KYC AML CFT POLICY

KYC AML CFT POLICY.

Introduction.

The policy on Know your Customer(KYC) norms/ Anti Money Laundering (AML) standards/Combating of Financing of terrorism (CFT) and obligations of the bank under various provisions of Prevention of Money Laundering Act was reviewed and approved by our Bank Board on 11.10.2023 based on RBI Master Directions dt. 28.04.2023 & 04.05.2023. The reviewed policy is valid upto 31.10.2026. RBI made amendments on 17.10.2023 to Master Direction on KYC & the same was incorporated by our bank vide circular dt. 27.11.2023 to our KYC AML CFT Policy 2023. RBI exercise of the powers conferred by Sections 35A of the Banking Regulation Act, 1949, the Banking Regulation Act (AACS), 1949, read with Section 56 of the Act ibid, Sections 45JA, 45K and 45L of the Reserve Bank of India Act, 1934, Section 10 (2) read with Section 18 of Payment and Settlement Systems Act 2007 (Act 51 of 2007), Section 11(1) of the Foreign Exchange Management Act, 1999, Rule 9(14) of Prevention of Money- Laundering (Maintenance of Records) Rules, 2005 and all other laws enabling the Reserve Bank in this regard, the Reserve Bank of India being satisfied that it is necessary and expedient in the public interest to do so, hereby issues the Directions. These norms apply to every entity regulated by RBI & to all the branches home as well as overseas. In case of difference between RBI & Home/Host country regulations, more stringent regulations of the two shall be adopted..

Objectives of KYC/AML/CFT 🞄 To prevent banks and other financial institutions from being used as a channel for Money Laundering (ML)/ Terrorist Financing (TF) and to ensure the integrity and stability of the financial system. 🞄 To prevent bank from being used, intentionally or unintentionally, by criminal elements for money laundering or financing of terrorism. 🞄 Guard against criminals, fraudsters and terrorists making use of the banking channels for their nefarious activities. 🞄 To understand the level of risk each account/transaction bears and the steps to be taken to manage them. 🞄 To know and understand its customers fully in terms of identity, location and activity to the extent of establishing the correctness/genuineness of the credentials for extending better Customer Service. 🞄 To implement the recommendations of Financial Action Task Force on Anti Money Laundering standards and on Combating Financing of Terrorism and the paper issued on Customer Due Diligence for the bank by Basel Committee on Banking Supervision..

The efforts on Money Laundering (ML)/ Terrorist Financing (TF) are continuously being made both internationally and nationally, by way of prescribing various rules and regulations. Internationally, the Financial Action Task Force (FATF) which is an inter-governmental body established in 1989 by the Ministers of its member jurisdictions, sets standards and promotes effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system. India, being a member of FATF, is committed to upholding measures to protect the integrity of international financial system. In India, the Prevention of Money-Laundering Act, 2002 and the Prevention of Money- Laundering (Maintenance of Records) Rules, 2005, form the legal framework on Anti- Money Laundering (AML) and Countering Financing of Terrorism (CFT). In terms of the provisions of the PML Act, 2002 and the PML Rules, 2005, as amended from time to time by the Government of India, Regulated Entities (REs) are required to follow certain customer identification procedures while undertaking a transaction either by establishing an account-based relationship or otherwise and monitor their transactions..

SOURCES OF INCOME • Tax Crimes • Fraud • Embezzlement • Drugs • Theft • Bribery • Corruption PLACEMENT GOAL Deposit Criminal Proceeds Into Financial System • Change of Currency • Change of Denominations • Transportation of Cash • Cash Deposits LAYERING GOAL Conceal The Criminal Origin of Proceeds • Wire Transfers • Withdrawals in Cash • Cash Deposits in Other Bank Accounts • Split and Merge Between Bank Accounts INTEGRATION JUSTIFICATION GOAL Create an Apparent Legal Origin for Criminal Proceeds • Creating Fictitious Loans, Turnover/ Sales, Capital Gains, Deeds, Contracts, Financial Statements • Disguise Ownership of Assets • Criminal Funds Used in Third Party Transactions INTEGRATION INVESTMENT GOAL Use Criminal Proceeds for Personal Benefit • Liquidity - Cash at Hand • Consumption • Investments.

MONEY MULE ACCOUNTS.

Discouraging the opening and operations of mule accounts to prevent cyber enabled frauds.

MECHANISM OF MONEY MULE IN BANKING SYSTEM. 1. Recruitment: Scammers are contacting the gullible customers through various social media platforms like Facebook, Instagram and telegram offering them part time online job, online bitcoin trading investment, phishing emails, promising easy money for minimal work. 2. Account setup: Fraudster's approach the marginalized people, such as the economically weaker sections or those lacking digital literacy by offerings of money in exchange of opening bank accounts in their names. Once the accounts are fully set up, the fraudsters often offer lucrative commission to these account holders and use the accounts digital banking facilities on their behalf to route the funds to multiple beneficiaries. 3. Money laundering: The scammer transfers illicit funds into the money mule's account, which is then transferred to multiple accounts to divert the tracking process. 4. Cash out: The scammer ultimately withdraws the funds, leaving the money mule with an empty account and potential legal consequences. This withdrawal process is done mostly through the high value ATM cards or cash withdrawals by the account holders from branch..

Definitions.

Beneficial Owner (BO) Where the customer is a company, the beneficial owner is the natural person(s), who, whether acting alone or together, or through one or more juridical persons, has/have a controlling ownership interest or who exercise control through other means. 🞄 “Controlling ownership interest” means ownership of/entitlement to more than 10 percent of the shares or capital or profits of the company. 🞄 “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..

Beneficial Owner (BO) Where the customer 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/have ownership of/entitlement to more than 15 percent of the property or capital or profits of the unincorporated association or body of individuals. 🞄 Term ‘body of individuals’ includes societies. Where no natural person is identified under (a), (b) or (c) above, the beneficial owner is the relevant natural person who holds the position of senior managing official. Where the customer is a trust, the identification of beneficial owner(s) shall include identification of the author of the trust, the trustee, the beneficiaries with 10 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..

Certified Copy - Obtaining a certified copy by the RE shall mean comparing the copy of the proof of possession of Aadhaar number where offline verification cannot be carried out or officially valid document so produced by the customer with the original and recording the same on the copy by the authorised officer of the RE as per the provisions contained in the Act. Provided that in case of Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs), as defined in Foreign Exchange Management (Deposit) Regulations, 2016, alternatively, the original certified copy, certified by any one of the following, may be obtained: ⋅ Authorised officials of overseas branches of Scheduled Commercial Banks registered in India, ⋅ branches of overseas banks with whom Indian banks have relationships, ⋅ Notary Public abroad, ⋅ Court Magistrate, ⋅ Judge, ⋅ Indian Embassy/Consulate General in the country where the non-resident customer resides..

“Central KYC Records Registry” (CKYCR) means an entity defined under Rule receive, store, safeguard and retrieve the KYC records in digital form of a customer..