KNOW YOUR CUSTOMER AND ANTI-MONEY LAUNDERING

What is KYC?

“KYC (Know Your Customer) is a framework for banks

which enables them to know / understand the customers

and their financial dealings to be able to serve them

better.”

All banks have been advised by The Reserve Bank of

India (RBI) to follow certain ‘KYC Guidelines’

SBI has issued revised KYC/AML/CFT Policy and

Procedural Guidelines vide e-circular No. 466/2008-09

dated 04.11.2008 and 161/2009-10 dated 16.06.2009

MONEY LAUNDRERING AND BANKS

• Prevent criminal elements from using the Bank for money laundering activities

• Money launderers use the banking system for cleansing ‘dirty money’ obtained from criminal activities with the objective of hiding/disguising its source

• The process of money laundering usually involves creating a web of financial transactions so as to hide the origin and true nature of these funds

OBLIGATION UNDER PMLA 2002

(i) maintaining a record of prescribed transactions

(ii) furnishing information of prescribed transactions to the specified authority

(iii) verifying and maintaining records of the identity of its clients ( in other words complying with the KYC requirements

(iv) preserving records in respect of (i) and (ii) above for a period of ten years from the date of transactions and in respect of (iii) ten years after the cessation of relationship with the clients in respect of above, for a period of account opening and KYC documents

Customer Acceptance Customer acceptance policy decides whether an individual/entity can be

accepted by the Bank as a customer, or not

Customer Identification Customer identification policy specifies the process for establishing identity and

address verification for KYC compliance

Monitoring of Transactions Specifies details of reports to be submitted to the Financial Intelligence Unit-

India to fulfill the obligations cast on the Bank under PMLA, 2002

Risk Management Risk Management facilitates meaningful monitoring of customer transactions by

segregating all accounts into High/Medium/Low Risk Catogary depending on Bank’s assessment based on cutomer profile

Key elements of KYC Policy and Guidelines

Branches should follow appropriate due diligence measures, i.e. verify identity and obtain required documents while opening accounts

Branches should not open accounts of individuals

Whose identity cannot be established

Who have connection with terrorist /anti-national organisations

Persons convicted for offences related to money laundering, terrorist/ anti-national activities, drug trafficking, bank frauds etc.

Foreign Politically Exposed Persons (PEPs) i.e persons who had occasion to indulge/associate with the aforesaid activities in line of their role responsibility.

Customer Acceptance

Customer Acceptance (contd.)

Banking facilities are not to be denied for genuine purposes, merely for the reason that criminal charges have been leveled against them or they have undergone some form of punishment in the past

Customer Acceptance Policy should not become too restrictive so as to result in denial of banking services to general public, especially to the financially / socially disadvantaged

Additional Information to be collected for customer risk-categorisation: purpose / reason for opening the account or establishing the

relationship anticipated level and nature of the activity that is to be

undertaken expected source of funds details of occupation/employment and sources of wealth or

income

Branch Head may consider closing the account for a customer not cooperating in regard to furnishing of information, after issuing due notice to the customer explaining the reasons for taking such a decision.

Customer Acceptance (contd.)

A copy of photo ID as well as document giving proof of address must be retained after duly verifying it with the original of respective document.

In respect of NRI accounts, introduction & authentication / verification of signatures to be made by a bank/ Indian Embassy / High Commission / Consulate / Notary Public / Person known to the Bank.

Customer Identification:Accounts of Individuals

Any one document from undernoted list for a proof of identity

1. Passport 2. Election ID card3. PAN Card4. Govt / Defence ID card5. ID cards of reputed employers6. Driving Licence7. Photo ID card issued by Post Offices8. Pension Payment Orders issued to the retired employees by

Central/State Government Dept./PSUs9. Photo identity card issued to bonafide students by a University

approved by UGC and/or Institute approved by AICTE

Customer Identification:Accounts of Individuals

Any one document from undernoted list for a proof of residence

1. Credit Card statement2. Salary slip3. Income / Wealth Tax Assessment Order4. Electricity Bill5. Telephone Bill6. Bank Account Statement (verified)7. Letter from reputed employer8. Letter from any recognised public authority9. Ration card10. Voter ID Card (only if it contains the current address)11. Pension Payment Orders issued to the retired employees by Central/State Govt.

Dept./PSUs if it contains current address12. Copies of Registered leave & license agreement/Sale Deed/Lease Agreement may be

accepted as proof of address13. Certificate issued by Hostel Warden of eligible institute, duly countersigned by

Registrar/Principal/Dean of Student Welfare14. Students residing with relatives, address proof/confirmation from the relative

Customer Identification:Accounts of Individuals

If a combination of documents cannot establish both the identity and the correct address of the applicant, (e.g. PAN Card and Salary Slip) applicants to be asked to give additional documents e.g. a letter from the employer giving the correct address, credit card statement etc.

Joint accounts: Applicants not closely related to each other would be required to establish their identity and address independently.

Customer Identification data to be updated once in 5 years, in respect of low risk customers, and once in 2 years for medium/high risk customers.

Customer Identification:Accounts of Individuals

“Customer Profile” has been included in the Account opening forms for exercising due diligence on individual transactions in accounts, covering the following info:-1. Occupation

2. Source of Funds

3. Monthly income

4. Annual turnover

5. Date of Birth

6. Educational qualifications.

7. Any relative settled abroad

8. Dealing with other banks

9. Existing credit facilities

10. Assets (approximate value)

Customer Profile

Based on Customer Profile, each Customer is to be classified into High, Medium or Low Risk Category in CBS (page 2 of CIF – Customer Risk - 01: Low, 02: Medium, 03: High)

This Risk Categorisation is utilised for monitoring of transactions and generation of alerts for Suspicious Transaction Reporting

Risk Category of High and Medium Risk Customers is to be reviewed every 2 years and Low Risk customers every 5 years

Customer Profile (contd.)

Customer Profile (contd.)

Customer profiles to prepared for all accounts Profiles have to be reviewed every two years, or when

the branch has a doubt after the authenticity / veracity / adequacy of previously obtained customer data

Care to be exercised that: Introduction of large number of accounts by a single introducer

– either staff or account holder (other than an employer company or institution) - to be probed thoroughly.

Information collected from the customer at the time of opening account will be treated confidential and not used or divulged for cross-selling.

Customers availing Internet Banking facility and other New Technology products also should be subjected to KYC measures.

Small Deposit Accounts

Accounts of small depositors have been given relaxations in KYC compliance provided balance does not exceeds Rs. 50,000/- and turn over Rs. 1,00,000/- in a year.

Introduction from an account holder subjected to full KYC compliance and at least six months old alongwith address/photo certification by him.

For Rural customers Kisan Bahi/Kisan Passbook issued by Revenue authority containing photograph/address of the land holder is a valid document.

RISK CATEGORISATION

IT IS FOR MONITORING THE TRANSACTION AND NOT A REFLECTION ON THE CUSTOMER

• LOW RISK

• MEDIUM RISK

• HIGH RISK

LOW RISK: ACCOUNTS

• All deposit accounts of salaried persons, pensioners, households, students may be classified as Low Risk provided the turnover is upto 15 times monthly income or Rs. 10 lacs, whichever is higher.

• OTHER INDIVIDUALS, SUMMATIONS BELOW Rs.10LACS P.A. (FOR EXISTING ACCOUNTS–LAST YEAR, FOR NEW ACCOUNTS– PROJECTIONS)

• All deposit accounts pertaining to Central Government, State Governments, PSU’s and JVs with Govt., Regulators, FIs, and Statutory bodies

• SMALL BUSINESS ENTERPRISES AND PUBLIC LIMITED COMPANIES WITH DEBIT OR CREDIT SUMMATION LESS THAN Rs 10 Lacs PER ANNUM

LOW RISK: ACCOUNTS

• All deposit accounts opened under financial inclusion viz. no frills accounts

• All time deposit accounts, including TDRs/STDRs/RDs

• All deposit accounts of agriculturists, rural artisans, labourers, having only domestic credits/debits may be classified as Low Risk provided debit/credit summations in the account do not exceed Rs.10 lacs p.a. or 15 times monthly income, whichever is higher.

MEDIUM RISK ACCOUNTS

• INDIVIDUALS ENGAGED IN BUSINESS• FIRMS IN PRIVATE SECTORS• PRIVATE LIMITED COMPANIES• PUBLIC LIMITED COMPANIES

HAVING SUMMATIONS OF RS. 10 LACS TO RS. 1 CRORE P.A.

. ALL ACCOUNTS HAVING MORE THAN 60% FOREX REMITTANCE TXN

• ALL DORMANT /INOPERATIVE ACCOUNTS

HIGH RISK: ACCOUNTS

• INDIVIDUALS ENGAGED IN BUSINESS• FIRMS IN PRIVATE SECTORS• PRIVATE LIMITED COMPANIES• PUBLIC LIMITED COMPANIES

HAVING SUMMATIONS ABOVE RS. 1 CRORE P.A.

HIGH RISK: ACCOUNTS

• TRUSTS,CHARITIES, NGOs,ORGANIZATIONS RECEIVING DONATIONS FROM INDIA AND ABROAD

• PEPs OF FOREIGN ORIGIN• NON FACE TO FACE CUSTOMERS• PERSONS HAVING DUBIOUS REPUTATION• NPA ACCOUNTS• ACCOUNTS HAVING MORE THAN 75% FOREX

REMITTANCE TXN

HIGH RISK: ACCOUNTS

HIGH RISK: CUSTOMERS DOMICILED IN COUNTRIES BELOW

Myanmar, Nigeria, Ukraine, Guatemala, Phillippines, Egypt,Cook Islands, Nauru, St. Vincent & the Grenadines, Angola, Cuba, Zimbabwe, Afghanistan, Iraq, Libya, Russia, Azerbaijan, Moldova, Kazakhstan, Georgia, Uzbekistan, Belarus, Armenia, Kyrgyzstan, Tajikistan and Turkmenistan

Reports to the Financial Intelligence Unit-India (FIU_IND)

i. Cash Transactions Reports (CTRs)

ii. Counterfeit Currency Reports (CCRs)

iii. Suspicious Transactions Reports (STRs)

iv. Non Profit Organisations Transactions Report (NPOs

Monitoring of Transactions

KYC process does not start and end with opening of accounts

Transactions should be monitored depending on the risk sensitivity of the account.

Special attention is to be paid to all complex, unusually large transactions and all unusual patterns, which have no apparent economic or visible lawful purpose.

High risk accounts should be subjected to intensive monitoring.

High value transactions by non account holding customers also to be monitored carefully.

Monitoring of Cash Transactions

1. All cash withdrawals and deposits for Rs. 10 lacs and above including individual cash transaction of less than Rs. 10 lacs but aggregating to Rs. 10 lacs in a calender month are to be reported by way of Cash Transaction Report (CTR) to Financial Intelligence Unit – India (FIU-IND) on prescribed format.

2. Issuance of traveller’s cheques, demand drafts, telegraphic transfers for Rs 50,000 and above is to be done only by debit to customer’s accounts or against negotiable instruments and not in cash.

Transactions of suspicious nature:

As per Rules of the Prevention of Money Laundering Act, 2002, “Suspicious transaction” means a transaction, whether or not made in cash, which, to a person acting in good faith –

a) gives rise to a reasonable ground of suspicion that it may involve the proceeds of crime, or

b) appears to be made in circumstances of unusual or unjustified complexity, or

c) appears to have no economic rationale or bonafide purpose

Transactions of Suspicious Nature

Some characteristics of a suspicious transaction are: Involvement of funds in illegal activity Intended to hide or disguise assets derived from illegal activities Designed to evade anti money laundering guidelines No business or apparent lawful purpose The sort in which the particular customer is not normally expected

to engage in and for which, after examining available facts, satisfactory linkage is not obtained

Unusual characteristics or activities Attempts to avoid reporting or record keeping requirements Provides insufficient or suspicious information

Transactions of Suspicious Nature

Reporting of Suspicious Transactions

Suspicious Transactions Reports are to be filed with FIU-IND in respect of all suspicious transactions /activity finalised as such by the Principal Officer (KYC/AML)

Filing of STRs is based on assessment made by the Bank in the light of customer transactions/activity and Bank is under no obligation to prove or testify this at a later date to FIU-IND/other investigating agencies

Customers should neither be told nor given any room for doubts in their mind that while seeking additional information, Bank is looking at their transactions / activity with suspicion. Such disclosure / indication is against the provisions of relevant Act / guidelines

Reporting of Suspicious Transactions

Bank has acquired and implemented AMLOCK for generation of Cash Transaction Reports on enterprise wide basis with its help.

It will also filter transactions for giving alerts on suspicious transactions.

Alerts generated are being analyzed at KYC/AML Cell, Corporate Centre, Jaipur, in consultation with the respective Circle/branch whenever required, to decide whether it is a suspicious transaction or not. Prima-facie suspicious alerts are then sent to the Principal Officer, for finalization and submission of STRs to Financial Intelligence Unit-India.

PRINCIPAL OFFICER (KYC/AML) & CGM(BO)PRINCIPAL OFFICER

(KYC/AML) & CGM(BO)

CIRCLESMONEY LAUNDERING REPORTING

OFFICER’S (MLROs)DGM & CCFO

CIRCLESMONEY LAUNDERING REPORTING

OFFICER’S (MLROs)DGM & CCFO

BUSINESS UNITSCAG/MCG/SAMG

BUSINESS UNITSCAG/MCG/SAMG

STRATEGIC BUSINESS UNITSRBU/PBBU/SMEBU/BPR/IT/NEW

BUSINESSES/GLOBAL MARKET/FD/ CENTRAL STATIONERY

DEPT./FRCT

STRATEGIC BUSINESS UNITSRBU/PBBU/SMEBU/BPR/IT/NEW

BUSINESSES/GLOBAL MARKET/FD/ CENTRAL STATIONERY

DEPT./FRCT

DY. MLRO’SAGM(REGIONS)/AGM(BPR OUTFITS)/AGM (ADMIN.)

DY. MLRO’SAGM(REGIONS)/AGM(BPR OUTFITS)/AGM (ADMIN.)

DGM (KYC/AML)DGM (KYC/AML)

Nominated MLRO’s (GM/DGM) in Business Units

Nominated MLRO’s (GM/DGM) in Business Units

Branch Heads as Asst. MLROsBranch Heads as Asst. MLROs

Nominated MLRO’s (GM/DGM) in SBUs.

Nominated MLRO’s (GM/DGM) in SBUs.

Asst. MLRO’sHeads of Branches/ BPR outfits

Asst. MLRO’sHeads of Branches/ BPR outfits

Reporting Structure of STRs

Branches are required to record and manually report all transactions of suspicious nature with full details to Controller/Administrative Office immediately as per the reporting structure

Counterfeit Currency Reports (CCRs)

All instances of detection of counterfeit currency reported to RBI/Police authorities are required to be reported to FIU-IND

CCRs are also required to be submitted to FIU-IND in respect of forgery of valuable security and documents, in plain text form, through the Principal Officer.

CCRs are also required to be filed in cases of detection of Counter Currency through Currency Verification and Processing System of RBI in remittances sent to them.

Contact details for any further queries on policy matters

a)a) Postal address :Postal address :

The Chief General Manager (Banking Operations) The Chief General Manager (Banking Operations) and Principal Officer (KYC/AML)and Principal Officer (KYC/AML)

State Bank of IndiaState Bank of IndiaCorporate CentreCorporate Centre

6thh Floor, State Bank Bhawan6thh Floor, State Bank BhawanMadam Cama RoadMadam Cama RoadMumbai – 400 021.Mumbai – 400 021.

b)b) Other communication details :Other communication details :

Name

S/Shri

Designation Phone No.

(022)

IP No. Fax No.

(022)

Mobile No. E-mail @

sbi.co.in

K.Ramachandran GM (BO) & Principal Officer

22850935 100211 22028883 9833113830 cgm.bo

K.M. Trivedi DGM (BO) 22740610 100244 22808206 9833438747 dgm.bod

Umesh Chandra AGM 22740612 100261 22820842 9920205632 umesh.c

V.K. Gupta Chief Manager 22740617 100261 22820842 99202025634 sa.bod

Contact details for any further queries on operational matters

Dy. General Manager (KYC/AML)

State Bank of India

KYC/AML Cell, Corporate Centre

Administrative Office Building

A-5, Nehru Place, Tonk Road

Jaipur-302015

Fax No. 0141-4089202 & 4089204