KYC & AML Division,

Corporation Bank Head Office

Know Your Customer – KYC
Customer: For the purpose of KYC Norms , a ‘ Customer’ is defined as a
person who is engaged in a financial transaction or activity with a
Regulated entity and includes a person on whose behalf the person who
is engaged in the transaction or activity, is acting.

"Walk-in Customer" means a person who does not have an account

based relationship with the Regulated Entity but undertakes transactions
with the branches.

Identification of an individual /Firm opening and maintaining account.

Objective :
• Prevent banks from being used, intentionally or unintentionally, by
criminal elements for money laundering activities.
• To know/understand its customers and their financial dealings better

KEY ELEMENTS OF KYC / AML POLICY

1. Customer Acceptance Policy
2. Customer Identification Procedures
3. Monitoring of Transactions 2
4. Risk Management.
Customer Acceptance Policy (CAP)
1 2
No account is opened in Low, Medium and High Risk
anonymous or fictitious Customers.
name

Customer
Acceptance
Policy

4 3
Does not match with any
person with known criminal Documentation depending
background on perceived risk.

3
Customer Identification Procedure (CIP)
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 as per Bank’s
Policy.

Monitoring of Transactions
Monitor high value transactions from money laundering stand
and transactions not commensurate with the size of the
relationship /client background.

This involves the need to track:

•Large amounts of cash transactions inconsistent with customer
activity.
•Complex, unusually large transactions which have no lawful
purpose.
•High risk category account requires intensified monitoring. 4
 Risk Management
•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.

•For the purpose of risk categorisation, individuals (other than High Net Worth)
and entities whose identities and sources of wealth can be easily identified
and transactions in whose accounts by and large conform to the known profile,
may be categorised as low risk.

•Customers that are likely to pose a higher risk than average risk to the bank
should be categorised as medium or high risk depending on customer's
background, nature and location of activity, country of origin, sources of funds
and his client profile etc.

Risk review/ re-classification of all customers: Half yearly, in the month of FEB
& AUG every year.
Periodical updation of KYC/Re-KYC:High Risk Customers- Once in 2
years,Medium Risk Customer – Once in 8 years,Low Risk Customers- Once in 10
years.
Internal Auditors should specifically check and verify the application/Account
opening form and KYC documents at the branches and comment on the lapses 5
observed in this regard as per KYC & AML guidelines.
 KYC-An Overview

Customer
Identification
Account Customer
Closure Acceptance

Inactive/
Account
Dormant
opening
Account
Client

Client Advice Transaction

/Mail/Review Instructions
Risk category

Transaction Compliance
Monitoring &
AML

6
 Paradigm shift – KYC

From introduction to document based identification - hence

introduction not mandatory

From financial loss (from frauds) to loss of reputation (non-

compliance) – name and shame!

KYC related information is confidential - not to be divulged for

cross-selling or any other purpose.

KYC information collected to be consistent with risk perception

and other information to be collected only with consent of the
customer.
Branches/Offices are advised to adhere to the directives and follow
the KYC & AML guidelines in letter & spirit to avoid any punitive action
by the regulator.
7
Obtention of Aadhaar and PAN/F60, mandatory for opening of New Bank
Accounts/ Existing bank a/cs and for transactions of Rs. 50,000/- & above
Branches are advised to obtain Aadhaar and PAN/F60 for opening of new bank
accounts as well as for any financial transaction of Rs 50,000/ and above.
Existing bank accounts are also to be seeded with Aadhaar by March 31, 2018,
failing which the said account shall cease to be operational till the time the
Aadhaar Number and PAN/F 60 is submitted by the client. Branches to
authenticate the Aadhaar before its seeding with the account. Last date is
extended till the final judgement of the honorable Supreme Court.

Aadhaar Authentication: Branches/offices, at the time of receipt of the Aadhaar

number, shall carry out its authentication before seeding the same in the system
by the following methods:
(a) e‐KYC/Biometric‐based authentication: The Aadhaar number and biometric
information submitted by an Aadhaar number holder are matched with the
biometric information of the said Aadhaar number holder stored in the Central
Identities Data Repository (CIDR). This may be fingerprints‐based or iris‐based
authentication or other biometric modalities based on biometric information
stored in the CIDR.

(b) Yes/No authentication provided by Unique Identification Authority of India‐

"Authentication facility" means the facility provided by the Authority for
verifying the identity information of an Aadhaar number holder through the
process of authentication, by providing a Yes/ No response or e‐KYC data, as
applicable. There are different methods under Yes/No such as Demographic 8
Authentication, OTP based authentication and Bio‐metric authentication .
Obtaining Aadhaar number holder’s Consent for Authentication In compliance
with Aadhaar Act:
a) unless otherwise provided in the Aadhaar Act, obtain the consent of an
individual before collecting his/her identity information for the purpose of
authentication in such manner as mandated by UIDAI’s policy and
regulations.
b) ensure that the identity information of an individual is only used for
submission to the CIDR for authentication. Nothing contained in this
Aadhaar Act shall prevent the use of Aadhaar number for establishing the
identity of an individual for any purpose, whether by the State or anybody
corporate or person, pursuant by law, for the time being in force, or any
contract to this effect. Provided that the use of Aadhaar number shall be
subject to the procedure and obligations under section 8 and Chapter VI of
the Act.
In case the client, eligible to be enrolled for Aadhaar and obtain a Permanent
Account Number does not submit the Aadhaar number / Permanent Account
Number at the time of commencement of an account based relationship with
Bank, the client shall submit the same within a period of six months from the
date of the commencement of the account based relationship.

In case the client fails to submit the Aadhaar number and Permanent Account
Number within the aforesaid six months period, the said account shall cease to
be operational till the time the Aadhaar number and Permanent Account 9
Number is submitted by the client.
 Master Direction - Know Your Customer (KYC)

RBI/ DBR/ 2015-16/ 18 Master Direction DBR. AML.

BC.No.81/14.01.001/2015-16 dt Feb 25, 2016
(Updated as on April 20, 2018)

RE, at the time of receipt of the Aadhaar number, shall carry

out, with the explicit consent of the customer, e-KYC
authentication (biometric or OTP based) or Yes/No
authentication. Provided,

i. Yes/No authentication shall not be carried out while

establishing an account based relationship.

ii. In case of existing accounts where Yes/No authentication

is carried out, REs shall ensure to carry out biometric or
OTP based e-KYC authentication within a period of six
months after carrying out yes/no authentication. 10
Master Direction - Know Your Customer (KYC) Contd..

iii. Yes/No authentication in respect of beneficial owners of a legal

entity shall suffice in respect of existing accounts or while
establishing an account based relationship.

iv. Where OTP based authentication is performed in ‘non-face to

face’ mode for opening new accounts, the limitations as
specified in Section 17 shall be applied.

v. Biometric based e-KYC authentication can be done by bank

official/business correspondents/business facilitators/ Biometric
enabled ATMs.

11
Master Direction - Know Your Customer (KYC) Contd..

From an individual who is eligible for enrolment of

Aadhaar, the Aadhaar number; the Permanent
Account Number (PAN) or Form No. 60 as defined
in Income-tax Rules, 1962, as amended from time
to time;

Provided, where an Aadhaar number has not been

assigned to an individual, proof of application of
enrolment for Aadhaar shall be obtained wherein
the enrolment is not older than 6 months and in
case PAN is not submitted, certified copy of an
OVD containing details of identity and address and
one recent photograph shall be obtained.
12
Master Direction - Know Your Customer (KYC) Contd..

In case the identity information relating to the Aadhaar

number or PAN submitted by the customer does not
have current address, an OVD as defined in section
3(a) (xiv) shall be obtained from the customer for this
purpose.
i. utility bill
ii. property or Municipal tax receipt;
iii. pension or family pension payment orders (PPOs)
iv. letter of allotment of accommodation from employer

Provided further that the customer shall submit Aadhaar

or OVD updated with current address within a period of
three months of submitting the above documents.”
13
 Central KYC Registry
Project Background:
Department of Financial Services, Ministry of Finance had constituted a
Group to set-up a Central KYC Registry vide Order dated 15.02.2012.
Central Registry of Securitisation Asset Reconstruction and Security
Interest of India(CERSAI) was incorporated as a non profit Company
under Section 25 of Companies Act, 1956 on 5th March, 2011. The
Company was entrusted the task of establishing, maintaining and
operating the Central Registry established by the Govt. of India on 31st
March, 2011 under SARFAESI Act , 2002.
Need for a Central KYC Registry:
Problems faced by the customers: customers have to undergo the
screening process each time they need to establish a relationship with
a financial institution.
Lack of uniformity in KYC procedures under regimes of different
regulators.
Compliance cost of
(1). conducting repeated KYC.
(2). updating KYC information.
(3). for record keeping of KYC documents. 14
 Benefits to Stakeholders

Customer Institution Regulators

• One time KYC • Seamless & • Reduction in

Compliance/ Automated back number of fake
Updation for all office for KYC accounts being
financial processing opened
relationships • Reduction in • Monitor all linked
processing time accounts of
• No repeat
for account suspected
documentation
opening perpetrators
• Time saving • Reduction in • Monitor compliance
compliance cost of institutions
and storage of
documents 15
 Guidelines
“Officially valid document” (OVD)
•Passport
•Driving license,
•Voter's Identity Card issued by the Election Commission of India,
•Job card issued by NREGA duly signed by an officer of the State
Government,
•Letter issued by the National Population Register containing details of
name,address or
•any other document as notified by the Central Government in
consultation with the Regulator.
A customer is required to submit only one OVD for both proof of identity
and for proof of address as part of KYC procedure.
Provided that where ‘simplified measures’ are applied 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.
16
 Guidelines
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, post-paid 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.
g)In case the person who proposes to open an account does not have an
OVD as 'proof of address', such person shall provide OVD of the relative,
with whom the person is staying, as the 'proof of address'.
Explanation: A declaration from the relative that the said person17is a
relative and is staying with him/ her shall be obtained.
 Guidelines
Revised Officially Valid Document for the persons who change their name
due to marriage or otherwise:
Copy of either the marriage certificate issued by the State Government or
the Gazette notification indicating change in name together with a
certified copy of ‘Officially valid document’ in the existing name of the
person.
Simplified procedure "means the procedure for undertaking customer due
diligence in respect of customers, who are rated as low risk by the
Regulated Entity and who do not possess any of the six officially valid
documents, with the alternate documents prescribed.
Small Accounts
If an individual customer does not possess either any of the OVDs or the
documents applicable in respect of simplified procedure then ‘Small
Accounts’ may be opened for such an individual. A ‘Small Account' means
a savings account in which:
a) The aggregate of all credits in a financial year does not exceed rupees
one lakh ;
b) The aggregate of all withdrawals and transfers in a month does not
exceed rupees ten thousand and
c) The balance at any point of time does not exceed rupees fifty
thousand.
18
 Guidelines
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 branch, 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)branches have to ensure that foreign remittances are not credited to the
small 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 a/c 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 24 months;
d)a small a/c shall be monitored & 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
19
the production of “officially valid documents”.
 Guidelines
Quoting of PAN:
Permanent account number (PAN) of customers shall be obtained
and verified while undertaking transactions as per the provisions of
Income Tax Rule 114B applicable to banks, as amended from time to
time. Form 60 shall be obtained from persons who do not have PAN.

Transaction:

"Transaction" means a purchase, sale, loan, pledge, gift, transfer,

delivery or the arrangement there of 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 other non- physical means;

(iii)The use of a safety deposit box or any other form of safe deposit;
(iv) Entering in to any fiduciary relationship;

(v) Any payment made or received in whole or in part of any

contractual or other legal obligation; or
20

(vi) Establishing or creating a legal person or legal arrangement.

 Guidelines
OTP BASED eKYC: Bank may provide an option for One Time Pin (OTP) based
e-KYC process for on-boarding of customers.
Accounts opened in terms of this provision i.e., using OTP based e-KYC, are
subject to the following conditions for non face to face customers:
(i)There must be a specific consent from the customer for authentication
through OTP
(ii) The aggregate balance of all the deposit accounts of the customer shall not
exceed rupees one lakh.
(iii) The aggregate of all credits in a financial year, in all the deposit taken
together, shall not exceed rupees two lakh.
(iv) As regards borrowal accounts, only term loans shall be sanctioned. The
aggregate amount of term loans sanctioned shall not exceed rupees sixty
thousand in a year.
(v) Accounts, both deposit and borrowal, opened using OTP based e-KYC shall
not be allowed for more than one year within which Customer Due Diligence
(CDD) procedure is to be completed. If the CDD procedure is not completed
within a year, in respect of deposit accounts, the same shall be closed
immediately. In respect of borrowal accounts no further debits shall be
allowed.
(vi) A declaration shall be obtained from the customer to the effect that no
other account has been opened nor will be opened using OTP based KYC either
with the same Bank or with any other Bank. Further, while uploading KYC
information to CKYCR, Branch shall clearly indicate that such accounts are
opened using OTP based e-KYC and other Bank shall not open accounts 21 based
on the KYC information of accounts opened with OTP based e-KYC procedure.
 Guidelines
Operation of Bank Accounts & Money Mules:
“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 order to minimize
the operations of such mule accounts, branches should strictly adhere to the
guidelines on opening of accounts and monitoring of transactions.
Customer Identification Procedure
Documents that may be obtained from customers
Customers/Clients Documents
(Certified copy of any one of the following officially
valid document)
Accounts of individuals (i) Passport (ii) PAN card (iii) Voter’s Identity Card (iv)
- Proof of Identity and Address 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.
Where ‘simplified measures’ are applied for verifying
the identity of customers the following documents shall
be deemed to be 'officially valid documents:
i. 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; 22
ii. letter issued by a gazetted officer, with a duly
 Customer Identification Procedure
Documents that may be obtained from customers contd…

Accounts of individuals Where ‘simplified measures’ are applied for

verifying for the limited purpose of proof of address
- Proof of Identity and Address
the following additional documents are deemed to
be OVDs
:.
i. Utility bill which is not more than two months
old of any service provider (electricity, telephone,
post-paid mobile phone, piped gas, water bill);
ii. Property or Municipal Tax receipt;
iii. Bank account or Post Office savings bank
account statement;
iv. Pension or family pension payment orders
(PPOs) issued to retired employees by
Government Departments or Public Sector
Undertakings, if they contain the address;
v. 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
vi. Documents issued by Government departments
of foreign jurisdictions and letter issued by
Foreign Embassy or Mission in India. 23
 Customer Identification Procedure
Documents that may be obtained from customers contd…

Accounts of (a) Certificate of incorporation;

Companies (b) Memorandum and Articles of Association;
(c) A resolution from the Board of Directors an power of attorney
granted to its manager officers or employees
to transact on behalf; and
An officially valid document in respect of managers, officers or
employees holding an attorney to transact on its behalf.

Accounts of (a) registration certificate;

Partnership firms (b) partnership deed; and
an officially valid document in respect of the person holding an
attorney to transact on its behalf.

Accounts of Trusts (a) registration certificate;

(b) trust deed; and
an officially valid document in respect of the
person holding a power of attorney to transact on its behalf

Accounts of (a) resolution of the managing body of such association

unincorporated or body of individuals;
association
(b) power of attorney granted to him to transact on its behalf;
or a body of
(c) an officially valid document in respect of the person holding
individuals
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
24 or
body of individuals.
 Customer Identification Procedure
Documents that may be obtained from customers contd…

Accounts of Apart from Customer identification procedure as

Proprietorship applicable to the proprietor any two of the following documents
Concerns in the name of the proprietary concern would suffice
Proof of the • Registration certificate (in the case of a registered concern)
name, address • Certificate/licence issued by the Municipal authorities under Shop
and activity of & Establishment Act,
the concern • 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.
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. 25
 Guidelines
 Politically Exposed Persons (residing outside India):
PEPS are individuals who are, or have been entrusted with
prominent public functions in a foreign country. . e.g.,Heads of
States/Governments, senior politicians, senior government/ judicial/
military officers, senior executives of state-owned corporations,
important political party officials or relative or known associated of that
Person,etc. (HOC 154/2016)

.Proper Customer due diligence/Enhanced due diligence.

•Information on public domain
•Verify the identity and source of funds
•Decision at senior level i.e. Zonal Office
•Transaction Monitoring on an ongoing basis
•Accounts of family members and the close relatives of PEPs
•Existing customer subsequently becoming PEP – RE KYC & EDD

26
 Guidelines
Beneficial Ownership
When a branch identifies a customer for opening an account, it should
identify the beneficial owner(s) and take all reasonable steps in terms of
Rule 9(3) of the PML Rules to verify his identity, as per guidelines
provided below where the :

(a)client is a company, the beneficial owner is the natural person(s)

acting through one or more juridical person, has/have a controlling
ownership interest or who exercises control through other means.
“Controlling ownership interest” means ownership of/entitlement to
More than 25% of the shares or capital or profits of the company.

(b) client is a partnership firm, the beneficial owner is the natural person
(s) through one or more juridical person, has/have ownership of/
entitlement to more than 15%of capital or profits of the partnership.

(c)client is an unincorporated association or body of individual or

trusts, 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% of the property or capital or
27
profits of the unincorporated association or body of individuals/trusts.
 Guidelines
 Non Face to Face Customers:
•In the case of non-face-to-face customers, apart from applying the
usual customer identification procedures, there is a need for 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
branch 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. 28
 Compliance Of KYC / AML Policy At
Branches & APCs
1. Avoid incomplete data entry while opening a/cs by branches.

2. Entering passport number in system for NRI accounts is

compulsory.

3. KYC compliance for POA (power of attorney) holder is to be

ensured.

4. Exact nature of business of the customer should be updated in

the party master, wherever possible.

5. Unauthorized transient a/cs to be closed.

6. Reliance on the KYC of only the principal card holder for

issuing add on card to Spouse/parents/brother/son and
daughter should be avoided and KYC of add on card holder
also to be obtained.
Compliance Of KYC / AML Policy At Branches
& APCs contd...
7. Occupation codes filled with irrelevant codes in the core system should
be avoided.

8. Monitoring of accounts without UCIC/wrong UCIC

9. Updating of Passport numbers for NRI accounts wherever passport

numbers are absent.

10. Branches should select the correct organization code for the a/c –
example: For Pvt. Ltd company organisation code is entered as
“Partnership” in the core etc.

11. KYC check for a/cs of Societies/Trusts/ Associations/

NGOs/Companies etc.

12. Branches should generate Exceptional Report and verify the

genuineness of transactions at the end of the day.

Please refer KYC & AML policy of the bank and various circulars issued in
this regard time to time for detailed guidelines. 30
Compliance Of KYC / AML Policy At Branches
& APCs contd...
Some of the important circulars issued by our Bank regarding KYC/AML
are given below for a quick reference:

Circular
No. Date Subject
Customers have the option to submit documentary proof of either current or permanent
724/2014 14.10.2014 address while opening the account.

834/2016 31.12.2016 Branch Level Alert Indicators that need to be reported to Head Office

816/2016 27.12.2016 SENDING “LETTER OF THANKS” and Periodical updation of KYC (Re-KYC)- norms re-iterated.

203/2016 31.03.2016 Know Your Customer (KYC) Direction, 2016

222/2016 02.04.2016 Adherence to KYC &AML/CFT GUIDELINES AND NORMS

154/2016 09.03.2016 Account of Politically Exposed Person (PEPs) Resident outside India
Compliance to Provisions of Master Direction on KYC & Seeding of PAN/F60 as per CBDT
797/2016 17.12.2016 guidelines.

795/2016 15.12.2016 Requirement of CDD for re-activation of dormant account and need for maintenance of records.
Obtention of Aadhaar and PAN/F60, mandatory for opening of New Bank Accounts/ Existing bank
439/2017 05.08.2017 a/cs and for transactions of Rs. 50,000/- & above.

31
 Money Laundering
Money Laundering as per section 3 of the Prevention Money Laundering
Act:
“Whosoever directly or indirectly attempts to indulge or knowingly
assists or knowingly is a party or is actually involved in any process or
activity connected with the proceeds of crime and projecting it as
untainted property shall be guilty of offence of money laundering.”

Money Laundering generally refers to ‘washing’ of the proceeds or

profits generated from:

Kidnapping
Prostitution Extortion

Drug Bribery
Trafficking Criminal & Corruption
Activities
Smuggling Gambling,
(arms, people, Robbery,
goods) Cheating

Terrorist Act Counterfeiting

& Forgery 32
Money Laundering Stages:
1. 2.
Predicate Crimes PLACEMENT
•Corruption and Bribery
• Initial introduction of
•Fraud
criminal proceeds into
•Organized crime
the stream of
•Drug and human trafficking
commerce
•Environmental crime
• Most vulnerable stage
•Terrorism
of money laundering
•Other serious crimes…
process

3.
4. LAYERING
INTEGRATION
• Involves distancing the money
•The last stage in the from its criminal source:
laundering process. •movements of $ into different
•Occurs when the laundered accounts
proceeds are distributed •movements of money to different
back to the criminal. countries
•Creates appearance of • Increasingly difficult to detect.
legitimate wealth.
33
Financial Intelligence Unit of India FIU-IND
The Financial Intelligence Unit-India (FIU-IND) constituted by
Govt. of India on 18/11/2004 as a nodal agency for the anti-money
laundering measures got statutory recognition on 01/07 2005.
The main function of FIU-IND is to receive CTR, NTR, CCR, STR,
CBWTR reports, analyze them and, as appropriate, disseminate
valuable financial information to intelligence/enforcement
agencies and regulatory authorities.
Domestic Cooperation Framework Intel./Law Enf. Agencies
IB
Reporting Entities RAW
Banking Company REIC
Financial Institutions FIU-IND CBDT-DGIT/CCIT
Intermediaries CBEC-DGDRI/DGCEI
ED
EOW of Police
Regulators EOW of CBI
RBI
SEBI
Foreign FIUs 34
IRDA
Types of Report submitted to FIU-IND:
Cash Transaction Report (CTR): All cash transactions of the value of more
than rupees ten lakhs or its equivalent in foreign currency & 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.

Counterfeit Currency notes Report (CCR):All cash transactions where

forged or counterfeit currency notes or bank notes have been used as
genuine or where any forgery of a valuable security or a document has
taken place facilitating the transactions.

Non profit organization Transaction Report (NTR):All transactions

involving receipts by non profit organizations of value more than Rs. Ten
lakhs or, its equivalent in foreign currency .

Cross Border Wire Transfer Report (CBWTR):All cross border wire

transfers of the value of more than five lakh rupees or its equivalent in
foreign currency where either the origin or destination of fund is in India.

Suspicious Transaction Report (STR):All suspicious transactions(including

attempted transactions) whether or not made in cash 35
 Suspicious Transaction Report
Suspicious transaction means a transaction referred to in clause
(h), including an attempted 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 proceeds of an offence specified in the Schedule
to the Act, regardless of the value involved; 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 a reasonable ground of suspicion that

it may involve financing of the activities relating to
terrorism;
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Branch Managers should inform KYC & AML Division
the following cases:
•In case they find that any customer/ account/ transaction falls within
the purview of branch level indicators listed vide HO Circular No.
834/2016 dated 31.12.2016. Indicators re-iterated here below for
your ready reference:
•Customer did not open account after being informed about KYC
requirement/ Customer offered false or forged identification
documents and documents that appears to be counterfeited, altered or
inaccurate/ Identity documents presented are not verifiable i.e.
Foreign documents, etc.
•Address provided by the customer is found to be non-existent /
Customer not staying at address provided during account opening.
(Before apprising, it is to be verified by the branch. Not that, if the
“Thanks letter” is returned, it is apprised.)
•Customer uses complex legal structures or where it is difficult to
identify the beneficial owner.
•Customer has been the subject of inquiry from any law enforcement
agency relating to TF or terrorist activities. 37
•Match of customer details with persons reported in local media/open
source for criminal offence.
•Customer did not complete transaction after queries such source of
funds, etc.,/ Customer is hurried or nervous / Customer over cautious in
explaining genuineness of the transaction.
•Customer changes the information provided after more detailed
information is requested / Customer provides information that seems
minimal, possibly false or inconsistent.
•Customer has vague knowledge about amount of money involved in the
transaction / Customer taking instructions for conducting transactions /
Customer could not explain source of funds satisfactorily.
•Customer is accompanied by unrelated individuals / Multiple customers
arrive together but pretend to ignore each other.
•Customer travels unexplained distances to conduct transactions.

•Customer offers different identifications on different occasions with an

apparent attempt to avoid linkage or multiple transactions.

•Customer makes inquiries or tries to convince staff to avoid reporting.

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•Transaction is unnecessarily complex for its stated purpose / The
amounts or frequency or the stated reason of the transaction does not
make sense for the particular customer / Transaction involving movement
of which is inconsistent with the customer's business.

•Alert raised by agents about suspicion /Alert raised by other institutions,

subsidiaries or business associates including Cross-border referral.
•Fraudulent telephone calls seeking sensitive information of customers.
Bank/ Branch officials have to give information of the call, Phone/Mobile
number from which call has been received, name of the customer/Bank
Officials lodging the complaint, account number, etc.
•Opening and closing of a/cs having common beneficial owner/ director/
partner/ proprietor etc. and companies having common address, within
a week of opening or closing the a/c.
•The details of a/cs opened in the name of PEP (Politically Exposed
Person, including local PEP) or in the name of his relatives or entities
where PEP is the beneficial owner.

•Foreign remittance received by NPO not approved by FCRA.

39
•The details of a/cs freezed based on the instructions of Law
Enforcement Agencies
•Complaint received from public for abuse of account for committing
fraud, etc.

•If the cheque book requirement of the customer largely varies with
the threshold fixed for SB or unusually huge number of cheques used
by the CBCA customer.

•Details of accounts opened for the purpose of election expenditure or

huge deposits and cash withdrawals during election time in the existing
a/cs

•Details of a/cs, where the reason code is marked as “09” i.e., E-mail
sent to KYC & AML Division, at the time of verification of Threshold
Limit Alerts before SIGN OFF.

•Branches refrain from the practice of issuing multiple cash DDs

aggregating to more than Rs.50,000/- where the applicant or the
beneficiary is the same person/ company. Exceptions being the DDs
issued in favour of Educational Institutions/ Universities for the
purpose of payment of fees.
40
•Branches enquire with the customer, the source of funds in case of
huge deposits and the end use of funds in case of huge cash withdrawals
in any a/c.

•Do not tip off the customer in case of any enquiry by the controlling
offices. Sometimes it is observed that e-mails sent by our Division
asking for details are straightaway forwarded to the customers by the
branches.

•Branches should monitor the transactions reported under CTR

available in Anti Money Laundering Menu of core system for
genuineness of the transactions. If found suspicious, they should inform
KYC & AML division.

•STR generation based on Newspaper/Media reports- Adverse media

reports about the customers/proposed customers/walk in customer if
any, to be reported to HO- KYC & AML division on an ongoing basis
through e-mail.

This list is illustrative not exhaustive.

Branch Manager/s should ensure that all officers/staff working in the branch/es
are following the KYC & AML guidelines. 41
 COMPLIANCE CULTURE

There is a need to inculcate compliance

culture at branches/Zonal Offices.

42
COMPLIANCE OF KYC / AML POLICY

43
THANK YOU

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