Presentation on theme: "KYC Norms & AML Standards Guidelines"— Presentation transcript:
1 KYC Norms & AML Standards Guidelines Group Members:-Sajala MaharjanAditya ShresthaAnkur GoelGaurav Prasad GaurAshish Bhatta
2 Introduction KYC : Know Your Customer PURPOSE : To Identify the ClientsWHERE IT IS USED : Bank and other financialinstitutions.WHY IT IS USED : - Monitor the financialtransactions- Risk Management- Customer Identification
3 KYC Policy’s Key Elements Customer Acceptance PolicyCustomer Identification ProcedureMonitoring of TransactionRisk Management
4 Customer Identification Policy Every bank should develop a Customer identification policy laying down explicit criteria for acceptance of customer.No account is opened in anonymous or factious / benami nameparameters are clearly defined in terms of nature of businessDocumentation requirement and other information to collect in respect ofdifferent customer depending of risk.Circumstances in which customer is permitted to act on behalf of anotherperson should be clearly defined.Banks should prepare profile for each new customer based on risk categorization profile may contain information relating to customer identity, social/financial status.
5 Risk categorizationEX :- salaried employees and people belonging to lower economic strataNon resident customersHigh net worth individualsTrusts, charities , NGOS and organization receiving donationCompanies having close family , shareholding or beneficial relationshipFirms with sleeping partnersPolitically exposed person of foreign originsNon face to face customersThose with dubious reputation as per public info available
6 Customer Identification Procedure Legal name and any other name usedCorrect permanent addressAccounts of individualsName of companyPrincipal place of businessMailing address of companyTelephone , fax noAccounts of companyLegal nameAddressName of all partners and their addressTelephone no of firms and partnersAccounts of partnership firms
7 Customer Identification Requirement Trustee/ nominee of fiduciary A/cAccounts of companies and firmsClient A/c opened by professional intermediariesAccounts of politically exposed personAccounts of non face to face customersAccounts of proprietary concernsAccounts of salaried employeesAccounts for foreign students studying in IndiaWalk in customersAccounts of foreign portfolio Investors
8 Monitoring of Transactions Extend of monitoring will depend on risk sensitivity of account.Risk involved in cash intensive businessHigh risk associated accounts or suspicious accountsUpdation of risk categoryRisk ManagementBOD must ensure appropriate procedure which cover proper management oversight, system and controls, segregation of duties and other related mattersBanks internal audit and compliance.National Money laundering / financing of terror assessment committee
9 Money LaunderingMoney laundering is the practice of engaging in financial transactions in order to conceal the identity, source, and/or destination of money, and is a main operation of the underground economy.Another DefinitionMoney laundering is a process whereby the origin of funds generated by illegal means is concealed (drug trafficking, gun smuggling, corruption, etc.)
10 Typologies/ Techniques Employed Deposit structuringConnected AccountsPayable Through AccountsInvestment Banking and the Securities SectorInsurance and Personal Investment ProductsCompanies Trading and Business ActivityCorrespondent BankingLawyers, Accountants & other IntermediariesMisuse of Non-Profit Organizations.
11 Monitoring of Transactions Ongoing monitoring is an essential element of effective KYC proceduresBank should pay special attention to all complex transactions and unusual patternLarge amount of inconsistent cash should attract the attention of the bankKey indicators should be set by every bank for very high account turnover inconsistent with the size of balanceCategorization of customer should be carried out periodically not less than 6 monthsHigh risk associated accounts should be taken into account by banks to identify and report in Suspicious Transaction Report
12 Closure of AccountAll accounts should be subject to minimum KYC standard to establish the identity of the natural/ legal person and the beneficiary person.When bank is not able to apply KYC measures due to no- furnishing of information by the customer, the account should be terminated after issuing the show cause notice to the customer
13 Introduction of New Technologies Special attention to money laundering threats from new or developing technologies.Banks engaged in issuing of electronic cards should fully comply with KYC/AML/CFT guidelinesBanks should ensure that appropriate KYC procedures are duly applied before issuing the cards to the customers.
14 Wire TransferWire transfer is a transaction carried out on behalf of an originator person through the bank by electronic means to make amount available to a beneficiary person to the bankCross border transferDomestic wire transferCross border transaction must contain name and address of the originatorRecord should be maintained for cross border transactions above Rs 5 lakhs as per PML RulesDomestic transfer of Rs fifty thousand and above must include all the information of the originatorNecessary information should be included in the making of payment through debit card or credit cardInter bank transfer and settlement should be excluded from above.
15 Parties Involved in Wire Transfer Ordering BankIntermediary BankBeneficiary Bank
16 Authorized Persons for KYC/AML Principal OfficerDesignated Director
17 Requirements for an Effective KYC Implementation Maintenance of Records of TransactionInformation to be MaintainedMaintenance & Preservation of RecordsReporting to FIU-IND