic wire transfers

(i) Information accompanying all domestic wire transfers of Rs.50,000/- (Rupees Fifty Thousand) and above 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.

(ii) If a branch has reason to believe that a customer is intentionally structuring wire transfer to below Rs.50,000/- (Rupees Fifty Thousand) to several beneficiaries in order to avoid reporting or monitoring, the branch must insist on complete customer identification before effecting the transfer. In case of non-cooperation from the customer, efforts should be made to establish his identity and Suspicious Transaction Report (STR) should be made to Zonal Office/Head Office for onward submission to FIU-IND.

(iii) When a credit or debit card is used to effect money transfer, necessary information as (i) above should be included in the message.

iii) Exemptions

Interbank transfers and settlements where both the originator and beneficiary are banks or financial institutions would be exempted from the above requirements.

iv) Role of Ordering, Intermediary and Beneficiary banks

(a) Ordering Bank

An ordering bank is the one that originates a wire transfer as per the order placed by its customer. The ordering bank must ensure that qualifying wire transfers contain complete originator information. The bank must also verify and preserve the information at least for a period of ten years.

(b) Intermediary bank

For both cross-border and domestic wire transfers, a bank processing an intermediary element of a chain of wire transfers must ensure that all originator information accompanying a wire transfer is retained with the transfer. Where technical limitations prevent full originator information accompanying a cross-border wire transfer from remaining with a related domestic wire transfer, a record must be kept at least for ten years (as required under Prevention of Money Laundering Act, 2002) by the receiving intermediary bank of all the information received from the ordering bank.


(c) Beneficiary bank

A beneficiary bank should have effective risk-based procedures in place to identify wire transfers lacking complete originator information. The lack of complete originator information may be considered as a factor in assessing whether a wire transfer or related transactions are suspicious and whether they should be reported to the Financial Intelligence Unit-India. The beneficiary bank should also take up the matter with the ordering bank if a transaction is not accompanied by detailed information of the fund remitter. If the ordering bank fails to furnish information on the remitter, the beneficiary bank should consider restricting or even terminating its business relationship with the ordering bank.

4.9 CLOSURE OF ACCOUNTS

Where the branch is unable to apply appropriate KYC measures due to non-furnishing of information and /or non-cooperation by the customer, it should consider closing the account or terminating the banking/business relationship after issuing due notice to the customer explaining the reasons for taking such a decision. Such decisions need to be taken at a reasonably senior level i.e. at Zonal Office level.

4.10 PRESERVATION AND REPORTING OF CUSTOMER ACCOUNT INFORMATION

In terms of Section 12 of the Prevention of Money Laundering Act (PMLA), 2002 Banks are required to comply with certain obligations with regards to preservation and reporting of customer account information. Accordingly, Reserve Bank of India has directed the Banks to put in place the systems/ procedures in respect of maintenance and preservation of information, records of transactions and reporting thereof to the appropriate authority to ensure compliance with the requirements of section 12 of the Act.

In compliance to the above directives, Branches/ Offices are advised to follow meticulously the under noted systems/ procedures for maintenance and preservation of information, records of transactions and reporting thereof to the appropriate authority.

1. Maintenance of Records of Transactions

Proper record of the transactions prescribed under Rule 3 of PML Rules, 2005, should be maintained as mentioned below :

a) All cash transactions of the value of more than rupees ten lakhs or its equivalent in foreign currency ;

b) All series of cash transactions integrally connected to each other which have been valued below rupees ten lakhs or its equivalent in foreign currency where such series of transactions have taken place within a month and the aggregate value of series of transactions exceeds rupees ten lakhs ;


Explanation - Integrally connected cash transactions referred to at (ii) above. The following transactions have taken place in a branch during the month of April 2008:

c) As per above clarification, the debit transactions in the above example are integrally connected cash transactions because total cash debits during the calendar month exceeds Rs. 10 lakhs

d) All transactions involving receipts by non-profit organisations of value more than rupees ten lakh or its equivalent in foreign currency [Ref: Government of India Notification dated November 12, 2009- Rule 3,sub-rule (1) clause (BA) of PML Rules]

e) 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 or a document has taken place facilitating the transactions.

f) All suspicious transactions, whether or not made in cash and by way of :

(i) deposits and credits, withdrawals into or from any accounts in whatsoever name they are referred to in any currency maintained by way of : a) cheques including third party cheques, pay orders, demand drafts, banker’s cheques

or any other instrument of payment of money including electronic receipts or credits and electronic payments or debits, or


Date Mode Dr (in Rs.) Cr (in Rs.) Balance (in Rs.)

B/F 8,00,000.0002/04/2008 Cash 5,00,000.00 3,00,000.00 6,00,000.00

07/04/2008 Cash 40,000.00 2,00,000.00 7,60,000.0008/04/2008 Cash 4,70,000.00 1,00,000.00 3,90,000.00

Monthly

summation10,10,000.00 6,00,000.00

b) travellers cheques, or

c) transfer from one account within the same banking company, financial institution and intermediary, as the case may be, including from or to Nostro and Vostro accounts, or

d) any other mode in whatsoever name it is referred to.

(ii) credits or debits into or from any non-monetary accounts such as demat account, security account in any currency maintained by the banking company, financial institution and intermediary, as the case may be.

(iii) money transfer or remittances in favour of own clients or non-clients from India or abroad and to third party beneficiaries in India or abroad including transactions on its own account in any currency by any of the following : –

(a) payment orders, or

(b) bankers cheques, or

(c) demand drafts, or

(d) telegraphic or wire transfers or electronic remittances or transfers, or

(e) internet transfers, or

(f) automated clearing house remittances, or

(g) lock box driven transfers or remittances, or

(h) remittances for credit or loading to electronic cards, or

(i) any other mode of money transfer by whatsoever name it is called;

(iv) loans and advances including credit or loan substitutes, investments and contingent liability by way of :-

(a) subscription to debt instruments such as commercial paper, certificate of deposits, preferential shares, debentures, securitized participation, inter bank participation or any other investments in securities or the like in whatever form and name it is referred to, or

(b) purchase and negotiation of bills, cheques and other instruments, or

(c) Foreign exchange contracts, currency, interest rate and commodity and any other derivative instrument in whatsoever name it is called, or

(d) letters of credit, standby letters of credit, guarantees, comfort letters, solvency certificates and any other instrument for settlement and/ or credit support;

(v) collection services in any currency by way of collection of bills, cheques, instruments or any other mode of collection in whatsoever name it is referred to.


2. Information to be preserved

Branches/ Offices should maintain the following information in respect of transactions : i) the nature of the transactions; ii) the amount of the transaction and the currency in which it was denominated; iii) the date on which the transaction was conducted; and iv) the parties to the transaction.


3. Maintenance and Preservation of Records in respect of :–

i) Transactions in the customer’s account as detailed in Rule 3 of PML Rules,2005 :

Banks are required to maintain the records containing information of all transactions including the records of transactions detailed in Rule 3 above. Maintenance and preservation of account information should be done in a manner that the data can be retrieved easily and quickly whenever required or when requested by the competent authorities. Further, based on PML Amendment Act 2012, our Bank has constituted a policy to maintain for at least TEN years from the date of transaction between the bank and the client, all necessary records of transactions, both domestic or international, which will permit reconstruction of individual transactions (including the amounts and types of currency involved if any) so as to provide, if necessary, evidence for prosecution of persons involved in criminal activity.

ii) Identification of the customer and his address :

Branches should ensure that records pertaining to the identification of the customer and his address (e.g. copies of documents like passports, identity cards, driving licenses, PAN card, utility bills etc.) obtained while opening the account and during the course of business relationship, are properly preserved for at least TEN years after the business relationship is ended as required under Rule 10 of the Rules ibid. The identification records and transaction data should be made available to the competent authorities upon request.

iii) Complex, unusual transactions :

As mentioned in Point No. 4.2.1(a) above, branches are advised to pay special attention to all complex, unusual large transactions and all unusual patterns of transactions, which have no apparent economic or visible lawful purpose. It is further clarified that the background including all documents/office records/memorandums pertaining to such transactions and purpose thereof should, as far as possible, be examined and the findings at branch as well as Zonal Office/Principal Officer level should be properly recorded. Such records and related documents should be made available to help auditors in their day-to-day work relating to scrutiny of transactions and also to Reserve Bank/other relevant authorities. These records are required to be preserved for TEN years as per our Bank’s policy based on PMLA, 2002.

In terms of Government of India Notification on amendment PML Rules and as circularized by RBI on 17.07.2014, it has been decided that banks may maintain records of the identity of clients, and records in respect of transactions with its client referred to in rule 3 in hard or soft format.


4. Reporting to Financial Intelligence Unit-India (FIU-IND)

a) In terms of the Rule 3 of the PML (Maintenance of Records) Rules, 2005, banks are required to furnish information relating to cash transactions, cash transactions integrally connected to each other, and all transactions involving receipts by non-profit organizations [NPO means any entity or organization that is registered as a trust or society under the Societies Registration Act, 1860 or any similar State legislation or a company registered (erstwhile Section 25 of Companies Act, 1956) under Section 8 of the Companies Act, 2013], cash transactions where forged or counterfeit currency notes or bank notes have been used as genuine, cross border wire transfer etc. to the Director, Financial Intelligence Unit-India (FIU-IND) at the following address :

Director, FIU-IND Financial Intelligence Unit-India 6th Floor, Hotel Samrat Chanakyapuri New Delhi-110 021 Website - http://fiuindia.qov.in/

b) It should be carefully noted that the reporting to FIU-IND will be made by the Principal Officer only from Head Office. In no case the branches/ zonal offices should submit the Suspicious Transaction Report (STR) to FIU-IND directly. Branches should submit the STR to their respective zonal offices, who in turn will compile the position and submit the consolidated report covering all the branches under the zone alongwith the reports (STR) of each branch to Head Office in confidence.

c) FIU-IND has released a comprehensive reporting format guide to describe the specifications of prescribed reports to FIU-IND. FIU-IND has also developed a Report Generation Utility and Report Validation Utility to assist reporting entities in the preparation of prescribed reports. The Office Memorandum issued on Reporting Formats under Project FINnet dated 31st March, 2011 by FIU, containing all relevant details, are available on FIU’s website for meticulous compliance by the banks/FIs while reporting to FIU-IND.

d) In terms of Rule 8, while furnishing information to the Director, FIU-IND, delay of each day in not reporting a transaction or delay of each day in rectifying a misrepresented transaction beyond the time limit as specified in the Rule shall constitute a separate violation. Banks/FIs are advised to take note of the timeliness of the reporting requirements.

e) In terms of the extant RBI guidelines, banks/FIs are required to prepare a profile for each customer based on risk categorisation. Further, the need for periodical review of risk categorisation has also been emphasized. Therefore, as a part of their transaction


http://fiuindia.qov.in/

monitoring mechanism, banks/FIs are required to put in place an appropriate software application to throw alerts when the transactions are inconsistent with risk categorization and updated profile of the customers. It is needless to add that a robust software throwing alerts is essential for effective identification and reporting of suspicious transaction.

f) In order to comply with the government directives, reporting of transactions are made to FIU-IND in the following manner :

(j) Cash Transaction Report (CTR)

Subsequent to migration of all branches to CBS, the Cash Transaction Reports (CTRs) covering all transactions of the value of more than Rs.10 lakhs or its equivalent in foreign currency and all series of cash transactions, integrally connected to each other and which have been valued below Rs.10 lakhs or its equivalent in foreign currency and where such series of transactions have taken place within a month and the aggregate value of such transactions exceeds Rs.10 lakhs or its equivalent in foreign currency, is being generated centrally by CBS, Project Office.

The directions of FIU-IND for filing of CTR by the bank is appended :-

1) The CTR for each month should be submitted to FIU-IND by 15 th of the succeeding month.

2) While filing CTR, details of individual transactions below Rupees fifty thousand need not be furnished.

3) CTR should contain only the transactions carried out by the bank on behalf of the clients/customers, excluding transactions between the internal accounts of the bank.

4) In case of Cash Transaction Reports (CTR) compiled centrally by banks for the branches having Core Banking Solution (CBS) at their central data centre level, banks may generate centralised Cash Transaction Reports (CTR) in respect of branches under core banking solution at one point for onward transmission to FIU-IND, provided :

a. The CTR is to be generated in the format prescribed by FIU-IND

b. A copy of the monthly CTR submitted on its behalf to FlU-lndia is available at the concerned branch for production to auditors/inspectors, when asked for

c. The instruction on ‘Maintenance of records of transactions’; ‘Information to be preserved’ and ‘Maintenance and Preservation of records’ as contained in Point No. 3 above respectively are scrupulously followed by the branch.


5) In view of the directions of FIU-IND vide Point No. (3) above, branches/offices must desist from making any cash transaction on behalf of the customers through BGL accounts viz. Sundry, Suspense, Internal A/C etc. in violation of extant guidelines. Moreover, for opening and operation of ‘Non-Customer Current Account’, branches/offices must follow the guidelines strictly noted in Instruction Circular No. 12699/BPR Cell/2013-14/10 dated 08.10.2013, where inter-alia the following action points are noted :- Opening of current account not belonging to any individual or to any business

entity (i.e. not a customer account), should only be done after obtaining prior permission in writing from the Head Office Finance & Accounts Department.

If such account is opened for bank’s internal purpose, it should be opened under product category 49 (Allahabad Bank Internal account) which is mapped to Other Liability in CGL.

The permission will be accorded after satisfying the genuine need and reason for opening such accounts for which permission is sought.

The request for permission and the approval by Head Office will be kept with the account opening form as part of security documents.

(vi)Counterfeit Currency Report (CCR)

All cash transactions, where forged or counterfeit Indian currency notes or bank notes have been used as genuine or where any forgery of valuable security or a document has taken place facilitating the transactions should be reported by the Principal Officer of the bank to FIU-IND in the specified format by 15th day of succeeding month of occurrence of such transactions (Counterfeit Currency Report – CCR).

These cash transactions should also include transactions where forgery of valuable security or documents has taken place and may be reported to Zonal Office/Head Office in plain text form.

In order to submit the Counterfeit Currency Report (CCR) by the bank within specified time period to FIU-IND, the Branches/Currency Chests should submit the statement of such transaction immediately through fax (033 2231 4629) / e-mail ([email protected]) directly to Head Office, AML & KYC cell on the date of occurrence itself.

(vii) Suspicious Transaction Report (STR)

Suspicious Transaction Report (STR) should contain all suspicious transactions whether or not made in cash, as already elaborated hereinbefore under ‘Maintenance of Records of Transactions’. It is likely that in some cases transactions are abandoned/ aborted by customers on being asked to give some details or to provide documents. It is clarified that branches should report all such attempted transactions in STRs, even if not completed by customers, irrespective of the amount of the transaction.


mailto:[email protected]

As detailed in the chapter “Monitoring of Transactions” both the transaction monitoring by nodal officers at Zonal Offices and Offline transaction monitoring at branches should be taken into account for identifying suspicious transactions.

Branch Managers should use reasonable judgment in determining the suspiciousness of any transaction and on being satisfied himself/ herself about the existence of a suspicious activity/ nature in the transaction will submit the report to their respective Zonal Office immediately in the prescribed format along with the reasons for treating any transaction or a series of transactions as suspicious. Such report should be submitted through e-mail/ fax without delay. On receipt of such report from the branch the concerned Zonal Office will scrutinize the same and send the report to the Principal Officer of the Bank without delay.

It may be mentioned here that suspicious transaction means a transaction, whether or not made in cash, which to a person acting in good faith –

Gives rise to a reasonable ground of suspicion that it may involve the proceeds of crime; or

Appears to be made in circumstances of unusual or unjustified complexity ; or Appears to have no economic rationale or bonafide purpose or Gives rise to reasonable ground of suspicion that it may involve financing of the

activities relating to terrorism.

Broad categories of reason for suspicion and examples of suspicious transactions are indicated as under :

Reasons / Examples of suspicious transactions

Identity of client False identification documents. Identification documents which could not be verified within reasonable time. Accounts opened with names very close to other established business identities.

Background of client Suspicious background or links with known criminals.

Multiple accounts Large number of accounts having a common account holder, introducer or authorized signatory with no rationale. Unexplained transfers between multiple accounts with no rationale.


Activity in accounts Unusual activity compared with past transactions. Sudden activity in dormant accounts. Exercise caution while allowing operation in dormant/ inoperative accounts.Activity inconsistent with what would be expected from declared business.

Nature of Unusual or unjustified complexity.

transactions No economic rationale or bonafide purpose. Frequent purchases of drafts or other negotiable instruments with cash. Nature of transactions inconsistent with what would be expected from declared business.

Value of transactions Value just under the reporting threshold amount (above rupees ten lakh) in an apparent attempt to avoid reporting. Value inconsistent with the client’s apparent financial standing.

Some important guidelines on submission of STR

While determining suspicious transactions, branches/offices should be guided by the definition of suspicious transaction as contained in PMLA Rules as amended from time to time.

It is likely that in some cases transactions are abandoned/aborted by customers on being asked to give some details or to provide documents. It is clarified that branches/offices should report all such attempted transactions in STRs through their respective ZOs, even if not completed by the customers, irrespective of the amount of the transaction.

Branches/Offices should make STRs if they have reasonable ground to believe that the transaction involves proceeds of crime irrespective of the amount of the transaction and/or the threshold limit envisaged for predicate offences in part B of Schedule of PMLA, 2002. The same principle should be followed at HO level while scrutinizing the STR alerts generated through AML system centrally.

The Suspicious Transaction Report (STR) is required to be furnished to FIU-IND by the Principal Officer of the Bank within 7 days of arriving at a conclusion that any transaction, whether cash or non-cash, or a series of transactions integrally connected are of suspicious nature. The Principal Officer should record his reasons for treating any transaction or a series of transactions as suspicious.


It should be ensured that there is no undue delay in arriving at such a conclusion once a suspicious transaction report is received from a branch or any other office. Such report should be made available to the competent authorities on request.

However, it should be carefully noted that Branches should not put any restrictions on operations in the accounts where an STR has been made. Moreover, branches should keep the fact of furnishing of STR strictly confidential, as required under PML Rules. It should also be ensured that there is no tipping off to the customer at any level.

(viii) Non-Profit Organisation Transaction Report (NTR)

The report of all transactions, whether cash or transfer, involving receipts by non-profit organizations of value more than Rs.10 lakhs or its equivalent in foreign currency should be submitted every month to the Director, FIU-IND by 15 th of the succeeding month in the prescribed format.

Explanation : Government of India Notification dated November 12, 2009- Rule 2 sub-rule (1) clause (ca) defines Non-Profit Organization (NPO). NPO means any entity or organisation that is registered as a trust or a society under the Societies Registration Act, 1860 or any similar State legislation or a company registered under section 25 of the Companies Act, 1956.

Branches are advised to mark the non-profit organizations as defined above in the CBS system for the existing accounts and also while opening new accounts.

The transactions of the NPOs are captured by CBS system on the basis of the customer type defined in the account. Therefore the customer type of non-profit organizations such as Trusts, Clubs, societies, associations etc. falling under the definition of Govt. of India notification should necessarily be opened under the following customer types to enable the CBS system to identify NPOs.

Branches/offices are also advised to immediately make a review of existing non-profit organization accounts with them and ensure to amend the customer type suitably for generation of the non-profit organization reports from CBS system.


Sl. No. Customer type code Description1. 0208 Non-Personal Trust2. 0209 Non-Personal Clubs3. 0210 Non-Personal Associations4. 0211 Non-Personal NGO’s

(ix) Cross-border Wire Transfer Report (CWTR)

With the amendments to Prevention of Money Laundering (PML) Rules, notified by the Government of India vide Notification no. 12 of 2013 dated 27th August, 2013 and in terms of amended Rule 3, every reporting entity is now required to maintain the records of all transactions including the records of all cross border wire transfers of more than Rs.5 lakh or its equivalent in foreign currency, where either the origin or destination of the fund is in India, in addition to the reports submitted currently. In view of the above notification, Reserve Bank of India vide its communication dated March 28, 2014 has advised all the banks to submit report on Cross-border Wire Transfers to the FIU-India through FINnet Gateway by 15th of the succeeding month.

FIU-IND in their publication of FAQs (Frequently Asked Questions), has clarified the nature of transactions to be included in the CBWT report, brief of which are appended:-

All transactions whether these are for Trade, Non trade or merchant are to be reported if it involves cross border transfers and exceeds the threshold of rupees five lakh or its equivalent in foreign currency.

Fund settlement transactions between banks via SWIFT message are also to be included under cross border wire transfers report.

Bank has to follow the first-in/last-out principle for the obligations regarding the reporting. The first bank which receives the inward remittance, whether for its own customer or acting as intermediary for the customer of other bank, has to file the report. Similarly the last bank which sends out the remittance whether for its own customer or acting as intermediary for the customer of other bank has to file the report.

If the values of each transaction for use of Credit cards / Debit cards / Pre-paid cards/ Travel cards in foreign country / foreign currency are more than Rupees five lakh or its equivalent in foreign currency where either the origin or destination is in India, then it will form part of the report.

In case bank receives a single inward remittance of more than Rs.5 lakh where the credit needs to be applied to multiple beneficiaries, the same needs to be reported and the details of all the recipients should be mentioned in the receiver part of the report.

Foreign currency purchased and sold through a branch is not to be included in the report

(g) Procedures to be followed for submission of the reports


In terms of Rule 8, while furnishing of information to the Director FIU-IND, delay of each day in not reporting a transaction or delay of each day in rectifying a misrepresented transaction beyond the time limit as specified in this rule shall constitute a separate violation.

Therefore, while submitting the reports to Head Office, the branches/ zonal offices should carefully follow the under noted guidelines/ procedures :-

The branches should submit the suspicious transaction in manual format whenever detected at their end.

Utmost confidentiality should be maintained in filing of STR to FIU-IND. The reports are to be transmitted by speed/ registered post, fax, e-mail at the notified address. Accordingly, the branches/ zonal offices are also advised to maintain confidentiality in submitting the STR to the Principal Officer of the Bank.

The guidelines are issued under Section 35A of the Banking Regulation Act, 1949 and Rule 7 of 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. Any contravention thereof or non-compliance shall attract penalties. Hence, the branches/ zonal offices are advised to comply with the guidelines in letter and spirit and ensure submission of Suspicious Transaction Report (STR) & Counterfeit Currency Report (CCR) strictly in terms of the stipulated time period, as aforesaid.

5. SCREENING OF CASH WITHDRAWALS AND DEPOSITS FOR THE PURPOSE OF CTR :

Subsequent to migration of all branches to CBS, the Cash Transaction Reports (CTRs) covering all transactions of the value of more than Rs.10 lakhs or its equivalent in foreign currency and all series of cash transactions integrally connected to each other which have been valued below Rs.10 lakhs or its equivalent in foreign currency where such series of transactions have taken place within a month and the monthly aggregate value of such transactions exceeds Rs.10 lakhs or its equivalent value in foreign currency, is being generated centrally by CBS, Project Office for submission of monthly CTR to FIU-IND. However, the copy of monthly CTR submitted by the Bank pertaining to the concerned branch is being placed on the reports folder every month. The following action points are to be adhered by the branches and Zonal Offices in this regard.

i. Action points for Branches :


The copy of the monthly CTR report should be perused carefully to find any abnormality or suspicion in the accounts. If any transaction appears suspicious the same should be reported immediately to the Zonal Office for onward reporting to Head Office. Thus, all CTRs thus reported in branch folder must be scrutinized at the branch level for STR alerts.

It should also be ensured that the monthly CTR report available in the branch should be produced before auditors/inspectors when asked for.

Branches are also advised to meticulously follow the instruction on “Maintenance of records of transactions; “Information to be preserved’ and “Maintenance and Preservation of records” as detailed in Para 4.11

ii. Action points for Zonal Offices :

Zonal Offices will closely monitor the high value transactions in the branches and guide the branches in reporting suspicious transactions to Head Office. Zonal Offices will scrutinize the reports received from the branches and investigate abnormality or suspicious transaction, if any, by deputing officials.

Zonal Offices will specially monitor the cash transactions reported in ‘CTR for Rs.1 crore and above’, lists of which are provided to ZOs in every month from HO AML & KYC Cell, to ensure verification of the genuineness of those transactions with regard to the business activities of the concerned customers to have a re-look over the submission of any Suspicious Transaction Report (STR), if needed. The KYC particulars should also be thoroughly verified for those accounts to ensure proper due diligence.

Zonal Heads, during their periodical branch visits, will verify such high value transaction accounts in discussion with the Branch Heads.


CHAPTER - 5

RISK MANAGEMENT

Branches/Offices should 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 about the clients, their business and risk profile and where necessary, the source of funds.

It should be ensured by the Bank that an effective AML/CFT programme is in place by establishing appropriate procedures and ensuring their effective implementation. It should cover proper management oversight, systems and controls, segregation of duties, training of staff and other related matters.

In addition, the following may also be ensured for effectively implementing the AML/CFT requirements :-

(i) Using a risk-based approach to address management and mitigation of various AML/CFT risks.

(ii) Allocation of responsibility for effective implementation of policies and procedures.(iii) Independent evaluation by the compliance functions of bank/FI’s policies and procedures,

including legal and regulatory requirements.(iv) Concurrent/internal audit to verify the compliance with KYC/AML policies and procedures.(v) Putting up consolidated note on such audits and compliance to the Audit Committee at

quarterly intervals.

5.1 Maintenance of Customers’ Risk Profile

(a) Branches/Offices should prepare a profile for each new customer based on risk categorisation. The customer profile should contain information relating to customer’s identity, social/financial status, nature of business activity, information about the clients’ business and their location etc. (Format provided in Appendix-II). The nature and extent of due diligence will depend on the risk perceived by the bank/FI.

(b) Branches/Offices should categorise their customers into low, medium and high risk category based on their assessment and risk perception of the customers, identifying transactions that fall outside the regular pattern of activity and not merely based on any group or class they belong to. Broad guidelines on risk perception is given in Appendix-I. The branches/offices are advised to go with the guidelines given in AML & KYC Policy for risk categorisation and ensure that the same are meticulously complied with to effectively help in combating money laundering activities. The nature and extent of due diligence, may be based on the following principles:


(i) Individuals (other than High Net Worth) and entities, whose identity and source of income, can be easily identified, and customers in whose accounts the transactions conform to the known profile, may be categorised as low risk. Illustrative examples include salaried employees and pensioners, people belonging to lower economic strata, government departments and government owned companies, regulators and statutory bodies, etc. Further, Non-Profit Organisations (NPOs)/ Non-Government Organisations (NGOs) promoted by the United Nations or its agencies, and such international/multilateral organizations of repute, may also be classified as low risk customers.

(ii) Customers who are likely to pose a higher than average risk should be categorised as medium or high risk depending on the background, nature and location of activity, country of origin, sources of funds, customer profile, etc. Customers requiring very high level of monitoring, e.g., those involved in cash intensive business, Politically Exposed Persons (PEPs) of foreign origin, may, if considered necessary, be categorised as high risk.

The above guidelines for risk categorisation are indicative and b ranches/offices may use their own judgement in arriving at the categorisation for each account based on their own assessment and risk perception of the customers and not merely based on any group or class they belong to. Further clarifications on risk based assessment is given hereunder.

5.2 Management of Customer Risk Profile

As discussed in Chapter – 2, Point 2.3 branches/offices should maintain “Customer Risk Profile” (Appendix-II) both for new as well as existing customers. While full details about the customers can be available in the respective account opening form, additional information commensurate with the assessment of the money laundering risks should also be obtained through interview/discussion with the customer. Branch Manager/Officers should be vigilant when customers conduct banking transactions and determine realistically the transactions that are unusual and potentially fraudulent. Necessary steps to be taken as and when there is a suspicion in any transaction. Branch should send a report to higher authority for the transactions that are of suspicious nature.

Branch should apply enhanced due diligence measures 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.

All customer accounts (both existing and new) should be categorized into three levels as per risk perceived, viz.

(i) Level - I (low risk),

(ii) Level - II (medium risk),

(iii) Level - III (high risk).


(i) Level - I (Low risk) customers :

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 conforms to the known profile, may be categorized as low risk accounts.

Illustrative examples of Level - I (low risk) customers may include ;

o Salaried employees whose salary structures are well defined.

o Businessmen/Traders whose activities are well defined and transactions in the accounts commensurate with the business transactions.

o People belonging to lower economic strata of society and whose accounts show small balances and low turnover.

o Government departments & Government owned companies, regulators and statutory bodies etc.

In such cases, only the basic requirements of verifying the identity and location (address) of the customers and introducers are to be met.

Reserve Bank of India observed that of late, there has been an increase in instances of fictitious offers, where fraudsters are using RBI’s corporate logo/name in their e-mail messages and also sometimes include the photograph of the Governor to convince the victims of the authenticity of the purported messages conveying lottery/prize winnings. The fraudsters persuade victims into making initial payment into a specified bank account towards charges for claiming the prize money. The victims invariably complain to RBI after they have lost money in such transactions. It was also observed by RBI from the responses received from banks in this regard that these transactions generally take place in newly opened accounts of individuals/salary accounts, which are classified as low risk.

In view of RBI directives, Bank has issued various advisories on website, warning public against falling prey to fictitious offers/ lottery winnings/ remittance of cheap funds in foreign currency from abroad by so-called foreign entities/individuals or to Indian residents acting as representatives of such entities/individuals.

Field functionaries are advised to adopt the following measures as part of the monitoring exercise:

a) Generally the fraudsters open and route transactions through salary/savings accounts categorized as low risk, by way of small deposits to evade detections. Branch should monitor operations in these low risk accounts for identifying “atypical transaction”. The abnormal patterns in the range of transactions, salary accounts, newly opened accounts etc should be identified. The transactions that are deviating from the threshold limit/outside the normal transaction region should be probed into and resolved quickly.


b) Branches should closely monitor such accounts in the initial 3-6 months of their opening with threshold limit carefully calibrated to track transactions not in line with customer profile and ensure quick turnaround time in resolution of alerts.

c) Branch officials should clarify queries from customers regarding such lottery winnings where they have been advised to deposit money in specified accounts. Branches should also display a notice within the premises that such facility is available.

The front office/ operations desks should exercise due caution to deal with accounts where STR is filed.

(ii) Level - II (Medium risk) customers :

Customers those are likely to pose a higher than average risk should be classified as Level - II (Medium risk). Customers particularly whose sources of fund are not clear and transaction exceeds the disclosed source of fund.

(iii) Level - III (High risk) customers :

Customers that are likely to pose a higher than average risk should be categorized as Level - III (High risk) depending upon customer’s back ground, nature and location of activity, country of origin, source of funds and his client’s profile.

Illustrative examples of Level - III (High risk) customers may include:

o In view of the risks involved in cash intensive business, accounts of bullion dealers (including sub-dealers) & jewelers should be categorized as High Risk.

o Those who are engaged in certain professions where money laundering possibilities are high e.g. Antique dealers (individuals and entities), Money Services Bureau (entities – non employees of these entities) and dealers in arms etc.

o Non-resident customers.

o High Net-worth Individuals (HNI).

o Trust, Charities, N.G.Os and organizations receiving donations. However, NPOs/NGOs promoted by United Nations or its agencies may be classified as low risk customer

o Companies having close family share holding or beneficial ownership.

o Firms with ‘sleeping partners’.

o Funds coming from the list of countries/ centers which are known for money laundering.

o Non face to face customers, and

o Those with dubious reputation as per public information available etc.


o Politically exposed persons (PEPs) of foreign origin, customers who are close relatives of PEPs and accounts of which a PEP is the ultimate beneficial owner;

(Indicative list of High/Medium risk customers and high/medium risk products & services enclosed in Appendix - I)

However, NPOs/NGOs promoted by United Nations or its agencies may be classified as Low Risks customers.

The above examples are illustrative and not exhaustive.

The Branch officials of the concerned branch, where suspicious activity/transaction is noticed, should verify the transactions depending upon the nature and circumstances, satisfy themselves whether the activity/ transactions in the account is to be reported as a suspicious nature or to be treated as a bonafide one. Accordingly, the account should be categorized as Level - I/ Level - II/ Level - III as deemed fit and be monitored suitably.

Preparation of customer’s profile should be a continuous exercise. Customer’s profile should be reviewed periodically.

The bank has already put in place a system-based risk categorization of the accounts with periodical review, i.e. once in six months (as on February & August end). The branches/offices are advised to apply enhanced due diligence measures in case of higher risk perception on a customer.

In order to ensure due diligence measures, particularly while operating the High Risk & High Net-worth Individual (HNI) customers’ accounts, bank has put in place a system of displaying the status of the customers introducing “F9” Hot-key, which would exhibit the following details of the customers :-

a) HNI Status with either ‘N’ (i.e. No) or ‘Y’ (i.e. Yes)b) Risk Profile with ‘Low’, ‘Medium’ or ‘High’c) Risk Scored) E-mail addresse) Mobile No.f) Date of Birthg) Genderh) Aadhaar No.i) PAN

Field functionaries are advised to ensure full utilization of this “F9” Hot-key and make it mandatory before proceeding for any type of banking operation of the customers in order to adherence of the aforesaid guidelines on due diligence.

A Low-risk customer may be treated as Medium/ High risk if the transactions in the account in subsequent period does not conform to his declared income/ source of fund and raise suspicion.

Accordingly, the profile of each customer account should be reclassified/ updated as and when situation arises.


CHAPTER - 6

GENERAL GUIDELINES

Our bank has established an effective KYC programme by approving appropriate systems and procedures. It covers proper management oversight, systems and controls, segregation of duties, training and other related matters. Responsibility is explicitly allocated within the bank for ensuring that the bank's policies and procedures are implemented effectively. Bank has devised procedures for creating risk profiles of existing and new customers (to be visible with hot-key “F9’’), assess risk in dealing with various countries, geographical areas and also the risk of various products, services, transactions, delivery channels, etc. Bank’s policies are in place for effectively managing and mitigating risks adopting a risk-based approach.

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 should provide an independent evaluation of the bank’s own 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 is put up before the Audit Committee of the Board on quarterly intervals.

6.1 Roles & responsibilities of bank’s officers & staff

Bank officers/employees will conduct themselves in accordance with the highest ethical standards and in accordance with the extant regulatory requirements and laws. They should not knowingly provide advice or other assistance to individuals who are indulging in laundering activities.

Bank officers/employees who suspect any sort of money-laundering activities in course of banking business should refer the matter to appropriate authority immediately.

Bank officers/employees should not indulge in unnecessary dialogue or provide unwanted guidance to the customers / intended customers to avoid dispute of any kind in future.

Failure to adhere to KYC / Money Laundering policies / procedures may subject bank employees to appropriate disciplinary action or such penal actions and penalties that may be stipulated under any law or regulatory directive.

In general terms there are FIVE golden rules to be followed :

1. You MUST NOT assist anyone whom you know or suspect to be laundering money that has been derived from any crime.

2. You MUST report any transaction which you suspect might be related to drugs, terrorism or other serious crimes.


3. You MUST NOT reveal in any way to anyone that a customer is being investigated or that they have been the subject of a report except to your Branch Manager and controlling authorities.

4. You MUST NOT go overboard in seeking information for KYC compliance and thereby invading into client’s privacy, to avoid intrusion.

5. You MUST NOT divulge customer information for cross selling or any other like purposes.

6.2 Duties/ responsibilities of officers/staff

The following duties/responsibilities arising to the officers/ staff out of the KYC guidelines.

Staff/Officer/Branch Manager vested with the authority to open new accounts

To interview the potential customers intending to open account.

To verify the introductory reference/ customer profile.

To arrive at threshold limit for each account and to exercise due diligence in identifying

suspicious transactions.

To ensure not to open account in the names of terrorist/banned organisations.

To adhere with the provisions of Foreign Contribution Regulation Act (FCRA), 1976.

To comply with the guidelines issued by the Bank from time to time in respect of opening

and conduct of account.

Branch Manager

To scrutinize and satisfy himself the information furnished in the Account opening form/ customer Profile/ threshold limit are in strict compliance with KYC Guidelines before authorizing Opening of account.

To ensure that Customer Due Diligence (CDD)/Enhanced Due Diligence (EDD) has been carried out while opening of account.

To ensure reporting of STRs based on off-line alert parameters in deserving cases.

Zonal Office/FGM Office/Head Office

Prompt reporting of information regarding suspicious transactions to concerned law enforcing Authority in consultation with Head Office.


Nodal OfficersEvery FGM Office and Zonal office will identify and nominate a Nodal Officer (not less than the rank of a Chief Manager) for implementation of KYC norms & AML measures including monitoring of suspicious transaction. The Nodal Officer so identified should have sufficient experience in operational banking and working computer knowledge.

The indicative roles and responsibilities of the Nodal Officers are appended :-

To co-ordinate all operational issues related to AML & KYC.

To keep functioning as a ‘liaison officer’ in between the branches and the controlling offices, and to ensure implementation of KYC norms & AML measures

To keep field functionaries apprise of AML & KYC matters like off-line alert monitoring for picking up suspicious transactions for reporting under STR, proper marking of each account with occupation and activity code.

To arrange for submission of KYC particulars as and when demanded by higher office.

To ensure that no account exists with junk/ invalid PAN.

To verify all cash transactions of Rs.1.00 crore and above occurred during a month (furnished by Head Office regularly) to ascertain genuineness of transactions regarding business activities of the customers and decide as to whether any suspicious transaction report needs to be submitted for these accounts.

To follow-up concurrent audit report (Annexure-SR2) for 100% rectification of KYC irregularities to ensure no carryover of same account in the next concurrent audit report.

To monitor newly opened account for at least 2 quarters giving emphasis in high volume & high value transactions.

Any other issues related to AML & KYC norms.

Concurrent auditors wherever posted

To verify and record comments on the Effectiveness of measures taken by Branches/level of implementation of KYC guidelines and to point out the shortcomings.

Inspecting Officer of the Bank

The Inspecting Officers while inspecting the branches should check the status of compliance on KYC & AML Norms and arrange for rectification of deficiencies/shortcomings, if any.


6.3 Evaluation of KYC Guidelines by Internal Audit and Inspection System

The Concurrent Auditor of the branches and Inspecting Officials while conducting audit / inspection of the branches / offices should verify compliance of the KYC guidelines and prevention of money laundering at branches and report the cases of deviations, if any, in the report.

6.4 Training to officers/ staff

Bank is having an ongoing employee training programme so that the members of officers/ staff are adequately trained in AML/CFT policy. Since training system plays a crucial role in manifestation of policy guidelines, training inputs on implementation of KYC policies should form an integral part of structured training modules/ syllabus so that officers/ staff are adequately trained for their role and responsibilities as appropriate to their hierarchical level. The training programme should have different focus on frontline officials, compliance officials and officials dealing with new customers. The front desk official needs to be specially trained to handle issues arising from lack of customer education. All concerned officers/ staff members should fully understand the rationale behind the KYC policies and implement them consistently.

6.5 Confidentiality of customer information

Information collected from customers for the purpose of opening of account should be treated as confidential and details thereof should not be divulged for the purpose of cross selling, etc. Information sought from the customer should be relevant to the perceived risk and be non-intrusive. Branches/ offices should, therefore, ensure that information sought from the customer is relevant to the perceived risk, is not intrusive, and is in conformity with the guidelines issued in this regard. Any other information that is sought from the customer should be called for separately only after the account has been opened, with his/her express consent and in a different form, distinctly separate from the application form. It should be indicated clearly to the customer that providing such information is optional.

6.6 Avoiding hardship to customers

While issuing operational instructions to branches, it should be kept in mind that the spirit of the instructions issued by the Reserve Bank/ other regulatory authorities so as to avoid undue hardships to individuals who are otherwise classified as low risk customers.

6.7 Sensitising the customers

Implementation of AML/CFT policy may require certain information from customers of a personal nature or which had not been called for earlier. The purpose of collecting such information could be questioned by the customer and may often lead to avoidable complaints and litigation. Branches/ offices should, therefore, get themselves prepared with


specific literature/pamphlets, e t c . , t o educate the customer regarding the objectives of the AML/CFT requirements for which their cooperation is solicited. The front desk officials should be specially trained to handle such situations while dealing with the customers.

6.8 KYC for the Existing Accounts

While the revised KYC guidelines will apply to all new customers, the same will also be applied to all existing customer accounts on the basis of materiality and risk. Transactions in existing accounts should be continuously monitored and any unusual pattern in the operation of the account should be reviewed on customer due diligence measures.

Term/ recurring deposit accounts or accounts of similar nature will be treated as new accounts at the time of renewal and revised KYC procedures should be applied meticulously.

Where the branches were unable to apply KYC measures due to non-furnishing of information / non-cooperation by the customers, their accounts will remain blocked/frozen after issuing due notice to the customers explaining the reasons for taking such a decision and when such customers approach bank for transaction etc., then KYC norms be complied with. However, prior approval must be taken from zonal office before closure of the account.

6.9 Applicability to Branches and Subsidiaries Outside India

The revised KYC 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 in the host country permit. When local applicable laws and regulations prohibit implementation of these guidelines, the same should be brought to the notice of Head Office and in turn to Reserve Bank of India. In case there is a variance in KYC/AML standards prescribed by the Reserve Bank and the host country regulators, branches/overseas subsidiaries of banks are required to adopt the more stringent regulation of the two.

6.10 Technology requirements

The AML software in use at banks/FIs needs to be comprehensive and robust enough to capture all cash and other transactions, including those relating to walk-in customers, sale of gold/silver/platinum, payment of dues of credit cards/reloading of prepaid/travel cards, third party products, and transactions involving internal accounts of the bank.

6.11 Penalty for Non-Adherence to KYC norms

Amendment has been made on Section 13(2) of PMLA 2002 vide Govt. of India Notification dated 04.01.2013, which confers power to the Director, FIU-IND on the following lines :-


http://etc.so/

“If the Director, in course of any inquiry, finds that a reporting entity or its designated director on the Board or any of its employees has failed to comply with the obligations under this Chapter, then, without prejudice to any other action that may be taken under any other provisions of this Act, he may –

(a) issue a warning in writing; or(b) direct such reporting entity or its designated director on the Board or any of its

employees, to comply with specific instructions; or(c) direct such reporting entity or its designated director on the Board or any of its

employees, to send reports at such interval as may be prescribed on the measures it is taking; or

(d) by an order, impose a monetary penalty on such reporting entity or its designated director on the Board or any of its employees, which shall not be less than ten thousand rupees but may extend to one lakh rupees for each failure.”

Under the circumstances, any violation of essential safeguards and laid down procedures in opening and operations of deposit accounts and non-compliance of KYC norms by the branch staff / officials and for lapses or connivance in perpetrating irregularities/fraudulent operations in accounts would attract punitive action against them.

Zonal Heads while visiting the branches should invariably check as to whether the KYC guidelines are strictly followed by the Branches. In case of deviation, all requisite steps should be taken to rectify the shortcomings under close monitoring.


Appendix – I

Indicative list of High/Medium Risk Customers

Characteristics of High Risk Customers

1. Individuals and entities listed in various United Nations Security Council Resolutions (UNSCRs) such as UN 1267 etc.

2. Individuals or entities listed in the schedule to the order under section 51A of the Unlawful Activities (Prevention) Act, 1967 relating to the purposes of prevention of, and for coping with terrorist activities.

3. Individuals or entities in watch lists issued by Interpol and other similar international organizations.

4. Customers with dubious reputation as per public information available or commercially available watch lists.

5. Individuals and entities specifically identified by regulators, FIU and other competent authorities as high risk.

6. Customers conducting their business relationship or transactions in unusual circumstances such as significant and unexplained geographic distance between the institution and the location of the customer, frequent and unexplained movement of accounts to different institutions, frequent and unexplained movement of funds between institutions in various geographic locations etc.

7. Customers based in high risk countries / jurisdictions or locations

8. Politically exposed persons (PEPs) of foreign origin, customers who are close relatives of PEPs and accounts of which a PEP is the ultimate beneficial owner.

9. Non-resident customers and foreign nationals.

10. Embassies/consulates

11. Off-shore (foreign) corporation/business

12. Non face-to-face customers

13. High net worth individuals

14. Firms with “Sleeping partners”

15. Companies having close family shareholding or beneficial ownership

16. Complex business ownership structures, which can make it easier to conceal underlying beneficiaries, where there is no legitimate commercial rationale.


17. Shell companies which have no physical presence in the country in which it is incorporated. The existence simply of a local agent or low level staff does not constitute physical presence.

18. Investment Management/ Money Management Company/ Personal Investment Company

19. Accounts for “gatekeepers” such as accountants, lawyers or other professionals for their clients where the identity of the underlying client is not disclosed to the financial institution.

20. Client Accounts managed by professional service providers such as law firms, accountants, agents, brokers, fund managers, trustees, custodians etc.

21. Trusts, charities, NGOs/Non- Profit Organisations (NPOs) (Especially those operating on a “cross-border” basis) unregulated clubs and organizations receiving donations (excluding NPOs/NGOs promoted by United Nations or its agencies)

22. Money Service Business: including seller of : Money Orders/ Travelers’ Checks/ Money Transmission/ Check Cashing/ Currency Dealing or Exchange

23. Business accepting third party cheques (except Super markets or retail stores that accep payroll cheques/ cash payroll cheques)

24. Gambling/ Gaming including “Junket Operators” arranging gambling tours.

25. Dealers in high value or precious goods (e.g. Jewel, gem and precious metals dealers, art and antique dealers and auction houses, estate agents and real estate brokers)

26. Customers engaged in business which is associated with higher levels of corruption (e.g. arms manufacturers, dealers and intermediaries.)

27. Customers engaged in industries that might relate to nuclear proliferation activities or explosives.

28. Customers that may appear to be Multi level marketing companies etc.

Characteristics of Medium Risk Customers

1. Non-Bank Financial Institution

2. Stock brokerage

3. Import/Export

4. Gas Station

5. Car/Boat/ Plane dealership

6. Electronics (wholesale)

7. Travel Agency

8. Used Car sales

9. Telemarketers

10. Providers of telecommunications service, internet café, IDD call service, phone cards, phone center


11. Dot-com company or internet business

12. Pawn shops

13. Auctioneers

14. Cash intensive business such as restaurants, retail shops, parking garages, fast food stores, movie theaters etc.

15. Sole Practitioners or Law Firms (small, little known)

16. Notaries (small, little known)

17. Secretarial Firms (small, little known)

18. Accountants (small, little known firms)

19. Venture Capital companies

Indicative List of High/Medium risk Products & Services

1. Electronic funds payment services such as Electronic cash (e.g. stored value and payroll cards) Fund transfers (domestic and international) etc.

2. Electronic banking

3. Private banking (domestic and international)

4. Trust and asset management services

5. Monetary instruments such as Travelers’ Cheque

6. Foreign Correspondent accounts

7. Trade Finance (such as letter of credit)

8. Special use of concentration accounts

9. Lending activities, particularly loans secured by cash collateral and marketable securities

10. Transactions undertaken for non-account holders (occasional customrs)

11. Provision of safe custody and safety deposit boxed

12. Currency Exchange transactions

13. Project financing of sensitive industries in high risk jurisdictions

14. Trade Finance services and transactions involving high risk jurisdictions

15. Services offering anonymity or involving third parties

16. Services involving banknote and precious metal trading and delivery

17. Services offering cash, monetary or bearer instruments; cross-border transactions, etc.


Indicative List of High/Medium risk Geographies

Countries/Jurisdictions

1. Countries subject to sanctions, embargoes or similar measures in the United Nations Security Council Resolutions (UNSCR)

2. Jurisdictions identified in FATF public statement as having substantial money laundering and terrorist financing (ML/TF) risks (www.fatf-gafi.org)

3. Jurisdictions identified in FATF public statement with strategic AML/CFT deficiencies (www.fatf-gafi.org)

4. Tax havens or countries that are known for highly secretive banking and corporate law practices

5. Counties identified by credible sources as lacking appropriate AML/CFT laws, regulations and other measures.

6. Countries identified by credible sources as providing funding or support for terrorist activities that have designated terrorist organizations operating within them

7. Countries identified by credible sources as having significant levels of criminal activity

8. Countries identifies by the bank as high risk because of its prior experiences, transaction history or other factors (e.g. legal considerations, or allegations of official corruption)

Locations

1. Locations within the country known as high risk for terrorist incidents or terrorist financing activities ( e.g. sensitive locations/ cities and affected districts)

2. Locations identified by credible sources as having significant levels of criminal, terrorist, terrorist financing activity.

3. Locations identified by the bank as high risk because of its prior experiences, transaction history or other factors.


http://www.fatf-gafi.org/

http://www.fatf-gafi.org/

Appendix - II

ALLAHABAD BANKBRANCH ……………………………

CUSTOMER RISK PROFILE

Type of Account : A/c No : Date of Opening : Full Name : Nationality : Occupation : @PAN/GIR No. : Driving Licence : Residential Address : NRI Passport No. : $(with Phone No., if any) :

Mr./Ms. Mr./Ms Mr./Ms

@ Form No.60/61 may be submitted in the absence of PAN/GIR No. $ if available

Purpose of Opening the Account Potential Activity expected in the Source of funds

Annual Income

A/c (Monthly / Annual Turnover)

Classification of the Account as per the observation of the official opening the A/c(Please mark wherever applicable)

High Risk Medium Risk Low Risk (Salaried/ Fixed Income group/Pensioner’s A/c)

Signature of the Official opening the A/c


BUSINESS RISK PROFILE(If engaged in business)

Geographical location of the business :

Nature/Activity of business / Occupation :

Estimated income from the business :

Any other source of income :

Total annual Income :

Approximate value of :-

(a) Movable Assets :

(b) Immovable assets :

Details of existing bank account, if any :

Details of Credit Facilities, if any, availed :

Details of foreign countries, :(if any visited during last three years)


Appendix - III

Foreign Portfolio Investors (FPIs) categorized by SEBI

Category Eligible Foreign Investors

I. Government and Government related foreign investors such asForeign Central Banks, Governmental Agencies, SovereignWealth Funds, International/ Multilateral Organizations/Agencies.

II. a) Appropriately regulated broad based funds such as Mutual Funds, Investment Trusts, Insurance /Reinsurance Companies, Other Broad Based Funds etc.

b) Appropriately regulated entities such as Banks, Asset Management Companies, Investment Managers/ Advisors, Portfolio Managers etc.

c) Broad based funds whose investment manager is appropriately regulated.

d) University Funds and Pension Funds.e) University related Endowments already registered with SEBI as

Fll/Sub Account.

III. All other eligible foreign investors investing in India under PISroute not eligible under Category I and II such as Endowments,Charitable Societies/Trust, Foundations, Corporate Bodies,Trusts, Individuals, Family Offices, etc.


Appendix - IVKYC documents prescribed by RBI for FPIs

FPI TypeDocument Type Category-I Category-II Category-III

Entity Level ConstitutiveDocuments(Memorandumand Articles ofAssociation,Certificate ofIncorporation etc.)

Mandatory Mandatory Mandatory

Proof ofAddress

Mandatory(Power ofAttorney {PoA}mentioning theaddress isacceptable asaddress proof)

Mandatory(Power ofAttorney {PoA}mentioning theaddress isacceptable asaddress proof)

Mandatoryother thanPower ofAttorney

PAN Card Mandatory Mandatory MandatoryFinancial Data Exempted * Exempted * MandatorySEBI RegistrationCertificate

Mandatory Mandatory Mandatory

Board Resolution Exempted * Mandatory MandatorySeniorManagement(Whole TimeDirectors/Partners/Trustees /etc.)

List Mandatory Mandatory MandatoryProof ofIdentity

Exempted * Exempted * Entity declares* on letter head fullname, nationality,date of birth orsubmits photoidentity proof

Proof of Address Exempted * Exempted * Declaration onLetter Head *

Photographs Exempted Exempted Exempted *AuthorizedSignatories

List andSignatures

Mandatory - listof GlobalCustodiansignatories canbe given in caseof PoA to GlobalCustodian

Mandatory - listof GlobalCustodiansignatories canbe given in caseof PoA to GlobalCustodian

Mandatory

Proof of Identity Exempted * Exempted * MandatoryProof of Address Exempted * Exempted * Declaration on

Letter Head *Photographs Exempted Exempted Exempted *

UltimateBeneficialOwner(UBO)

List Exempted * MandatoryProof of Identity Exempted * Exempted * MandatoryProof of Address Exempted * Exempted * Declaration on

Letter Head *Photographs Exempted Exempted Exempted *

* Not required while opening the bank account. However, FPIs concerned may submit an undertaking that upon demand by Regulators/Law Enforcement Agencies the relative document/s would be submitted to the bank.


Appendix – VCustomer Identification Procedure

Features to be verified and documents that may be obtained from customersFeatures Documents

Accounts of individuals - Proof of Identity - Proof of Address

(i) Passport (ii) Permanent Account Number (PAN) card (iii) Voter’s Identity Card issued by Election Commission of India (iv) Driving License (v) Job Card issued by NREGA duly signed by an officer of the State Govt. (vi) The letter issued by the Unique Identification Authority of India (UIDAI) containing details of name, address and Aadhaar number (vii) Any other document as notified by the Central Government in consultation of regulator. [The discretion given to banks earlier stands withdrawn]* [Accept NREGA Job Card as an ‘officially valid document’ for opening of bank accounts without the limitations applicable to ‘Small Accounts’]

Where ‘simplified measures’ are applied for verifying the identity of customers the following documents shall be deemed to be the 'Officially Valid Documents (OVD)’ :-• Identity card with applicant's Photograph issued

by Central/State Government Departments, Statutory/ Regulatory Authorities, Public Sector Undertakings, Scheduled Commercial Banks, and Public Financial Institutions;

• Letter issued by a Gazetted Officer, with a duly attested photograph of the person.

Where ‘simplified measures’ are applied for verifying for the limited purpose of proof of address the following additional documents are deemed to be OVDs :-• Utility bill which is not more than two months

old of any service provider (electricity, telephone, postpaid mobile phone, piped gas, water bill);

• Property or Municipal Tax Receipt

• Bank account or Post Office savings bank account statement;

• Pension or family pension payment orders (PPOs) issued to retired employees by Government Departments or Public Sector Undertakings, if they contain the address;

• Letter of allotment of accommodation from


Features Documents employer issued by State or Central Government departments, statutory or regulatory bodies, public sector undertakings, scheduled commercial banks, financial institutions and listed companies. Similarly, leave and license agreements with such employers allotting official accommodation; and

• Documents issued by Government departments of foreign jurisdictions and letter issued by Foreign Embassy or Mission in India.

Accounts of companies - Name of the company - Principal place of business - Mailing address of the company - Telephone/Fax Number

a) Certificate of incorporation;b) Memorandum and Articles of Association;c) A resolution from the Board of Directors and

power of attorney granted to its managers, officers or employees to transact on its behalf; and

d) An officially valid document in respect of managers, officers or employees holding an attorney to transact on its behalf, as noted in Point No. 1.3, Chapter - 1 above

Accounts of partnership firms - Legal name - Address - Names of all partners and their

addresses - Telephone numbers of the firm and

partners

a) Registration certificate; b) Partnership deed; andc) An officially valid document in respect of the

person holding an attorney to transact on its behalf.

Accounts of trusts & foundations - Names of trustees, settlors,

beneficiaries and signatories - Names and addresses of the

founder, the managers/ directors and the beneficiaries

- Telephone/fax numbers

a) Registration certificate; b) Trust deed; andc) An ‘Officially valid document’ in respect of the

person holding an attorney to transact on its behalf, as noted in Point No. 1.3, Chapter - 1 above


Features Documents Accounts of Un-incorporated Association or Body of Individuals

a) 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, as noted in Point No. 1.3, Chapter - 1 above; and

d) Such information as may be required by the bank to collectively establish the legal existence of such an association or body of individuals.

Juridical Person It should be verified that any person purporting to act on behalf of such client is so authorized and verify the identity of that person

Accounts of Proprietorship concerns - Proof of the name, address and activity of the concern

• Registration certificate (in the case of a registered concern)

• Certificate/license issued by the Municipal authorities under Shop & Establishment Act,

• Sales and income tax returns • CST/VAT certificate • Certificate/registration document issued by Sales

Tax/Service Tax/Professional Tax authorities 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.

(These documents should be in the name of the proprietary concern.)

In cases where the banks are satisfied that it is not possible to furnish two such documents, they would have the discretion to accept only one of those documents as activity proof. In such cases, the banks, however, would have to undertake contact point verification, collect such information as would be required to establish the existence of such firm,


Features Documents confirm, clarify and satisfy themselves that the business activity has been verified from the address of the proprietary concern.

Apart from the above documents, the “Officially Valid Documents”, as noted in Point No. 1.3, Chapter - 1 above must be obtained

The Branches should ask their customers to establish their identity (true name, residential and mailing address). This may be done with the help of certain official documents “in original.” The verifying official, at the time of opening the account must scrutinize the documents submitted with their original and certify the KYC documents through seal as “Verified from original” and put his signature, name & PF number below his official signature.

No photocopies of Driving License/ Passport etc. should be relied upon


Appendix - VIFINANCIAL INCLUSION

ACCOUNT OPENING-CUM-OVERDRAFT APPLICATION FORM

FOR INDIVIDUALS

ALLAHABAD BANK (www.allahabadbank.in)Branch: Code:

VILLAGE/TOWN DISTRICT STATEPlease open an Account as per information given below. (Please fill in CAPITAL Letters and Tick ( ) Appropriate Boxes )First Applicant / Sole Applicant: Date:________________________________

FULL NAMEMr./Mrs./Ms

First Middle Last

AffixPhotograph

FATHER’S/HUSBAND’SNAME Mr.MOTHER’S NAME Mrs.DATE OF BIRTH

D D M M Y Y Y Y GENDER ( ) OCCUPATION ( )Agriculturi

stOthers (Specify)

TEL. No. M HousewifeMOBILE No. F BusinessEmail ID OTHER ServiceAadhaar No. Voter ID No.

CATEGORY ( ) RELEGION ( )General OBC SC ST Others Hindu Muslim Sikh Christian Others

OPERATING INSTRUCTIONS

( )

ByMe

Jointly ByAny Two

Any of Us/Survivor

Former orSurvivor

On behalf of Minorby Guardian

Others Specify

PAN/GIR Number / Form 60/61 of First/Sole Applicant

(Form 60/61 is to be filled by those who do not have PAN/GIR)

ADDRESSSole/First Applicant

Present

PIN

Permanent

PIN

OTHER FACILITIES REQUIREDS. No. Particulars ( ) Yes No S. No. Particulars ( ) Yes No1. Passbook 5. Rupay Card / Debit Card2. Statement of A/c through E mail/Post 6. Internet Banking Facility3. Cheque Book 7. Mobile Banking Facility4. Linking of Aadhaar No./ Voter ID No. (If

available)8. Nomination Facility

NOMINATION: I nominate following person to whom in the event of my/minor’s death, the amount of deposit outstanding in the a/c, may be returned by you.

DEPOSIT NOMIONEENature of Deposit

Account No. Additional Details

Name Address Relationship with Depositor

Age * DoB if Minor

Since the Nominee is a minor on this date, I appoint Mr./Mrs./Ms__________________________________________-Address__________________________________________________________________________________________________________,Age__________________to receive the amount of deposit on behalf of the nominee in the event of my/minor(s) death.

I agree to abide by the terms and conditions of the Bank Account of Allahabad Bank. .DatePlace Signature/^Thumb Impression of First/Sole Applicant

^ If the Depositor(s) put thumb impression (s) the same is are to be attested by two witness, otherwise it shall be attested by one witness

Witness 1 Name Address SignatureWitness 2 Name Address Signature

Above Particulars VerifiedName & Number of BC Signature of Business Correspondent

=====================================================================================================================APPLICATION FOR OVERDRAFT FACILITY:

I also request you to sanction me an Overdraft limit of `________________ `(_____________________________________________) for meeting my emergency family needs. I shall abide by the terms and conditions stipulated by Bank in this regards. My Gross Annual Income is `______________ from all sources. My main source of income is ` _______________


(Signature of the Applicant)------------------------------------------------------------ CUT HERE ---------------------------------------------

Nomination Registered BranchThe above mentioned nomination is registered at Serial No. ___________________ in respect of (Type of A/c)---------Deposit A/C No._______________________

For Allahabad Bank (Authorized Official with S.S. No.)

FINANCIAL INCLUSIONACCOUNT OPENING-CUM-OVERDRAFT APPLICATION

FORMFOR INDIVIDUALS

ALLAHABAD BANK (www.allahabadbank.in)Branch: Code:

KYC IDENTIFICATION DOCUMENTS/PAPERS SUBMITTED BY APPLICANT (Any one document from each of the following two lists subject to Bank’s satisfaction)

LIST 1 LIST 2Sl.No.

Latest / Recent Documents showing Identity Proof

( )Tick

Sl. No.

Latest / Recent Documents showing Residence Proof

( )Tick

1. Driving Licence with Photograph 1. Driving Licence with Photograph2. MNREGA Job Card 2. Telephone Bill, Electricity Bill, Ration Card3. Voter’s Identity Card 3. Bank Account Statement (With Address)

MNREGA Job Card4. PAN Card, Government ID Card 4. Any documentary evidence in support of residential address to the

Bank5. Aadhaar Card 5. Aadhaar Card, Voter Card6. Any Other document as per RBI Guidelines 6. In case of Married Women, address proof of the groom is

acceptableDetails of Documents for Identification submitted by the Applicant:

INTRODUCTION (If Applicable) DETAILS OF THE INTRODUCERName CIF No.Address Branch Name

Account No.Mobile No. Type of A/c

E Mail Date of Opening of A/cIt is certified that Mr./Mrs./Ms._________________________________________________________ is known to me personally since last __________ Months /Years and confirm the Occupation, Photograph and address in the application form for opening of account are correct to the best of my /our knowledge and belief.Date: (Signature of the Introducer)_____________________________________________________________________________________________________________________

Declaration / CertificateI, Sri _______________________________S/o____________________________having SB A/c No._______________with you do hereby declare/certify that Smt. _______________________is my bona fide and legal wife and that she is the leading female member of my family.

Date (Signature)FOR BANK’S USE ONLY

PROCESSING FOR OPENING OF ACCOUNTName of the First/Sole Applicant

Mr./Mrs./Ms CIF ACCOUNT No.

ATM cum Debit Card NumberRupay Card Number

Name, S.S. No. & Signature of Verifying Official

PROCESSING CUM SANCTION FOR OVER DRAFT FACILITYAnnual Income from various sources declared by the Applicant(s): `_____________________ ( `____________________________________________) Details of Over Draft Sanctioned

Limit Sanctioned ` ( In Figures)` (In Words)

Rate of Interest % Above base Rate , Minimum % with Monthly RestsPeriod 12 Months


Documents Obtained a. DP Noteb. Letter of continuing security to be signed by the Borrowerc.d.

Recommended SanctionedName, S.S. No. & Signature Name, S.S. No. & Signature of

Authorized Official

------------------------------------------------------------ CUT HERE -------------------------------------------------


Appendix - VII

List of firms advised by RBI posing as Multi Level Marketing (MLM) Agencies

a. Vide HOIC10668/AML&KYC/2009-10/05 dated 02.09.2009

i) Fine India Sales Pvt. Ltd.ii) Lakshya Levels Marketingiii) Eve Industriesiv) Trident Advertising & Trade Links Pvt. Ltd.v) Super Life Link Distributorsvi) Lue Brain Education Societyvii) Manya Mantra Marketing

b. Vide HOIC11442/AM L&KYC/2011-12/01 dated 30.06.2011

SpeakAsia - Agents

State - Andhra Pradesh

Sl. No.

Name Location City

1. Manasareddy Devireddy Andhra Pradesh Krishna2. Ms.Swamy Andhra Pradesh Andhra Pradesh

State - Arunachal Pradesh

Sl. No.

Name Location City

1. Ms B. S. Autocare ArunachalPradesh Itanagar

State - Assam

Sl. No.

Name Location City

1. SPA Associates Assam Silchar

State - Bihar

Sl. No.

Name Location City

1. Raj Kishore Prasad Bihar Patna2. Anuj Kumar Bihar Nalanda


State - ChattisgarhUnion Territories - Chandigarh, Dadra Nagar Haveli and Daman Diu

Sl. No.

Name Location City

1. Grow Rich Associates Maharashtra Mumbai2. Speak India Online Maharashtra Mumbai3. Perfect Online Survey Uttaranchal Dehradun4. Bramhanath Enterprises Maharashtra Mumbai5. Amrita Enterprises Uttar Pradesh Farrukabad6. Shreeya Info Media Uttar Pradesh Lucknow

State - Delhi

Sl. No.

Name Location City

1. Shivam Enterprises Delhi Delhi2. Shink Enterprises Delhi -3. Shink Enterprises Delhi Laxmi Nagar main

Road

State - Goa

Sl. No.

Name Location City


State - Gujrat

Sl. No.

Name Location City

1. Patel Communication Gujarat Ahmedabad2. Daksh Resources Gujarat Ankleshwar3. Target Advertising Gujarat Surat4. Samrajaya consultancy

ServicesGujarat Ahmedabad

5. Dreamz Gujarat Surat


State - Haryana

Sl. No.

Name Location City

1. M/S Shree sai Group Haryana Rewari2. Durej Network Haryana -

State – Himachal Pradesh

Sl. No.

Name Location City


State – Jammu & Kashmir

Sl. No.

Name Location City


State - Jharkand

Sl. No.

Name Location City



State - Karnataka

Sl. No.

Name Location City

1. Sinaan Karnataka Haveri2. A R Earnings Karnataka Bengaluru3. EMS Group Bangalore Karnataka Bengaluru

State - Kerala

Sl. No.

Name Location City

1. speakkerala Kerala Kochi

Union Territory - Lakshadweep

Sl. No.

Name Location City


State – Madhya Pradesh

Sl. No.

Name Location City

1. Amit Sabhlok Madhya Pradesh Jabalpur2. Goldmine Madhya Pradesh Indore3. Money Solutions Madhya Pradesh Gwalior4. Rama Infotech Madhya Pradesh Gwalior5. P S Associates Madhya Pradesh Bhopal


State - Maharashtra

Sl. No.

Name Location City

1. Grow Rich Associates Maharashtra Mumbai2. Speak India Online Maharashtra Mumbai3. Bramhanath Enterprises Maharashtra Mumbai4. M/s R.K. Investments Maharashtra Nashik5. Bramhanath Enterprises Maharashtra Pune6. Balaji Associates Maharashtra Nagpur7. IQRA Infotech Maharashtra Mumbai8. Permal Reddiar Maharashtra Vashi9. Gallop New Media Inc. Maharashtra Pune

10. ABN Research Online Maharashtra Mumbai11. Star Enterprises Maharashtra Navi Mumbai12. Biomile Marketing Pvt. Ltd Maharashtra Dahanu13. NIVI International Maharashtra Mumbai14. Universal Enterprises Maharashtra Mumbai15. Shreeram Infotech Maharashtra Mumbai16. Money Ocean Financial Solutions Maharashtra Mumbai17. Speak Mumbai Maharashtra Mumbai18. BTC World Maharashtra Mumbai19. Rishikesh Investments Maharashtra Amravati20. Pomp & Glory Enterprises Maharashtra Sanpada Navi Mumbai

States – Manipur & Meghalaya, Mizoram, Nagaland, Sikkim and TripuraUnion Territories - Puducherry

Sl. No.

Name Location City


State – Orissa

Sl. No.

Name Location City

1. Ashirbada Marketing Orissa Bhubaneswar


State – Punjab

Sl. No.

Name Location City

1. R S Associates Punjab Bathinda2. SIMR Associates Punjab Jalndhar3. M/S laxmi Enterprises Punjab Ludhiana4. Digital Prana Punjab Amritsar5. Deep Associates Punjab Amritsar

State – Rajasthan

Sl. No.

Name Location City

1. Krishna Associates Rajasthan Jaipur2. Accurasoft Outsourcing Rajasthan Jaipur

State – Uttar Pradesh

Sl. No.

Name Location City

1. Turtle Informatics Uttar Pradesh Lucknow2. M/s Agarwal & Company Uttar Pradesh Muzaffar Nagar3. Rajesh Enterprises Uttar Pradesh Raipur4. Akruti Techsolutions Pvt. Ltd Uttar Pradesh Gorakhpur5. Golden Sky Tours Uttar Pradesh Varanasi6. Amrita Enterprises Uttar Pradesh Farrukhabad7. Shreeya Info Media Uttar Pradesh Lucknow8. Gayatri Built Well Pvt. Ltd Uttar Pradesh Greater Noida9. Sunrise Vision Uttar Pradesh Allahabad

10. S.S. BPO Services Pvt. Ltd. Uttar Pradesh Lucknow11. Speak Nation Uttar Pradesh Moradabad12. Protocol Services and

ConsultancyUttar Pradesh Lucknow

13. Raj services Uttar Pradesh Varanasi14. Shri Sai Enterprises Uttar Pradesh Rampur15. Sai Kripa Agency Uttar Pradesh Varanasi16. Star Infotech Uttar Pradesh Lucknow17. Speak Continent Uttar Pradesh Lucknow18. Saloni Share Solution Uttar Pradesh Patna19. Chandradeep Enterprises Uttar Pradesh Bareilly20. Bankey Bihari Associates Uttar Pradesh Muzaffar Nagar


State – Uttaranchal

Sl. No.

Name Location City

1. Perfect Online Survey Uttaranchal Dehradun2. Swift Online Money Uttaranchal Dehradun3. Hi Tech Online Survey Uttaranchal Haridwar

State – West Bengal

Sl. No.

Name Location City

1. Gopsun Deal Trade Private Ltd. West Bengal Kolkata


Appendix - VIII

Companies/Individuals identified/suspected of carrying out MLM activities

1. HIMBJS Holidays Private Ltd.2. HIMBJS Risk Management Pvt. Ltd.3. Itech. Eye Consumer Electronic Private Ltd.4. Spattern Computers Private Ltd.5. SHIMBJS Automobile Private Ltd.6. Accresent Way Mktg Pvt. Ltd.7. Baishag Real Estate and Construction Ltd.8. Angel Agritech Ltd.9. Angelay Food Products Pvt. Ltd.10. Yatra Hospitality Services Pvt. Ltd.11. Swapnaneer Abasan Pvt. Ltd.12. Angel Mediline and Research Centers Pvt. Ltd.13. Angel Rural Development Ltd.14. Angel Cinivision and Media Pvt. Ltd.15. Angel Movie Max and Entertainment Pvt. Ltd.16. Angel Allied India Ltd.17. Yuvraj Construction18. Mr Sekh Nazibulla19. Mr SK Hasibul Haque


Appendix - IX

ALERT SCENARIOS INDICATED BY IBA STUDY FOR DETECTION OF SUSPICIOUS TRANSACTIONS

Sl Code Indicator Rule/ Scenario

1 WL1.1 Match with UN listMatch of customers details with individuals/entities on various UNSCR lists.

2 WL1.2 Match with UAPA listMatch of customers details with designated individuals/entities under UAPA.

3 WL1.3 Match with other TF list

Match of customers details with TF suspects of Interpol,EU, OFAC, Commercial lists(World check, Factiva, LexisNexis, Dun & Bradstreet etc.) and other sources.

4 WL2.1Match with other criminal list

Match of customers details with criminal lists of Interpol, EU, OFAC, Commercial lists(World check, Factiva, LexisNexis, Dun & Bradstreet etc.) and other sources.

5 TM1.1High value cash deposits in a day

Cash deposits greater than INR[X1] for individuals and greater than INR[X2] for non-individuals in a day.Top[N] cash deposits in a day

6 TM1.2High value cash withdrawals in a day

Cash withdrawals greater than INR[X1] for individuals and greater than INR[X2] for non-individuals in a day.Top[N] cash withdrawals in a day

7 TM1.3High value non-cash deposits in a day

Non-cash deposits greater than INR[X1] for individuals and greater than INR[X2] for non-individuals in a day.Top[N] non-cash deposits in a day

8 TM1.4High value non-cash withdrawals in a day

Non-cash withdrawals greater than INR[X1] for individuals and greater than INR[X2] for non-individuals in a day.Top[N] non-cash withdrawals in a day

9 TM2.1High value cash deposits in a month

Cash deposits greater than INR[X1] for individuals and greater than INR[X2] for non-individuals in a month.Top[N] cash deposits in a month

10 TM2.2High value cash withdrawals in a month

Cash withdrawals greater than INR[X1] Cash withdrawals greater than INR[X]for individuals and greater than INR[X2] for non-individuals in a month.Top[N] cash withdrawals in a month



11 TM2.3High value non-cash deposits in a month

Non-cash deposits greater than INR[X1] for individuals and greater than INR[X2] for non-individuals in a month.Top[N] non-cash deposits in a month

12 TM2.4High value non-cash withdrawals in a month

Non-cash withdrawals greater than INR[X1] for individuals and greater than INR[X2] for non-individuals in a month.Top[N] non-cash withdrawals in a month

13 TM3.1Sudden high value transaction for the client

Value of transaction is more than[Z] percent of previous largest transaction for the client(or client profile)

14 TM3.2Sudden increase in value of transactions in a month for the client

Value of transactions in a month is more than[Z] percent of the average value for the client(or client profile)

15 TM3.3Sudden increase in number of transactions in a month for the client

Number of transactions in a month is more than[Z] percent of the average number for the client(or client profile)

16 TM4.1High value transactions in a new account

Transactions greater than INR[X] in newly opened account within [Y] months

17 TM4.2High activity in a new account

Number of transactions more than[N] in newly opened account within [Y] months

18 TM5.1High value transactions in a dormant account

Transactions greater than INR[X] in a dormant account within [Y] days of reactivation

19 TM5.2Sudden activity in a dormant account

Number of transactions more than[N] in a dormant account within [Y] days of reactivation

20 TM6.1High value cash transactions inconsistent with profile

Cash transactions greater than INR[X] by customer with low cash requirements such as students, housewife, pensioner, salaried person, wage earner and minor.

21 TM6.2High cash activity inconsistent with profile

Number of cash transactions greater than INR[X] by customer with low cash requirements such as students, housewife, pensioner, salaried person, wage earner and minor.

22 TY1.1

Splitting of cash deposits just below INR 10,00,000 in multiple accounts in a month.

Cash deposit in amounts ranging between INR 9,00,000 to INR 9,99,.999 in multiple accounts of the customer greater than [N] times in a month.



23 TY1.2Splitting of cash deposits just below INR 50,000

Deposit of cash in the account in amounts ranging between INR 40,000 to INR 49,999 greater than [N] times in [Y] days

24 TY1.3Frequent cash deposits just below INR 10,00,000

Cash transactions in amounts ranging between INR 9,00,000 to INR 9,99,.999 greater than [N] times in [Y] days.

25 TY1.4Routing of funds through multiple accounts

Transactions greater than INR[X1] between more than [N] accounts aggregating to more than [X2] on the same day.

26 TY1.5Frequent low cash deposits

Cash deposits in amounts ranging between INR[X1] to [X2] greater than [N] times in [Y] days.

27 TY1.6Frequent low cash withdrawals

Cash withdrawals in amounts ranging between INR[X1] to [X2] greater than [N] times in [Y] days.

28 TY2.1 Many to one fund transferFunds sent by more than [N] remitters to one recipient.

29 TY2.2 One to many fund transferFunds sent by one remitter for more than [N] recipients.

30 TY2.3Routing of funds through multiple locations

Routing of funds through multiple countries or locations

31 TY3.1Customer providing different details to avoid linkage

Customer providing different IDs or date of birth at different instances

32 TY3.2Multiple customers working together

Common address/telephone used by multiple unrelated customers.Common ID used by multiple customers.Group of individuals conducting transactions at the same time

33 TY4.1

Repeated small cash deposits followed by immediate ATM withdrawals in different locations.

Cash deposit in amount ranging between INR[X1] to INR[X2] greater than [N] times in [Y] days followed by immediate ATM withdrawals in different locations.

34 TY4.2

Repeated small value transfers from unrelated parties followed by immediate ATM withdrawals.

Account to account transfer (RTGS/NEFT) from unrelated parties in amount ranging between INR[X1] to INR[X2] greater than [N] times in [Y] days followed by immediate ATM withdrawals



35 TY4.3

Repeated small value remittance from unrelated parties followed by immediate ATM withdrawls

Inward remittance(especially from high risk countries) from unrelated parties in amount ranging between INR[X1] to INR[X2] greater than [N] times in [Y] days followed by immediate ATM withdrawals(especially other bank’s ATM

36 TY4.4Repeated small value withdrawls in sensitive locations

Cash withdrawl in amount ranging between INR[X1] to INR[X2] greater than [N] times in [Y] days in locations with known terrorist incidents

37 TY4.5

Repeated small value inward remittances from unrelated parties used for specific activity

Inward remittance(especially from high risk countries) used for purchase of communication equipments, tickets, hotel booking etc.

38 TY5.1Majority of repayment in cash

Cash repayments greater than INR[X] amount in cash in [Y] days

Card repayment in cash is greater than [Z] percent of repayments in [Y] days.

39 TY5.2Large debit balance in credit card

Debit balance in credit card is greater than INR[X]

40 TY5.3Large value card transactions for purchase of high value goods

Card used greater than INR[X] for jewellery (MCC5944) in [Y] days.

41 TY5.4Large value cash withdrawls against international card.

Cash withdrawls greater than INR[X] against international card in [Y] days.

42 TY5.5Repeated small valur cash withdrawls against international card

Cash withdrawls against international card in amount ranging between INR[X1] to INR[X2] greater than [N] times in [Y] days in locations with known terrorist incidents

43 TY5.6Large repetitive card usage by the same merchant.

More than [N] transactions at same merchant aggregating to more than INR[X] in [Y] days.

44 TY7.1 Repayment of loan in cashLoan repayments in cash greater than INR[X] in [Y] months.

45 TY7.2Premature closure of large FDR through PO/DD

Premature closure of large FDR for amount greater than INR[X1] within [N] days and payment by PO/DD

46 TY7.3 High number of cheque leaves

Greater than [X1] number of cheque leaves issued for savings bank account and [X2] for



current account in a period of [Y] days.



47 TY7.4 Frequent locker operationNumber of locker operations greater than [X] times in [Y] days.

48 RM1.1High value transactions by high risk customers

Transactions greater than INR[X] by high risk customers

49 RM1.2High value cash transactions in NPO

Cash transactions greater than INR[X] in Trust/NGO/NPO in [Y] days.

50 RM1.3High value cash transactions related to real estate

Cash transactions greater than INR[X] related to real estate transactions in [Y] days

51 RM1.4High value cash transactions by dealer in precious metal or stone

Cash transactions greater than INR[X] by dealer in precious metal or stone or high value goods in [Y] days

52 RM2.1High value transactions in product/services with high ML risk

Transactions greater than INR[X] using product/services with high ML risk.

53 RM2.2High value inward remittance

Inward remittance greater than [X] value aggregated in [Y] days

54 RM2.3Inward remittance in a new account

Inward remittance greater than [X] value in a new account within [Y] days

55 RM2.4Inward remittance inconsistent with client profile

Inward remittance greater than [X] value in [Y] days in account of students, housewife, pensioner, salaried person, wage earner and minor.

56 RM3.1High value transactions with a country with high ML risk

Transaction greater than INR[X] involving a country considered to be high risk from the money laundering or drug trafficking perspective.

57 RM3.2High value transactions with Tax Havens.

Transaction greater than INR[X] involving tax havens or countries that are known for highly secretive banking and corporate law practices

58 RM3.3High value transactions in a location with high ML risk

Transaction greater than INR[X] in a location considered to be high risk from the money laundering and drug trafficking perspective.



59 RM4.1Transactions involving a country with high TF risk

Transactions involving a country considered to be high risk from the terrorist financing perspective.

60 RM4.2Transactions involving a location with high TF risk

Transactions involving a location considered to be high risk from the terrorist financing perspective.

61 RM4.3Transactions involving a location with terrorist incident.

Transactions involving a location prior to or immediately after a terrorist incident


Appendix - X

OFFLINE ALERT INDICATORS PROVIDED BY IBA STUDYFOR DETECTION OF SUSPICIOUS TRANSACTIONS AT BRANCHES

Sl. No.

Alert Indicator Indicative Rule / Scenario

1CV1.1-Customer left without opening account

Customer did not open account after being informed about KYC requirement

2CV2.1- Customer offered false or forged identification documents

Customer gives false identification documents or documents that appears to be counterfeited, altered or inaccurate.

3WL2.2- Identity documents are not verifiable

Identity documents presented are not verifiable, i.e. foreign documents etc.

4CV3.1- Address found to be non existent

Address provided by the customer is found to be non existent.

5CV3.2- Address found to be wrong

Customer not staying at address provided during account opening

6CV4.2- Difficult to identify beneficial owner

Customer uses complex legal structures or where it is difficult to identify the beneficial owner.

7LQ1.1- Customer is being investigated for criminal offences

Customer has been the subject of enquiry from any law enforcement agency relating to criminal offences.

8LQ2.1- Customer is being investigated TF offences

Customer has been the subject of enquiry from any law enforcement agency relating to TF or terrorist activities.

9MR1.1- Adverse media report about criminal activities of customer

Match the customer details with persons reported in local media / open source for criminal offences.

10MR2.1- Adverse media report about TF or terrorist activities of customer

Match the customer details with persons reported in local media / open source for terrorism or terrorist financing related activities.

11EI 1.1- Customer did not complete transaction

Customer did not complete transaction after queries such as source of funds etc.

12 EI 2.1- Customer is nervous Customer is hurried or nervous

13 EI 2.2- Customer is over cautiousCustomer over cautious in explaining genuineness of the transaction.

14EI 2.3- Customer provides inconsistent information

Customer changes the information provided after more detailed information is required. Customer provides information that seems minimal, possibly false or inconsistent.


Sl. No.

Alert Indicator Indicative Rule / Scenario

15EI 3.1- Customer acting on behalf of a third party

Customer has vague knowledge about amount of money involved in the transaction.

Customer taking instructions for conducting transactions.

16EI 3.2- Multiple customers working as a group

Multiple customers arrive together but pretend to ignore each other

17EI 4.1- Customer avoiding nearer branches

Customer travels unexplained distances to conduct transactions.

18EI 4.2- Customer offers different identifications on different occasions

Customer offers different identifications on different occasions with an apparent attempt to avoid linkage of multiple transactions.

19EI 4.3- Customer wants to avoid reporting

Customer makes enquiries or tries to convince staff to avoid reporting.

20EI 4.4- Customer could not explain source of funds

Customer could not explain source of funds satisfactorily.

21EI 5.1- Transaction is unnecessarily complex

Transaction is unnecessarily complex for its stated purpose.

22EI 5.2- Transaction has no economic rationale

The amount or frequency or the stated reason of the transaction does not make sense for the particular customer.

23EI 5.3- Transaction inconsistent with business

Transaction involving movement of which is inconsistent with the customer’s business.

24EI 6.1- Unapproved inward remittance in NPO

Foreign remittance received by NPO not approved by FCRA.

25PC1.1- Complaint received from public

Complaint received from public for abuse of account for committing fraud etc.

26 BA1.1- Alert raised by agent Alert raised by agents about suspicion.

27BA1.2- Alert raised by other institution

Alert raised by other institutions, subsidiaries or business associates including cross-border referrals.


Appendix - XI

AN INDICATIVE LIST OF SUSPICIOUS ACTIVITIES

Transactions Involving Large Amounts of Cash

b. Exchanging an unusually large amount of small denomination notes for those of higher denomination.

c. Purchasing or selling of foreign currencies in substantial amounts by cash settlement despite the customer having an account with the bank.

d. Frequent withdrawal of large amounts by means of cheques, including traveller’s cheques.

e. Frequent withdrawal of large cash amounts that do not appear to be justified by the customer’s business activity.

f. Large cash withdrawals from previously dormant/inactive account or from an account, which has just received an expected large credit from abroad.

g. Company transactions, both deposits and withdrawals that are denominated by unusually large amounts of cash, rather than by way of debits and credits normally associated with the normal commercial operations of the company e.g. cheques, letters of credit, bills of exchange etc.

h. Depositing cash by means of numerous credit slips by a customer such that the amount of each deposit is not substantial, but the total of which is substantial.

Transactions which do not make Economic Sense

i) A customer having a large number of accounts with the same bank, with frequent transfers between different accounts.

ii) Transactions in which assets are withdrawn immediately after being deposited, unless the customer’s business activities furnish a plausible reason for immediate withdrawal.

Activities not consistent with the Customer’s Business

i. Corporate accounts where deposits or withdrawals are primarily in cash rather than cheques.

j. Corporate accounts where deposits and withdrawals by cheque/telegraphic transfer/foreign inward remittances/any other means are received from/made to sources apparently unconnected with the corporate business activity/dealings.

k. Unusual applications for DD/TT/PO against cash.

l. Accounts with large volume of credits through DD/TT/PO whereas the nature of business does not justify such credits.

m. Retail deposit of many cheques but rare withdrawals for daily operations.


Attempts to avoid Reporting/Record keeping Requirements

i) A customer who is reluctant to provide information needed for a mandatory report, to have the report filed or to proceed with a transaction after being informed that the report must be filed.

ii) Any individual or group that coerces/ induces or attempts to coerce/ induce a bank employee not to file any reports or any other forms.

iii) An account where there are several cash deposits/withdrawals below a specified threshold level to avoid filing of reports that may be necessary in case of transactions above the threshold level, as the customer intentionally splits the transactions into smaller amounts for the purpose of avoiding the threshold limit. Avoid splitting of cash deposit by non-PAN holders. Accept form 60/61 for applicable transactions, where PAN is not available.

iv) Multiple DDs purchased by purchasers against cash for total value exceeding Rs.50000 from a particular branch on the same day favouring the same beneficiary. The mode of transactions indicated possibility of structured transaction. Walk-in customers resort to structuring of a single cash transaction in to a series of transactions below the threshold limit of Rs.50000 and purchased multiple DDs in a single day.

v) In case of transactions carried out by a non-account based customer, that is a walk-in customer, where the amount of transaction is equal to or exceeds Rs.50000, whether conducted as a single transaction or several transactions that appear to be connected, the customer’s identity and address should be verified. However, if a bank has reason to believe that a customer is intentionally structuring a transaction in to a series of transactions below threshold limit of Rs.50000, bank should verify identity and address of the customer and also consider filing a suspicious transaction report (STR) to FIU-IND.

Unusual Activities

i) An account of a customer who does not reside/have office near the branch even though there are bank branches near his residence/office.

ii) A customer who often visits the safe deposit area immediately before making cash deposits, especially deposits just under the threshold level.

iii) Funds coming from the list of countries/centers which are known for money laundering.

Customer who provides Insufficient or Suspicious Information

i) A customer/company who is reluctant to provide complete information regarding the purpose of the business, prior banking relationships, officers or directors, or its locations.

ii) A customer/ company who is reluctant to reveal details about its activities or to provide financial statements.

iii) A customer who has no record of past or present employment but makes frequent large transactions.


Certain Suspicious Funds Transfer Activities

i) Sending or receiving frequent or large volumes of remittances to/from countries outside India.

ii) Receiving large TT/DD remittances from various centers and remitting the consolidated amount to a different account/center on the same day leaving minimum balance in the account.

iii) Maintaining multiple accounts, transferring money among the accounts and using one account as a master account for wire/funds transfer.

Certain Suspicious Behavior of Employees

i) An employee whose lavish lifestyle cannot be supported by his or her salary.

ii) Negligence of employees/ willful blindness is reported repeatedly.

Some examples of suspicious activities/ transactions to be monitored by the operating staff.

Large Cash Transactions

Multiple accounts under the same name

Frequently converting large amounts of currency from small to large denomination notes

Placing funds in term Deposits and using them as security for more loans

Large deposits immediately followed by wire transfer

Sudden surge in activity level

Same funds being moved repeatedly among several accounts

Multiple deposits of money orders, Banker’s Cheques, drafts of third parties

Transactions inconsistent with the purpose of the account

Maintaining a low or overdrawn balance with high activity


Appendix -XII

File No.17015/10/2002-IS-VI Government of India

Ministry of Home Affairs Internal Security-I Division *********************************

New Delhi, dated 27th August, 2009 ORDER

Subject : Procedure for implementation of Section 51A of the Unlawful Activities (Prevention)Act, 1967

The Unlawful Activities (Prevention) Act, 1967 (UAPA) has been amended and notified on 31.12.2008, which, inter-alia, inserted Section 51A to the Act. Section 51A reads as under:-

"51A. For the prevention of, and for coping with terrorist activities, the Central Government shall have power to –

(a) freeze, seize or attach funds and other financial assets or economic resources held by, on behalf of or at the direction of the individuals or entities Listed in the Schedule to the Order, or any other person engaged in or suspected to be engaged in terrorism;

(b) prohibit any individual or entity from making any funds, financial assets or economic resources or related services available for the benefit of the individuals or entities Listed in the Schedule to the Order or any other person engaged in or suspected to be engaged in terrorism;

(c) prevent the entry into or the transit through India of individuals Listed in the Schedule to the Order or any other person engaged in or suspected to be engaged in terrorism",

The Unlawful Activities (Prevention) Act define "Order" as under :-

1. "Order" means the Prevention and Suppression of Terrorism (Implementation of Security Council Resolutions) Order, 2007, as may be amended from time to time. In order to expeditiously and effectively implement the provisions of Section 51A, the following procedures shall be followed:-

Appointment and Communication of details of UAPA nodal officers :-

2. As regards appointment and communication of details of UAPA nodal officers :(i) The UAPA nodal officer for IS-I division would be the Joint Secretary (IS.I), Ministry

of Home Affairs. His contact details are 011-23092736(Tel), 011-23092569(Fax) and (e-mail).


(ii) The Ministry of External Affairs, Department of Economic Affairs, Foreigners Division of MHA, FIU-IND; and RBI, SEBI, IRDA (hereinafter referred to as Regulators) shall appoint a UAPA nodal officer and communicate the name and contact details to the IS-I Division in MHA.

(iii) The States and UTs should appoint a UAPA nodal officer preferably of the rank of the Principal Secretary/Secretary, Home Department and communicate the name and contact details to the IS-I Division in MHA.

(iv) The IS-I Division in MHA would maintain the consolidated list of all UAPA nodal officers and forward the list to all other UAPA nodal officers.

(v) The RBI, SEBI, IRDA should forward the consolidated list of UAPA nodal officers to the banks, stock exchanges/depositories, intermediaries regulated by SEBI and insurance companies respectively.

(vi) The consolidated list of the UAPA nodal officers should be circulated to the nodal officer of IS-I Division of MHA in July every year and on every change. Joint Secretary(IS-I), being the nodal officer of IS-I Division of MHA, shall cause the amended list of UAPA nodal officers to be circulated to the nodal officers of Ministry of External Affairs, Department of Economic Affairs, Foreigners Division of MHA, RBI, SEBI, IRDA and FIU-IND.

Communication of the list of designated individuals/entities

3. As regards communication of the list of designated individuals/entities : (i) The Ministry of External Affairs shall update the list of individuals and entities

subject to UN sanction measures on a regular basis. On any revision, the Ministry of External Affairs would electronically forward this list to the Nodal Officers in Regulators, FIU-IND, IS-I Division and Foreigners' Division in MHA.

(ii) The Regulators would forward the list mentioned in (i) above (referred to as designated lists) to the banks, stock exchanges/depositories, intermediaries regulated by SEBI and insurance companies respectively.

(iii) The IS-I Division of MHA would forward the designated lists to the UAPA nodal officer of all States and UTs.

(iv) The Foreigners Division of MHA would forward the designated lists to the immigration authorities and security agencies.

Regarding funds, financial assets or economic resources or related services held in the form of bank accounts, stocks or insurance policies etc.

4. As regards funds, financial assets or economic resources or related services held in the form of bank accounts, stocks or insurance policies etc., the Regulators would forward the designated lists to the banks, stock exchanges/depositories, intermediaries regulated by SEBI and insurance companies respectively. The RBI, SEBI and IRDA would issue necessary guidelines to banks, stock exchanges/depositories, intermediaries regulated by SEBI and insurance companies requiring them to –


(i) Maintain updated designated lists in electronic form and run a check on the given parameters on a regular basis to verify whether individuals or entities listed in the schedule to the Order (referred to as designated individuals/entities) are holding any funds, financial assets or economic resources or related services held in the form of bank accounts, stocks or insurance policies etc. with them.

(ii) In case, the particulars of any of their customers match with the particulars of designated individuals/entities, the banks, stock exchanges/ depositories, intermediaries regulated by SEBI and insurance companies shall immediately, not later than 24 hours from the time of finding out such customer, inform full particulars of the funds, financial assets or economic resources or related services held in the form of bank accounts, stocks or insurance policies etc. held by such customer on their books to the Joint Secretary (IS.I), Ministry of Home Affairs, at Fax No.011-23092569 and also convey over telephone on 011-23092736. The particulars apart from being sent by post should necessarily be conveyed on e-mail.

(iii) The banks, stock exchanges/ depositories, intermediaries regulated by SEBI and insurance companies shall also send by post a copy of the communication mentioned in (ii) above to the UAPA nodal officer of the state/ UT where the account is held and Regulators and FIU0IND, as the case may be.

(iv) In case, the match of any of the customers with the particulars of designated individuals/entities is beyond doubt, the banks stock exchanges / depositories, intermediaries regulated by SEBI and insurance companies would prevent designated persons from conducting financial transactions, under intimation to Joint Secretary (IS.I), Ministry of Home Affairs, at Fax No. 011-23092569 and also convey over telephone on 011-23092736. The particulars apart from being sent by post should necessarily be conveyed on e-mail.

(v) The banks, stock exchanges/depositories, intermediaries regulated by SEBI and insurance companies shall file a Suspicious Transaction Report (STR) with FIU-IND covering all transactions in the accounts covered by paragraph (ii) above , carried through or attempted, as per the prescribed format.

5. On receipt of the particulars referred to in paragraph 3(ii) above, IS-I Division of MHA would cause a verification to be conducted by the State Police and/or the Central Agencies so as to ensure that the individuals/entities identified by the banks, stock exchanges/depositories, intermediaries regulated by SEBI and Insurance Companies are the ones listed as designated individuals/entities and the funds, financial assets or economic resources or related services, reported by banks, stock exchanges/depositories, intermediaries regulated by SEBI and insurance companies are held by the designated individuals/entities. This verification would be completed within a period not exceeding 5 working days from the date of receipt of such particulars.


6. In case, the results of the verification indicate that the properties are owned by or held for the benefit of the designated individuals/entities, an order to freeze these assets under section 51A of the UAPA would be issued within 24 hours of such verification and conveyed electronically to the concerned bank branch, depository, branch of insurance company branch under intimation to respective Regulators and FIU-IND. The UAPA nodal officer of IS-I Division of MHA shall also forward a copy thereof to all the Principal Secretary/Secretary, Home Department of the States or UTs, so that any individual or entity may be prohibited from making any funds, financial assets or economic assets or economic resources or related services available for the benefit of the designated individuals/entities or any other person engaged in or suspected to be engaged in terrorism. The UAPA nodal officer of IS-I Division of MHA shall also forward a copy of the order under Section 51A, to all Directors General of Police/Commissioners of Police of all states/UTs for initiating action under the provisions of Unlawful Activities (Prevention) Act.

The order shall take place without prior notice to the designated individuals/entities.

Regarding financial assets or economic resources of the nature of immovable properties.

7. IS-I Division of MHA would electronically forward the designated lists to the UAPA nodal officer of all States and UTs with the request to have the names of the designated individuals/entities, on the given parameters, verified from the records of the office of the Registrar performing the work of registration of immovable properties in their respective jurisdiction.

8. In case, the designated individuals/entities are holding financial assets or economic resources of the nature of immovable property and if any match with the designated individuals/entities is found, the UAPA nodal officer of the State/UT would cause communication of the complete particulars of such individual/entity along with complete details of the financial assets or economic resources of the nature of immovable property to the Joint Secretary (IS.I), Ministry of Home Affairs, immediately within 24 hours at Fax No.011-23092569 and also convey over telephone on 011-23092736. The particulars apart from being sent by post should necessarily be conveyed on e-mail.

9. The UAPA nodal officer of the State/UT may cause such inquiry to be conducted by the State Police so as to ensure that the particulars sent by the Registrar performing the work of registering immovable properties are indeed of these designated individuals/entities. This verification would be completed within a maximum of 5 working days and should be conveyed within 24 hours of the verification, if it matches with the particulars of the designated individual/entity to Joint Secretary(IS-I), Ministry of Home Affairs at the Fax telephone numbers and also on the e-mail id given below.


10. A copy of this reference should be sent to the Joint Secretary (IS.I), Ministry of Home Affairs, at Fax No.011-23092569 and also convey over telephone on 011-23092736. The particulars apart from being sent by post would necessarily be conveyed on e-mail. MHA may have the verification also conducted by the Central Agencies. This verification would be completed within a maximum of 5 working days.

11. In case, the results of the verification indicate that the particulars match with those of designated individuals/entities, an order under Section 51A of the UAPA would be issued within 24 hours, by the nodal officer of IS-I Division of MHA and conveyed to the concerned Registrar performing the work of registering immovable properties and to FIU-IND under intimation to the concerned UAPA nodal officer of the State/UT.

The order shall take place without prior notice, to the designated individuals/entities.

12. Further, the UAPA nodal officer of the State/UT shall cause to monitor the transactions/accounts of the designated individual/entity so as to prohibit any individual or entity from making any funds, financial assets or economic resources or related services available for the benefit of the individuals or entities listed in the schedule to the order or any other person engaged in or suspected to be engaged in terrorism. The UAPA nodal officer of the State/UT shall upon coming to his notice, transactions and attempts by third party immediately bring to the notice of the DGP/Commissioner of Police of the State/UT for also initiating action under the provisions of Unlawful Activities (Prevention) Act.

Implementation of requests received from foreign countries under U.N. Security Council Resolution 1373 of 2001.

13. U.N. Security Council Resolution 1373 obligates countries to freeze without delay the funds or other assets of persons who commit, or attempt to commit, terrorist acts or participate in or facilitate the commission of terrorist acts; of entities owned or controlled directly or indirectly by such persons; and of persons and entities acting on behalf of, or at the direction of such persons and entities, including funds or other assets derived or generated from property owned or controlled, directly or indirectly, by such persons and associated persons and entities. Each individual country has the authority to designate the persons and entities that should have their funds or other assets frozen. Additionally, to ensure that effective cooperation is developed among countries, countries should examine and give effect to, if appropriate, the actions initiated under the freezing mechanisms of other countries.

14. To give effect to the requests of foreign countries under U.N. Security Council Resolution 1373, the Ministry of External Affairs shall examine the requests made by the foreign countries and forward it electronically, with their comments, to the UAPA nodal officer for IS-I Division for freezing of funds or other assets.


15. The UAPA nodal officer of IS-I Division of MHA, shall cause the request to be examined, within 5 working days so as to satisfy itself that on the basis of applicable legal principles, the requested designation is supported by reasonable grounds, or a reasonable basis, to suspect or believe that the proposed designee is a terrorist, one who finances terrorism or a terrorist organization, and upon his satisfaction, request would be electronically forwarded to the nodal officers in Regulators. FIU-IND and to the nodal officers of the States/UTs. The proposed designee, as mentioned above would be treated as designated individuals/entities.

16. Upon receipt of the requests by these nodal officers from the UAPA nodal officer of IS-I Division, the procedure as enumerated at paragraphs 4 to 12 above shall be followed.

The freezing orders shall take place without prior notice to the designated persons involved.

Procedure for unfreezing of funds, financial assets or economic resources or related services of individuals/entities inadvertently affected by the freezing mechanism upon verification that the person or entity is not a designated person

17. Any individual or entity, if it has evidence to prove that the freezing of funds, financial assets or economic resources or related services, owned/held by them has been inadvertently frozen, they shall move an application giving the requisite evidence, in writing, to the concerned bank, stock exchanges/depositories, intermediaries regulated by SEBI, insurance companies, Registrar of Immovable Properties and the State/UT nodal officers.

18. The banks stock exchanges/depositories, intermediaries regulated by SEBI, insurance companies, Registrar of Immovable Properties and the State/UT nodal officers shall inform and forward a copy of the application together with full details of the asset frozen given by any individual or entity informing of the funds, financial assets or economic resources or related services have been frozen inadvertently, to the nodal officer of IS-I Division of MHA as per the contact details given in paragraph 4(ii) above within two working days.

19. The Joint Secretary (IS-I), MHA, being the nodal officer for (IS-I) Division of MHA, shall cause such verification as may be required on the basis of the evidence furnished by the individual/entity and if he is satisfied, he shall pass an order, within 15 working days, unfreezing the funds, financial assets or economic resources or related services, owned/held by such applicant under intimation to the concerned bank, stock exchanges/depositories, intermediaries regulated by SEBI, insurance company and the nodal officers of States/UTs. However, if it is not possible for any reason to pass an order unfreezing the assets within fifteen working days, the nodal officer of IS-I Division shall inform the applicant.


Communication of Orders under section 51A of Unlawful Activities (Prevention) Act.

20. All Orders under section 51A of Unlawful Activities (Prevention) Act, relating to funds, financial assets or economic resources or related services, would be communicated to all banks, depositories/stock exchanges, intermediaries regulated by SEBI, insurance companies through respective Regulators, and to all the Registrars performing the work of registering immovable properties, through the State/UT nodal officer by IS-I Division of MHA.

Regarding prevention of entry into or transit through India

21. As regards prevention of entry into or transit through India of the designated individuals, the Foreigners Division of MHA, shall forward the designated lists to the immigration authorities and security agencies with a request to prevent the entry into or the transit through India. The order shall take place without prior notice to the designated individuals/entities.

22. The immigration authorities shall ensure strict compliance of the Orders and also communicate the details of entry or transit through India of the designated individuals as prevented by them to the Foreigners' Division of MHA.

Procedure for communication of compliance of action taken under Section 51A.

23. The nodal officers of IS-I Division and Foreigners Division of MHA shall furnish the details of funds, financial assets or economic resources or related services of designated individuals/entities frozen by an order, and details of the individuals whose entry into India or transit through India was prevented, respectively, to the Ministry of External Affairs for onward communication to the United Nations.

24. All concerned are requested to ensure strict compliance of this order.

(D. Diptivilasa)Joint Secretary to Government of India


Appendix - XIII

An Illustrative Check-list covering Money-Laundering Activities

A customer maintains multiple accounts, transfer money among the accounts and uses one account as a master account from which wire/funds transfer originates or into which wire/funds transfer are received (a customer deposits funds in several accounts, usually in amounts below a specified threshold limit and the funds are then consolidated into one master account and wired outside the country).

A customer regularly depositing or withdrawing large amounts by wire transfer to/ from or through countries that are known sources of narcotics or where Bank secrecy laws facilitate laundering money.

A customer sends and receives wire transfers (from financial haven countries) particularly if there is no apparent business reason for such transfers and is not consistent with the customer’s business or history.

A customer receiving many small incoming wire transfer of funds or deposits of cheques and money orders, then orders large outgoing wire transfers to another city or country.

A customer experiences increased wire activity when previously there has been no regular wire activity.

Loan proceeds unexpectedly are wired or mailed to an offshore Bank or third party.

A business customer uses or evidences or sudden increase in wired transfer to send and receive large amounts of money, internationally and/ or domestically and such transfers are not consistent with the customer’s history.

Deposits of currency or monetary instruments into the account of a domestic trade or business, which in turn are quickly wire transferred abroad or moved among other accounts for no particular business purpose.

Sending or receiving frequent or large volumes of wire transfers to and from offshore institutions.

Instructing the Bank to transfer funds abroad and to expect an equal incoming wire transfer from other sources.

Wiring cash or proceeds of a cash deposit to another country without changing the form of the currency.

Receiving wire transfers and immediately purchasing monetary instruments prepared for payment to a third party.


Periodic wire transfers from a person’s account/s to Bank haven countries.

A customer pays for a large (international or domestic) wire transfers using multiple monetary instruments drawn on several financial institutions.

A customer or a non-customer receives incoming or makes outgoing wire transfers involving currency amounts just below a specified threshold limit, or that involve numerous Bank or travellers cheques

A customer or a non customer receives incoming wire transfers from the Bank to ‘Pay upon proper identification’ or to convert the funds to bankers’ cheques and mail them to the customer or non-customer, when :–

The amount is very large (say over Rs.10 lakhs) The funds come from a foreign country or Such transactions occur repeatedly

A customer or a non-customer arranges large wire transfers out of the country which are paid for by multiple Bankers’ cheques (just under a specified threshold limit)

A Non-customer sends numerous wire transfers using currency amounts just below a specified threshold limit.


Appendix – XIV

List of Circulars on ‘Know Your Customer (KYC)’ Guidelines issued from 1 st July 2014

Sl.No.

InstructionCircular No.

Date Subject Gist of Circular

1 13358/AML &KYC/2014-15/18

13.10.2014 Clarifications on AML & KYC issues

Clarifications from RBI on representations received by IBA from the member banks on different issues relevant to amendment of PML Rules

2 13359/AML &KYC/2014-15/19

15.10.2014 KYC – Clarification of Proof of Address

Guidelines on simplifying the requirement of submission of ‘proof of address’

3 13361/AML &KYC/2014-15/20

17.10.2014 Customers’ transactions through BGL A/Cs and

Guidelines on simplifying requirement of submission of ‘proof of address’

4 13388/AML &KYC/2014-15/21

01.11.2014 KYC Norms – Clarification on periodic updation for Low Risk Customers

Non-requirement of repeated KYC for the same customers open new accounts, simplifying norms for periodic updation for low risk customers & partial freezing in case of non-compliance of KYC requirements despite repeated reminders

5 13423/AML &KYC/2014-15/25

21.11.2014 Basic Savings Bank Deposit Account (BSBDA) & Small Account

Discontinuance of simplification norms for low income group in urban & rural areas in view of introduction of BSBDA & Small Accounts

6 13431/AML &KYC/2014-15/26

27.11.2014 Guidelines on KYC norms Precautions to be taken on operation of accounts opened under PMJDY in order to possible involvement of ‘Money Mules’


Sl.No.

InstructionCircular No.

Date Subject Gist of Circular

7 13501/AML &KYC/2014-15/33

06.01.2015 Observance of KYC norms for opening of accounts & monitoring of credit of high value instruments

Proper KYC documents to be ascertained while opening of accounts, periodic review and monitoring of deposit of high value instruments to be ensured

8 13515/AML &KYC/2014-15/36

15.01.2015 Reactive STR submission Guidelines on submission of reactive STR based on off-line alert indicators

9 13610/AML &KYC/2014-15/41

20.03.2015 KYC guidelines on accounts of proprietary concerns

Amendments on guidelines for submission of identity proof documents for opening of proprietary account

10 13753/AML &KYC/2015-16/07

17.06.2015 Amendment to PMLA on additional documents for the limited purpose of proof of address

Relaxations on submission of OVDs on proof of address for low risk customers

11 13851/AML &KYC/2015-16/13

05.08.2015 Introduction of “F9” Hot-key Mandatory operation of “F9” Hot-key introduced for displaying risk profile & HNI status

12 13995/AML & KYC/2015-16/20

05.11.2015 Amendment to Prevention of Money Laundering (Maintenance of Records) Rules, 2005 on submitting OVDs in case of change in name on account of marriage or otherwise

A document shall be deemed to an OVD even if there is a change in the name subsequent to its issuance, provided it is supported by a marriage certificate issued by the State Govt. or a Gazette notification indicating such a change of name


Appendix - XVChanges incorporated in the current consolidated guidelines vis-à-vis guidelines

issued in terms of last Policy vide IC No. 13347 dated 10.10.2014

Sl.No.

Chapter/ Paragraph

Existing Guideline(As per last Policy vide IC 13347 dated 10.10.2014)

Revision proposed Rationale/Remarks

1. Chapter-1, Para-1.1

Nil Definition of customer – a person who is engaged in a financial transaction or activity with a reporting entity

RBI Master Cir DBR.AML.BC.No.15/ 14.01.001/2015-16 dated 01.07.2015, Point No.2.1

2. Chapter-1, Para-1.1.1

Nil Definition of Person – an individual, a Hindu undivided family, a company, a firm, an association of persons, every artificial juridicial person, and any agency, office or branch owned or controlled by any of the above persons

RBI Master Cir DBR.AML.BC.No.15/ 14.01.001/2015-16 dated 01.07.2015, Point No.2.4

3. Chapter-1, Para-1.3.1 & 1.3.2

Nil Simplified measures for Proof of Identity (inclusion of identity card issued by central/state Govt. department etc.) & Proof of Address (inclusion of utility bills, property or municipality tax receipt etc.) – applicable to Low Risk Customers

RBI Master Cir DBR.AML.BC. No.15/14.01.001/2015-16 dated 01.07.2015 Point No.2.3(i) & (ii); RBI Cir DBR.AML.BC. No.104/14.01.001/2014-15 dated 11.06.2014; Govt. of India Gazette Notification No. G.S.R.288(E) dated April 15, 2015

4. Chapter-1, Para-1.6 h)

Nil Stoppage of initiation of any customer’s transactions through BGL accounts

HO IC No. 13361/AML&KYC/2014-15/20 dated 17.10.2014


Sl.No.

Chapter/ Paragraph

Existing Guideline


5. Chapter-3, Para-3.1(a) & (b)

Clarification of existing guidelines given in the revised policy

Meaning of customer’s identification and procedure of identification is provided in the revised policy guidelines

RBI Master Cir DBR.AML.BC.No. 15 /14.01.001/2015-16 dated 01.07.2015, Point No.3.2.1(a) & 3.2.1(b)

6. Chapter-3, Para-3.2.1.(ii)

Clarification of existing guidelines given in the revised policy

e-KYC is more categorically defined as a valid process of KYC verification

RBI Master Cir DBR.AML.BC.No. 15 /14.01.001/2015-16 dated 01.07.2015, Point No.3.2.2.I.A(ii)


Aadhaar as a valid document for OVD

Aadhaar scheme is noted as pure voluntary and not mandatory in terms of the order dated passed by the Hon’ble Supreme Court of India

Govt. of India, MoF, DFS letter No. F.No./1/127/2014-FI (C-71719) dated 23.10.2015

8. Chapter-3, Para-3.2.1.(xiii)

Students with Pakistani nationality will need prior approval of RBI for opening accounts

Students with Pakistani and Bangladesh nationality will need prior approval of RBI for opening accounts

RBI Master Cir DBR.AML.BC.No. 15 /14.01.001/2015-16 dated 01.07.2015, Point No. 3.2.2.I.A(xv)

9. Chapter-3, Para-3.2.1.(xv)

Nil Definition of HNI customers, as approved by ORMC, is included in the revised policy

ORMC approval on 02.07.2013 in terms of RBI direction

10. Chapter-3, Para-3.2.1.(xvi)

Nil OVDs for change in name on account of marriage or otherwise

GoI gazette notification G.S.R.730(E) dated 22.09.2015 & RBI Cir No.RBI/2015-16/213 DBR.AML.No.46/14.01.001/2015-16 dated 29.10.2015

11. Chapter-3, Para-3.2.2.(v)

For proprietary concern, any two of the documents noted to be taken as activity proof

Further relaxation is given y RBI with allowing discretion to the bank to obtain any one document as proof of activity of the firm

RBI Master Cir DBR.AML.BC.No. 15 /14.01.001/2015-16 dated 01.07.2015, Point No.3.2.2.I.B(v)


Sl.No.

Chapter/ Paragraph

Existing Guideline


12. Chapter-3, Para-3.2.5.(i).6

Seeking fresh proof of identity & address at the time of periodic updation of KYC

RBI has allowed relaxation to obtain fresh proof. It is stated that bank need not seek fresh proofs dering periodic updation of KYC from the ‘low risk’ customers

RBI circular RBI/2014-15/269 DBOD.AML.BC.No.44/14.01.001/2014-15 dated 21.10.2014


Nil Provision of freezing or closure of accounts in case of non-compliance of KYC despite repeated reminders by the bank to the respective customers

RBI circular RBI/2014-15/269 DBOD.AML.BC.No.44/14.01.001/2014-15 dated 21.10.2014

14. Chapter-3, Para-3.2.6.4).c)

At per cheque facility availed by co-operative banks

Role of Urban Co-operative Banks (UCBs) are clarified

RBI Master Cir DBR.AML.BC.No. 15 /14.01.001/2015-16 dated 01.07.2015, Point No.3.2.2.IV(A)

15. Chapter-3, Para-3.2.6.8).k)

Pradhan Mantry Jan Dhan Yojana (PMJDY)

Precautions to be taken on opening & operation of accounts under PMJDY in view of avoiding of any possibility of involvement of ‘Money Mules’ and thereby using an account in somebody else’s name to do illegal transactions


16. Chapter-5, Para-5.2(iii)

Definition and illustrative list of High Risk customers

Provision of “F9” Hot-key is introduced in order exhibit details of customers which include inter-alia HNI status, Risk Profile, Risk Score, etc.; and use of “F9” Hot-key is made mandatory before proceeding for any type of banking operation


17. Chapter-6, Para-6.11

Penalty for non-adherence of KYC norms

Power conferred to the Director, FIU-IND for taking action including imposing of monetary penalty for any non-compliance of KYC norms and reporting under AML

GoI gazette notification dated 04.01.2013 on amendment of Section13(2) of PMLA 2002


Sl.No.

Chapter/ Paragraph

Existing Guideline


measures

Sl.No.

Chapter/ Paragraph

Existing Guideline


18. Chapter-3 Simplification KYC for low income group in urban & rural areas

Discontinuance of simplification norms for low income group in urban & rural areas in view of introduction of BSBDA & Small Accounts

HO IC No.13423/AML & KYC/2014-15/25


GLOSSARY

A BDescription Page No. Description Page No.

Acceptance of Cash Deposits 14 Beneficial Ownership 33 At-par cheque facility availed by Co-

operative Banks Aadhaar Linkage

39

46

Branches and Subsidiaries Outside India - Applicability of KYC Guidelines

86

Anti-Money Laundering Focus - Process Involved

61

Action points for Branches 76 Action points for Zonal Offices 76 Avoiding hardship to Customers 85

C DDescription Page No. Description Page No.

Customer Customer's Transactions through BGL

Accounts Customer Profile Customer Identification Procedure Customer Due Diligence

814

171920

Designated Director Duties / Responsibilities of Officers /

staff Domestic wire transfers

1183

63

Company 28 Client accounts - opened by

Professional Intermediaries Controlling ownership interest

32

33

CDD requirements for Periodic Updation 34

Correspondent Bank 37 Correspondent relationship with a "Shell

Bank"38

Ceiling and Monitoring of Cash Transactions & Issuance of Demand Drafts (DDs) / Inter-Office Instruments (IOIs) / Bankers' Cheque etc.

53

Combating Financing of Terrorism (CFT)

55

Cross-border wire transfers 62 Closure of Accounts 64 Cash Transaction Report (CTR) 69 Counterfeit Currency Report (CCR) 70 Cross-border Wire Transfer Report

(CWTR)74

Customers' Risk Profile Maintenance 77 Customer Risk Profile Management 78

Confidentiality of Customer Information 85


E FDescription Page No. Description Page No. E-KYC service of UIDAI 20 Foreign students 25 Evaluation of KYC Guidelines by Internal

Audit and Inspection System84 Foreign Portfolio Investors (FPIs)

Freezing and closure of Accounts3036

Electronic cash 90 Freezing of Assets under Section 51A of UAPA, 1967

56

Freezing of Financial Assets 58 Financial Action Task Force (FATF) 59 Foreign Contribution Regulation Act

(FCRA),197660

“F9” Hot Key 81

G HDescription Page No. Description Page No. Guidelines on submission of STR 72 High Net-Worth Individual (HNI)

Customers27

High Risk Customers 80

I JDescription Page No. Description Page No. Important Guidelines on AML & KYC

Compliance Introduction of the Customer

12

21

Jurisdictions that do not or Insufficiently Apply the FATF Recommendations

59

Introduction of New Technologies – Credit cards/ Debit cards/ Smart cards etc.

34

Important Guidelines on Opening of A/C 40 Independent Confirmation of the Address 44 Implementation of requests received from Foreign Countries under UNSCR

58

Information to be Preserved 66 Intermediary Bank 63

K LDescription Page No. Description Page No. KYC for the Existing Accounts 86 Low Risk Customers

Layering7961


M NDescription Page No. Description Page No. Money Mules and Operation of Bank

Accounts39 Non-face-to-face Customer 25

Monitoring of New Accounts 49 Non-Profit Organisation Transaction Report (NTR)

73

Monitoring Transactions of Suspicious Nature

50 Nodal Officers 84

Multi Level Marketing (MLM) concerns' Accounts

50

Monitoring of Alerts 52 Maintenance of Records of

Transactions64

Maintenance & Preservation of Records

67

Medium Risk Customers 80

O PDescription Page No. Description Page No. Officially Valid Document (OVD) Offline Transaction Monitoring Ordering Bank

95263

Person Proof of Identity (PoI) in case of simplified measures Proof of Address (PoA) in case of simplified measures Principal Officer PAN verification

9 10

10

1112

Positive confirmation of Proof of Address

24

Politically Exposed Persons (PEPs) resident outside India

26

Partnership Firm 29 Proprietary Concerns 30 Periodic Updation of KYC 34 Partial Freezing of operation 36 Payment of Cheques etc. 40 Photograph 42 PAN/GIR or alternatively Form 60/61 43 Pradhan Mantri Jan Dhan Yojana (PMJDY)

46

Payment of Cheques etc. 54 Procedure for Unfreezing of Fund, Financial Assets etc.

59

Preservation and Reporting of Customer Account Information

64

Preservation of Records 67 Penalty for Non - Adherence to KYC norms

86


Q R

Description Page No. Description Page No.

Reporting to FIU-IND 68

Reasons / Examples of Suspicious Transactions

71

Risk Management 77 Roles & Responsibilities of Bank's Officers & Staff

82

S TDescription Page No. Description Page No.

Sale of Third Party Products - KYC requirements

12 Transactions Transactions through NRE/NRO

Accounts

914

Structuring of Transactions with value just below Threshold Limits

13 Trust/Nominee or Fiduciary A/Cs 29

Simplified Measures for Proof of Address 22 Transaction Monitoring 52 Simplified Measures for Proof of Identity 22 Training to Officers/ Staff 85 Small Accounts 22 Technology Requirements 86 Shifting of bank accounts to another

centre24

Salaried Employees 37

Self Help Groups (SHGs) 37

Shell Bank 38

Suspicious Transaction Report (STR) 70

STR Submission - Some Important Guidelines

72

Screening of Cash Withdrawals and Deposits for the Purpose of CTR

75

Sensitising the Customers 85


U V


Unincorporated Association or a Body of Individuals

29

Unique Customer Identification Code (UCIC)

40

Unusual activities 119

W X


Walk-in Customers 36

White-listing of Accounts for AML System

54

Wire - Transfer 61

Y ZDescription Page No. Description Page No.
