1.

Know your Customers (KYC), Anti Money

Laundering (AML) and Combating of
Financing of Terrorism (CFT)

1. Preamble
1.1 Banks and other financial institutions are unwittingly used as intermediaries for
the transfer or deposit of funds derived from criminal activity. Criminals and their
associates use the financial system to make payments and transfers of funds from one
account to another, to hide the source and beneficial ownership of money and to provide
storage for bank-notes through a safe deposit facility.

1.2 Money laundering is the process of concealing the illicit origin of proceeds of
crimes. Terrorist financing is the collection or the provision of funds for terrorist purposes.
In the case of money laundering, the funds are always of illicit origin, whereas in the case
of terrorist financing, funds can stem from both legal and illicit sources. The primary goal
of individuals or entities involved in the financing of terrorism is therefore not necessarily
to conceal the sources of the money but to conceal both the funding activity and the
nature of the funded activity.

1.3 Similar methods are used for both money laundering and the financing of
terrorism. In both cases, the actor makes an illegitimate use of the financial sector. The
techniques used to launder money and to finance terrorist activities/terrorism are very
similar and in many instances identical.

1.4 International Community has recognised that Money Laundering poses a serious
threat not only to the financial systems of the countries but also to their integrity and
sovereignty. Concerted efforts are being made world over to fight this crime through
enactment of stringent laws and regulations and adoption of measures to prevent
financial system being used for money laundering.

1.5 There are limits in some countries on their specific responsibility but one cannot
deny that supervisors (like RBI in India) cannot be indifferent to the use made of banks
by criminals. Banking supervisors have a general role to encourage ethical standards of
professional conduct among banks and other financial institutions.

1.6 There had been a number of developments in Anti-Money Laundering (AML) /

Combating of Financing of Terrorism (CFT) Standards and Practices in India such as
enactment of Prevention of Money Laundering Act (PMLA) with effect from 1st July 2005,
Prevention of Money Laundering (Maintenance of Records) Rules, 2005 and establishment
of Financial Intelligence Unit-India (FIU-Ind), as the nodal agency for investigation of and
prosecution for money-laundering offences.

1.7 With India becoming a member of Financial Action Task Force (FATF), a new
requirement has been enjoined on us to revisit the KYC / AML / CFT Standards, so as to
align our Banking Law & Practice in tune with global industry standards and the
recommendations given by FATF.
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1.8 Technological advancements in the banking system enable launderers to move

money across countries much faster. Hence, war against money laundering would be
effective, only if all countries participate in the drive. Know Your Customer (KYC)
guidelines are seen as important tools to ensure that the banking system is not used for
laundering proceeds of criminal activities. KYC norms/guidelines play a very important
role in preventing money laundering and efforts to combat financing of terrorism through
banks.

1.9 In the context of the recommendations made by the Financial Action Task Force
(FATF) on Anti Money Laundering (AML) standards and on Combating Financing of
Terrorism (CFT), RBI / IBA / FIU-IND has specified certain standards based on which our
Bank has formulated a policy on identification and acceptance of customers to have a
business relationship.

1.10 The Policy Document on KYC / AML / CFT Standards shall be reviewed annually
by CO: AML Cell based on guidelines / instructions given by RBI / IBA & FIU -IND from
time to time which provides a broad framework of guidelines to be adopted by our Bank.
Branches shall adopt a watchful and vigilant attitude against money laundering through
banking channels, based on this Board approved Policy guidelines.

1.11 The following four key elements form the basis for an effective KYC Policy of a
Bank:
1.11.1 Customer Acceptance Policy

1.11.2 Customer Identification Procedures

1.11.3 Monitoring of Transactions

1.11.4 Risk management

2. Know Your Customer (KYC) Guidelines

2.1 The objective of KYC / AML / CFT guidelines are -
2.1.1 to prevent Banks from being used, intentionally or unintentionally, by criminal
elements for money laundering or terrorist financing activities, and

2.1.2 to enable banks to know / understand their customers and their financial
dealings better, which in turn, help them manage their risks prudently.

2.2 Know Your Customer is the principle on which the banking system operates to
avoid the pitfalls of operational, legal and reputation risks and consequential losses by
scrupulously adhering to the various procedures laid down for opening and conduct of
accounts.

2.3 Money Laundering

2.3.1 The offence of Money Laundering has been defined in Section 3 of the Prevention
of Money Laundering Act (PMLA) 2002. Money Laundering can be called a process by
which money or other assets obtained as proceeds of crime are exchanged for "clean
money" or other assets with no obvious link to their criminal origins.

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2.3.2 There are three stages of money laundering during which there may be
numerous transactions made, that could alert the Bank to the underlying criminal
activity:-

i. Placement - the physical disposal of cash proceeds derived from illegal activity.

ii. Layering - separating illicit proceeds from their source by creating complex layers
of financial transactions designed to disguise the audit trail and provide anonymity.

iii. Integration - the provision of apparent legitimacy to criminally derived wealth. If

the layering process has succeeded, integration schemes place the laundered proceeds
back into the economy in such a way that they re-enter the financial system appearing to
be normal business funds.

2.4 An effective counter financing of terrorism framework must address all the risk
issues. It must prevent, detect and punish illegal funds entering the financial system and
the funding of terrorist individuals, organisations and / or activities.

2.5 While prudent procedures existed in the banking system for opening of an
account with a bank, these measures have come into greater focus with increased cross
border transactions and the unequivocal acceptance of proceeds of a crime as undesirable
money by the financial system. Thus, the guidelines go beyond merely establishing the
identity of the person and satisfying about his credentials.

2.6 The due diligence expected involves 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. Thus, this
is not a responsibility, which ends with the opening of the account and monitoring of
transactions in the initial few months of opening of the account, as was the practice in
vogue in our country. Ongoing monitoring is an essential element of effective KYC / AML /
CFT procedures.

2.7 Obligation of a Banker to Maintain Secrecy of the Information Received

2.7.1 Branches should treat 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 customers for the purpose of opening of accounts as
confidential and not divulge any details thereof either for cross selling or for any other
purpose.

2.7.2 Branches shall, therefore, should obtain only the ‘mandatory’ information
required for KYC purpose which the customer is obliged to give while opening an account
/ during periodic customer updation and ensure that information sought from the
customer under KYC norms is

i. relevant to the perceived risk

ii. not intrusive

iii. in conformity with the guidelines issued by Corporate Office from time to time in
this regard.

2.7.3 Any other information from the customer should be sought separately with
his/her consent and after opening the account. In other words, seeking additional
‘optional’ information should not be part of the account opening process. The objectives

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should be explained to the customer and his/her express approval should be taken for the
specific uses to which such information could be put.

2.7.4 It should be ensured that the KYC procedure adopted does not lead to denial of
access to the general public for banking services.

2.8 Branches should prepare and maintain documentation on their customer

relationships and transactions to meet the requirements of the Prevention of Money
Laundering Act and other laws and regulations to enable any transaction effected through
them to be reconstructed.

3. Definition of Customer
3.1 For the purpose of KYC policy, a ‘Customer’ is defined as :
3.1.1 a person or entity that maintains an account and/or has a business relationship
with the Bank;

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

3.1.3 beneficiaries of transactions conducted by professional intermediaries, such as

Stock Brokers, Chartered Accountants, Solicitors etc. as permitted under the law, and

3.1.4 any person or entity connected with a financial transaction which can pose
significant reputational or other risks to the Banks, say, a wire transfer or issue of a high
value demand draft as a single transaction

3.2 ‘Beneficial Owner’ -- Rule 9, sub-rule (1A) of PMLA Rules, define Beneficial
Owner as a ‘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.
3.2.1 A juridical person means one who is not a natural person but recognised as a
person in law like a Partnership, Trust, Limited Company etc.

3.2.2 Identification of Beneficial Owner - In case of

i. Client is a Trust

Where the client is a trust, identification of beneficial owner shall include

identification of author (founder) of the trust, the trustee, the beneficiaries with more
than 15% interest in the trust and any other natural person exercising ultimate effective
control over the trust through a chain of control or ownership.

ii. Client other than individual / Trust

a is the natural person, who, whether acting alone or together, or through one or
more juridical person, exercises control through ownership or who ultimately has a
controlling ownership interest.

 Note: Controlling ownership interest means

 More than 25% of shares or capital or profits of the judicial person, where the
judicial person is a company
 More than 15% of capital or profits of the judicial person, where the judicial
person is a partnership

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 More than 15% property or capital or profits of the judicial person where the
judicial person is an unincorporated association or body of individuals.
In case there is a doubt under (a) above as to whether the person with the controlling ownership interest is the beneficial owner or where no
natural person exerts control through ownership interests; the beneficial owner: is the natural person exercising control over the juridical
person through other means. (Explanation: control through other means can be exercised through voting rights, agreement, arrangements
etc.)
b. where no natural person is identified in (a) and (b) above,
the natural person who holds the position of senior managing level.

iii. Company listed on a stock exchange

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

 Examples - Branch is opening an Account for ‘Company A Ltd.’ which is held by some
companies and individual.
Company A Limited

1. Company B Ltd - 50% 2. Company C Ltd - 25% 3. Mr. M -

25%

1a. Company D- 60% 1b. Mr. N - 40% 2a. Company E - 80% 2b. Mr. P - 20%

1a.a. Mr. R - 20% 1a.b. Company F - 80% 2a.a. Company G - 70% 2a.b. Mr. N - 30%

The beneficial owner/s of Company A Ltd. can be ascertained as follows.

1. Share of Mr. M in Company A Ltd. = by straight holding 25%

2. Share of Mr. N through holding company B = 40% of 50% i.e. 20%

3. Share of Mr. P through holding company C = 20% of 25% i.e. 5%

4. Share of Mr. R through holding company D & B = 20% of 60% of 50% i.e. 6 %

5. Share of Mr. N through holding company E & C = 30% of 80% of 25% i.e. 6%

Among M/s M, N, P and R, Mr. N is holding a total of 26% (20 + 6) in Company A through
holding companies. Since N’s holding is 26% which is more than the stipulated 25%, he is the
Beneficial Owner for Company A Ltd. though he is not directly holding any share in company A Ltd.

Example-2: We give below the share holding pattern of a ‘Company BCD Ltd.’
1. Share of Mr. B - Director = 10%

2. Share of Mr. C - Director = 15%

3. Share of Mr. D - Director = 15%

4. Share of Mr. E - Managing Director = 40%

5. Share of Mr. F = 20% (Mr. F is not a Director)

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In this case,

The personal CIF of M/s B, C, D & E will be linked to the Non-personal CIF of the
Company BCD Ltd. as Directors and

The personal CIF of Mr. E, by virtue of holding more than 25% of capital, will be
linked to the Non-personal CIF of the Company BCD Ltd. as ‘Beneficial Owner’ also. (In
effect Personal CIF of Mr. E need to be linked to the Non-personal CIF of the company in
both the capacities as Director and Beneficial Owner)

Example-3: We give below the profit sharing pattern of ‘Partnership firm XYZ’
1. Profit Share of Mr. X, Partner = 70%

2. Profit Share of Mr. Y, Partner = 20%

3. Profit Share of Mr. Z, Partner = 10%

In this case, Mr. X and Mr. Y, by virtue of sharing more than 15 % of the Profits,
are to be treated as "Beneficial Owners". Hence their Personal CIF is to be linked with the
Non-personal CIF of the Partnership XYZ as ‘Beneficial Owner’ also through the
relationship menu (In effect Personal CIFs of M/s X & Y need to be linked to the Non
personal CIF of the partnership in both the capacities as Partner and Beneficial Owner/s)

3.2.3 Format for submission of beneficial ownership by customers, to the Bank, is

given as Annexure 1.1.

4. Customer Acceptance
4.1 Before commencing a business relationship with a prospective customer, the
branches have to ensure that such a relationship does not, in any way, go against the
Bank’s Customer Acceptance Policy which is based on two principles namely-
4.1.1 No account is opened (or kept) in anonymous or fictitious / benami name(s),
where customer identity has not been disclosed or cannot be verified.

4.1.2 Documentation and / or other information requirements are 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 by Reserve
Bank of India / Financial Intelligence Unit / Government of India etc from time to time.

4.1.3 No account shall be opened where the bank is unable to apply appropriate
customer due diligence (CDD) measures, either due to non cooperation of the customer
or non reliability of the data / information furnished by the customer.

4.1.4 CDD procedure is to be followed for all the joint account holders, while opening a
joint account.

4.1.5 No transaction or account based relationship shall be undertaken without

following the CDD procedure.

4.1.6 Circumstances, in which a customer is permitted to act on behalf of another

person / entity, must be in conformity with the established law and practice of banking as

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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.

4.1.7 Before opening a new account branches should 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.

5. Customer Identification Procedures

5.1 Parameters of risk perception: ‘Customer risk’ in the present context refers to the
money laundering and terrorist funding risk associated with a particular customer from a
bank’s perspective. This risk is based on the risk perceptions associated with the
parameters comprising a customer’s profile, and the level of risk associated with the
product and channels being used by him.

5.2 Customer identification means identifying the customer and verifying his/her
identity by using reliable, independent source of documents, data or information.

5.3 Customer Identification Procedure should be carried out at the following different
stages:
5.3.1 while establishing a banking relationship

5.3.2 while carrying out a financial transaction for a non-account based customer
(walk-in customer) where the amount equal to or exceeding ` 50,000/- whether
conducted as a single transaction or several transaction that appear to be connected

5.3.3 Selling third party products as agents, selling bank’s own products, payment of
dues of credit cards/sale and reloading of prepaid/travel cards and any other product for
more than rupees fifty thousand.

5.3.4 any international money transfer operations &

5.3.5 when the bank has a doubt about the authenticity / veracity or the adequacy of
the previously obtained customer identification data.

5.4 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 Bank 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
the Bank and a burdensome regime for the customers.

5.5 Due Diligence can be defined as any measure undertaken to collect and verify
information and positively establish the identity of a customer. While Basic Due Diligence
Measures may be adequate for low risk customers, additional / enhanced due diligence
measures are required to be taken for all the High/Medium Risk customers of a bank - by
way of obtaining additional documents at the time of account opening as well as
enhanced levels of transaction monitoring in the account subsequently.

5.6 Besides risk perception, the nature of information / documents required would
also depend on the type of customer (individual, corporate etc.)

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5.7 For customers who are natural persons, branches should obtain sufficient
identification data to verify the Identity of the customer, Address / location, and also
Recent photograph.

5.8 For customers that are legal persons or entities, branches should verify
5.8.1 their legal status through proper and relevant documents;

5.8.2 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 and understand the
ownership and control structure of the customer and determine who are the natural
persons who ultimately control the legal person.

5.9 With a view to avoid undue hardships to individuals who are, otherwise,
classified as low risk customers who live with their relatives (e.g. wife, son, daughter and
parents etc. who live with their husband, father / mother and son), branches can obtain
an identity document of the prospective customer along with the officially valid document
of the relative with whom the prospective customer is living. Branches should also obtain
a declaration from the relative that the said person (prospective customer) wanting to
open an account is a relative and is staying with him/her. Branches can use any
supplementary evidence such as a letter received through post for further verification of
the address.

5.10 In case of persons who change their names on account of marriage or otherwise,
Branches can obtain a copy of the marriage certificate issued by the State Government or
Gazette notification indicating change in name together with a certified copy of the
‘officially valid document’ in the existing name of the person, as proof address and
identity, while establishing an account based relationship or while undertaking periodic
updation exercise.

5.11 The Prevention of Money Laundering (Maintenance of Records) Rules, 2005 has
been further amended, vide Gazette Notification dated 1st June, 2017, where banks
have to obtain
5.11.1 Aadhaar number or proof of application of enrolment for Aadhaar and

5.11.2 Permanent Account Number (PAN) or Form No.60 as per Income Tax Rules,1962
from customers desiring to open bank accounts.

5.11.3 Accordingly, all individuals who are eligible to be enrolled for Aadhaar should
submit Aadhaar Number or proof of enrolment for Aadhaar and PAN or Form 60 for
opening of bank accounts.

5.11.4 In the case of non-personal customers, persons who are having an attorney to
transact on behalf of the entities and are eligible to be enrolled for Aadhaar should
submit the Aadhaar Number or proof of application of enrolment for Aadhaar and PAN or
Form 60.
5.12 Where an Aadhaar Number is not assigned to a customer, he should furnish
proof of application of enrolment for Aadhaar and in case the Permanent Account Number
is not submitted, one Certified copy of an Officially Valid Document should be submitted,
in addition to Form 60.
5.12.1 Where the customer (individual or any person who has an attorney to transact
on behalf of entities), who is not eligible to be enrolled for an Aadhaar Number, he should

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submit PAN or Form 60 as defined in the Income Tax Rules,. 1962. If the customer does
not submit the PAN, he should submit one certified copy of the Officially Valid Document
containing details of his identity and address, one recent photograph and such other
documents in respect of the nature of business and financial status of the customer.

5.12.2 Non-Residents and Residents in Jammu & Kashmir, Assam, Meghalaya: In case
the customer is a non-resident or is a resident in the States of Jammu and Kashmir,
Assam or Meghalaya and does not submit the PAN, the customer should submit one
certified copy of the Officially Valid Document containing details of his identity and
address, one recent photograph and such other document in respect of nature of business
and financial status of the customer.

5.12.3 In case the customer who is eligible to be enrolled for Aadhaar and to obtain
PAN, does not submit the Aadhaar number and the PAN at the time of commencement of
an account based relationship, the customer should submit Aadhaar number and PAN
within a period of six months from the date of commencement of the account based
relationship, failing which the account shall cease to be operational till the time the
Aadhaar and PAN is submitted by the client.
5.13 At the time of receipt of the Aadhaar number, branches should undertake the
authentication of such Aadhaar with Unique Identification authority of India, through
menu provided by the Information Technology Department.
5.14 In case the Aadhaar submitted by the customer does not have the current
address of the customer, he can submit an officially valid document for proof of address.
5.15 As per Supreme Court judgement dated 26.09.2018, Aadhaar is mandatory only
for DBT beneficiaries who are availing subsidies/benefits/services covered by Section 7 of
the Aadhaar Act, and Banks are entitled to seek authentication of these beneficiaries for
the purpose of transfer of any monetary subsidy or benefit to the Bank account.
Branches can open accounts with other KYC documents also as enumerated in KYC/AML
guidelines.

6. Risk Categorisation

6.1.1 Customer Profile To achieve the objectives of the KYC framework i.e., to
ensure appropriate customer identification and monitor transactions of suspicious nature,
branches should obtain all information necessary to establish the identity/legal existence
of each new customer, based preferably on the disclosures by customers themselves.

6.1.2 Branches should prepare a profile for each new customer based on risk
categorisation. A format of the Customer Profile is given in Annexure 1.2. The customer
profile contains information relating to customer’s social/financial status, nature of
business activity, information about his clients’ business and their location, etc.
6.1.3 The nature and extent of due diligence will depend on the risk perceived by the
branch. However, while preparing customer profile, branches should take care to seek
only such information from the customer which is relevant to the risk category and is not
intrusive. The customer profile will be a confidential document and details contained
therein shall not be divulged for cross selling or for any other purposes.

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6.1.4 Customer Risk Profiling should be done and customers are to be categorized into
low, medium and high risk based on defined parameters of risk perception as briefly
outlined below:

i. Customer constitution: Individual, proprietorship, partnership, private limited

etc.

ii. Business segment: Retail, Corporate etc.

iii. Country of Residence/Nationality: Whether India or any overseas location /

Indian or foreign national

iv. Product Subscription: Salary account, NRI Products etc.

v. Economic profile: High Net worth Individual (HNI), Public Limited Company etc.

vi. Account Status: Active, inoperative, dormant

vii. Account vintage: less than six months old etc.

viii. Presence in regulatory negative / PEP / defaulter / Fraudster list

ix. Suspicious Transaction Reports (STR) filed for the customer

x. AML Alerts

6.1.5 The Highest of the Risk Categorization arrived, based on the above has to be
assigned to the Customer.

6.1.6 Procedure for risk based classification of customers is given as Annexure 1.3.

6.2 High Risk Category

6.2.1 Customers who are likely to pose a higher than average risk to the bank may be
categorized as High Risk or Medium Risk depending on customer’s background, nature
and location of activity, country of origin, sources of funds income / turnover levels and
his client profile etc.

6.2.2 The indicative list of customers in High Risk Category requiring higher due
diligence include

i. Politically Exposed Persons (PEPs) of foreign origin, customers who are close
relatives of PEPs and accounts in which a PEP is the ultimate beneficial owner

ii. Non-resident customers / foreigners based in high risk countries / jurisdictions or

locations

iii. High net worth individuals

iv. Private trusts, charities, unregulated clubs / organizations & NGOs receiving
donations (excluding NPOs / NGOs promoted by United Nations or its agencies)

v. Companies having close family shareholding or beneficial ownership / firms with

‘sleeping partners’

vi. Non-face to face customers

vii. Those with dubious reputation as per public information available Customers
engaged as Dealers in Art / Antique Goods, Bullion, Jewellery & Precious Metals, Arms /
Ammunition & Real Estate.

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viii. Multi level marketing companies & Money Services Bureau etc.

ix. Especially those for whom the sources of funds are not clear and obtain
information on the customer beyond documentary evidence such as information on net
worth, intended business activity in case of NRI customers etc.

6.2.3 Besides obtaining higher level of approvals for opening such accounts, branches
should also take up verification of customer information with independent data sources.

6.2.4 Indicative list of High Risk Countries are given as Annexure No.1.4.

6.3 Medium Risk Category

6.3.1 Indicative list of customers in Medium Risk Category include

i. Non-resident customers / foreigners based in other than high risk countries /

jurisdictions or locations

ii. Public Trusts

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

iv. Travel agency etc.

6.3.2 Indicative list of High / Medium Risk Customers / Products & Services as per
guidelines given by IBA Working Group is given in Annexure 1.5.

6.4 Low Risk Category

6.4.1 Customers both individuals 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 categorized as low risk.

6.4.2 Indicative list of low risk customers could be

i. Salaried employees / Pensioners, whose salary structures are well defined,

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

iii. Government departments & Government owned companies,

iv. Regulators, and statutory bodies etc.

v. Customers who are employment-based or with regular source of Income from a

known source which supports the activity being undertaken

vi. Customers who are Pensioners or recipients of such benefits

vii. Customers whose income originates from their partner’s employment

viii. Customers with long-term and active business relationship with the Bank etc

6.4.3 In Low Risk Accounts, branches shall verify only the basic requirements of
identity and location of the customer. All borrowal customers where due diligence is done
at the time of granting the facilities will also fall under the low risk category except
borrowal accounts having dealings with High / Medium risk countries which need to be
classified accordingly.

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6.5 Turnover / Income Criteria for Customer Risk Categorisation

6.5.1 Besides the above parameters for Risk Categorisation (viz. Constitution /
Domicile of the Customer / Product / Services availed), the Credit Summations
(Turnover) in the Account in a year representing the Gross Income/Turnover of the
constituent should be adopted as one of the criteria for customer Risk Categorization.
Customers, in whose account the aggregate credits to the account fall within the range
as specified hereunder, are to be classified accordingly:

Customer Type / Low Risk - Annual Income Medium Risk - Annual Income / High Risk - Annual Income /
Constitution / Turn Over Turn Over Turn Over

Individuals Clubs & Upto and inclusive of Above ` 10 lakhs & (below) Above ` 50 lakhs
Associations ` 10 lakhs Upto and inclusive of ` 50
lakhs

Sole Proprietary Upto and inclusive of Above ` 1 Crore & (below) Above ` 5 Crores
concerns ` 1 Crore Upto and inclusive of ` 5
Crores

Partnership firms Upto and inclusive of Above ` 5 Crores & (below) Above ` 10 Crores
` 5 Crores Upto and inclusive of ` 10
Crores

Limited Cos. (Public & Upto and inclusive of Above ` 10 Crores & Above ` 50 Crores
private) ` 10 Crores (below) Upto and inclusive
of ` 50 Crores

6.5.2 Trusts (Private Trusts)-High Risk:

All accounts irrespective of their income / receipts / turn over - to be classified as High
Risk.

6.5.3 Trusts (Public Trusts)-Medium Risk:

All accounts irrespective of their income / receipts / turn over - to be classified as

Medium Risk.

6.5.4 All Government accounts irrespective of the turnover in the accounts are
classified as Low Risk.

7. Customer Identification for Individuals and entities

7.1 The list of documents to be obtained for various types of customers is given in
Annexure 1.6.

7.2 Original documents should be produced for verification and copy, duly attested
by the official concerned after due verification regarding validity etc. should be kept
along with the account opening form

7.3 When the aforesaid documents are accepted as the basis for opening the Savings
Bank or a Term Deposit account in the name of the holder of such document(s), the
officer authorising the opening of such account must
7.3.1 verify that the documents are prima facie in order and valid

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7.3.2 ensure that the signature of the applicant and other particulars given in the
application form are tallying with the signature and other particulars recorded in the
Identity Documents and appearance of the applicant broadly matches with the
photograph on the identity Documents.
7.3.3 note all the relevant particulars such as reference number, authority, date and
place of issue, etc. as given in the passport, voter’s identity card, driving License, etc., in
the account opening form.
7.3.4 authenticate the photocopies of the documents and keep the records along with
the account opening form & certify the documents with reference to the originals.
7.3.5 incorporate the data in the system appropriately & validate the ids with tools
available in the system.
7.4 In case of joint account and applicants who are not close relatives branches
should obtain necessary proof of documents independently, establishing their identity
and address.

7.5 Branches should not accept incomplete address or address with "Care of
……….................……." without due enquiry.

7.6 For High Risk customers, branches should ensure Enhanced Due Diligence.

7.7 For customers that are legal persons or entities (i.e., other than individuals),
branches should
7.7.1 verify the legal status of the legal person/entity through proper and relevant
documents

7.7.2 verify that any person(s) purporting to act on behalf of the legal person/entity is
duly authorized and such person(s) is/are properly identified by calling for documents
(as listed above for individual low risk customers) and verify the identity of that
person(s)

7.7.3 Understand the ownership and control structure of the customer and determine
who are the natural persons who ultimately control the legal person.

7.8 Updating the data on KYC

7.8.1 "KYC updation’’ is a process of customer identification and consequent re-
affirmation of his identity using reliable, independent source documents, data or
information available

7.8.2 As per RBI Guidelines branches should periodically update customer

identification data after the account is opened.

7.8.3 Branches should perform the due diligence process 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 of the client, his business and risk profile and,
wherever necessary, the source of funds.

7.8.4 Full KYC exercise shall be required to be done at least every TEN Years for Low
Risk and at least every EIGHT Years for Medium Risk individuals and entities.

7.8.5 Full KYC exercise shall be required to be done at least every TWO years for High
Risk individuals and entities.

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Deposits

7.8.6 Fresh photographs shall be required to be obtained from minor customer on

becoming major.

7.8.7 Transactions in Dormant / Inoperative Accounts can be permitted only after KYC
Updation is completed and marked in the system.

7.8.8 Branches should update the KYC data of the customers by contacting the
customers through various means such as letters, e-mails, SMS, phone, etc., asking them
to furnish their KYC documents afresh. Adequate Public Notice regarding KYC Updation
requirement and customer obligation to fulfill the same shall be placed in Bank’s website,
Branch Premises and Newspapers.

7.8.9 All individuals should mandatorily submit

1. Aadhaar Number –in case of DBT beneficiaries

2. Permanent Account Number / Form 60 as per Income Tax Rules.

7.8.10 Exemptions

i. Accounts where information is available in Public Domain: Central, State & Public
Sector Undertakings / Corporations and Accounts of some publicly known entities like
listed companies.

ii. Non-transactional liability products like term deposits.

iii. Restricted value accounts like the Small Accounts/No Frill Accounts in view of in-
built safeguards provided in the system.

iv. In Pensioner Accounts the date of latest Life Certificate can be considered for
KYC Updation.

v. Non-transactional Asset products like home loans, personal loans, etc. having a
pre-determined cash flow (EMI) which carry low AML risk and where a higher level of due
diligence has been conducted at the time of credit exposure.

vi. Standard Asset products like Cash Credit, Overdrafts, and Credit Cards, which
are subject to periodic review/renewal where KYC updation may be treated as a part of
the review/ renewal exercise.

vii. The date of opening of New accounts with the existing CIF of the Customer can
be considered as KYC Updating. While opening such new accounts under an existing CIF,
Branches are advised to re-visit the existing KYC Compliance.

8. Typical type of accounts requiring extra element of caution

8.1 Walk-in Customers
8.1.1 A walk-in customer, (non-account based customer) where the amount of
transaction is equal to or exceeds ‘. 50,000/- (Rupees fifty thousand only), whether
conducted as a single transaction or several transactions that appear to be connected.

i. The customer’s identity should be verified

ii. The customer’s address should be verified

iii. However, if a bank has reason to believe that a customer is intentionally

structuring a transaction into a series of transactions below the threshold of ‘. 50000/-,

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 KYC/ AML/ CFT

branch should verify the identity and address of customer and also may consider filing a
Suspicious Transaction Report (STR) to FIU-IND.

8.1.2 Identity and address of walk in customers should be verified where cash
transactions of ‘.50000 or above in sale of insurance products / third party products /
gold coins / issue of Demand Drafts etc., In all such cases PAN Number / Form 60 should
also be obtained.

8.1.3 Branches should properly maintain records related to transactions of walk-in

customers.

8.1.4 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 should follow the instructions given below:

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

ii. Also maintain transaction details with regard to sale of third party products and
related records for a period and in the manner prescribed by Reserve Bank of India.

iii. The instructions to make payment by debit to customers’ accounts or against

cheques for remittance of funds / issue of travelers’ cheques, sale of gold / silver /
platinum and requirement of quoting PAN number for transactions of ‘. 50000 and above,
would also be applicable to sale of third party products by banks as agents to customers,
including walk-in customers.

8.1.5 The above instructions in respect of third party products 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 above the threshold of ‘. 50000 and above.

9. KYC for Walk-in Customers for various types of transactions.

9.1 The Application/Challan for all types of transactions by walk-in customers
irrespective of the amount should be filled with full details such as Name, Address,
Telephone Number, etc. of the applicant.

9.2 Branches should obtain KYC documents for walk-in customers for the following
types of transactions.
Nature of Transaction KYC compliance requirement

Remittances such as Demand draft/ NEFT / Copy of any one of the Officially Valid
BPO etc above Rs.20,000/- Documents furnished in Table-1 OR if the
customer is unable to produce any OVD,
Application must be filled up with proper
then copy of any one of the documents
details such as name, address, and
furnished in Table-2, to be obtained for the
telephone number etc of the applicant.
proof of identity of the walk-in customer.

Cash deposits above Rs.20, 000/- into Copy of any one of the Officially Valid
accounts by third parties i.e. persons other Documents furnished in Table-1 OR if the
than Account holder or employee/ Partner/ customer is unable to produce any OVD,
then copy of any one of the documents

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Deposits

Director/ Trustee etc in case of entities. furnished in Table-2, to be obtained for the
proof of identity of the walk-in customer.
Deposit challan must be filled up with
proper details such as name, address, and
telephone number etc of the person
depositing cash.

Payment of an un-crossed instrument Copy of any one of the documents specified

payable to bearer where the amount is in Table-1: Officially Valid documents OR
Rs.50,000/- and above Table-2: Documents other than OVD under
relaxed norms, to be obtained for the proof
Name, Address, telephone number,
of identity of the walk-in customer.
signature etc of the person receiving cash is
to be obtained on the reverse of the
instrument.

Payment of an un-crossed instrument Copy of any one of the Officially Valid

payable to Order irrespective of the amount Documents as per Table-1 OR if the
customer is unable to produce any OVD,
Name, Address, telephone number,
then any one of the documents furnished in
signature etc of the person receiving cash is
Table-2, to be obtained for the proof of
to be obtained on the reverse of the
identity of the walk-in customer.
instrument.

Sale of Bank’s own products, Gold / Silver / Copy of any one of the Officially Valid
Platinum or third party products / insurance Documents as per Table-1 OR if the
products against cash and remittance of customer is unable to produce any OVD,
dues of Credit cards / prepaid travel cards then any one of the documents furnished in
etc by cash irrespective of the amount. Table-2, to be obtained for the proof of
Application must be filled up with identity of the walk-in customer.
proper details such as name, address, and
telephone number etc of the applicant.

9.3 Walk-in customers of all other categories.

9.3.1 Any person or entity connected with a financial / Non-financial transaction which
can pose significant reputational or other risk to the bank, KYC compliance is mandatory
for such persons.

9.3.2 Any person or entity connected with a financial or Non-financial transaction

which can pose significant reputational or other risk to the bank irrespective of the
amount involved.

 For example: Guarantor, Surety, Indemnifier, Awardees of Contracts / Work Orders,

Claimants of Deposits / Assets / Actionable Claims / Estates / Contents of Locker /
Pledged items / Valuables etc.
 Note: For nominees, KYC need to be insisted only when claim is made.
 Branch Manager / the relevant authority has to ensure that proper details such as name,
address, telephone number etc of the individual or entity concerned are obtained and recorded.
9.3.3 For the proof of identity of the walk-in customer, Copy of any one of the Officially
Valid Documents as per Table-1 OR if the customer is unable to produce any OVD, then
any one of the documents furnished in Table-2, to be obtained:

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 KYC/ AML/ CFT

i. Table-1:

List of Officially Valid Documents (OVD) for Individuals as per PML Act, 2002

1) Passport,

2) Driving license,

3) Proof of Possession of Aadhaar Number*

4) Voter’s Identity Card issued by Election Commission of India,

5) Job card issued by NREGA duly signed by an officer of the State Government,

6) Letter issued by the National Population Register containing details of name,

address.

* Whether Proof of possession of Aadhaar is taken as OVD, it should be

submitted in such form as issued by Unique Idenditification Authority of Indian (UIDAI).

In case of non-DBT beneficiaries, Banks can rely on certified copy of any of the
OVDs, as defined in RBI Master Direction on KYC, along with PAN/Form 60, for
establishment of account based relationship. In order to establish the identity, an
individual who is Aadhaar number holder but not DBT beneficiary may voluntarily submit
his /her proof of possession of Aadhaar as an OVD. In this case it should be ensured that
the client redacts or black out the Aadhaar number through appropriate means in the
document.

ii. In case the identity information relating to the Aadhaar number submitted by the
customer does not have current address, the customer can submit any of the six OVDs
mentioned in Table 1 above.

“Provided that in case the OVD furnished by the customer does not contain updated
address, the following documents shall be deemed to be OVDs for the limited purpose of
proof of address:-

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

iv. letter of allotment of accommodation from employer issued by State Government

or Central Government Departments, statutory or regulatory bodies, public sector
undertakings, scheduled commercial banks, financial institutions and listed
companies and leave and licence agreements with such employers allotting official
accommodation;

The customer should submit Aadhaar or OVD updated with current address within a
period of three months

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Deposits

9.3.4 Due diligence may be applied by the person/s originating / authorising the
transaction to ensure identity of the walk-in customer, without causing harassment to the
person concerned.

9.4 Trust/Nominee or Fiduciary Accounts

9.4.1 There exists the possibility that trust/nominee or fiduciary accounts can be used
to circumvent the customer identification procedures.

9.4.2 Branches should determine 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.

9.4.3 While opening an account for a trust, branches should take reasonable
precautions to verify the identity of the trustees and the settlers of trust (including any
person settling assets into the trust), grantors, protectors, beneficiaries and signatories.

9.4.4 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.

9.5 Accounts of Salaried employees

9.5.1 Branches shall open accounts of salaried employees on production of
certificates/letter of identity and/or address issued only from corporates and other
entities of repute by the competent authority designated by the concerned employer to
issue such certificate/letter.

9.5.2 In addition to the above, branches should insist on KYC documents as applicable
to individual customers given in Annexure 1.6.

9.6 Accounts of companies and firms

9.6.1 Branches should be vigilant against business entities being used by individuals
as a ‘front’ for maintaining accounts with the Bank.

9.6.2 Branches should examine its control structure, 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.

9.6.3 Certain firms posing as Multi Level Marketing (MLM) agencies for consumer
goods and services have been mobilizing large deposits from the public (with promise of
high return) by opening accounts at various bank branches. These funds running into
crores of rupees were being pooled at the principal accounts of the MLM Firms and were
eventually flowing out of the accounts for purpose appearing illegal or highly risky. Hence
while opening agency accounts in the name of proprietary concerns, utmost customer
due diligence should be undertaken.

9.7 Client accounts opened by professional intermediaries

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 KYC/ AML/ CFT

9.7.1 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.

9.7.2 Branches may hold ‘pooled’ accounts managed by

i. professional intermediaries on behalf of entities like mutual funds, pension funds

or other types of funds and

ii. Lawyers / chartered accountants or stockbrokers for funds held ‘on deposit’ or ‘in
escrow’ for a range of clients.

9.7.3 Where funds held by the intermediaries are not co-mingled at the branches and
there are ‘sub-accounts’, each of them attributable to a beneficial owner, all the
beneficial owners must be identified.

9.7.4 Where such funds are co-mingled at the branches, the Branches should still look
through to the beneficial owners.

9.7.5 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.

9.7.6 It should be noted that the ultimate responsibility for knowing the customer lies
with the Branches.

9.7.7 Branches should not allow opening and / or holding of an account on behalf of
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 the customer confidentiality.

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

9.8.1 Politically exposed persons are individuals who are or have been entrusted with
prominent public position 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. Persons of foreign origin /
diplomatic missions, such as the one listed above, located in India and Persons holding
prominent position in multilateral agencies such as United Nations, World Bank, etc., can
also be construed as PEPs.

9.8.2 PEPs are to be classified as High Risk Customers by the Bank.

9.8.3 Branches should gather sufficient information on any person/customer of this

category intending to establish a relationship and check all the information available on
the person in the public domain. Branches should verify the identity of the person and
seek information about the sources of funds before accepting the PEP as a customer.

9.8.4 An account for PEP and/or the family members/close relatives of PEPs should be
opened only after getting approval from the Zonal Manager. In the event of an existing
customer or beneficial owner of an existing account, subsequently becoming a PEP,
branch should obtain the approval of the respective Zonal Manager to continue the
business relationship and subject the account to the enhanced due diligence measures.

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Deposits

9.8.5 Branches should also subject such accounts, including those where PEP is the
beneficial owner, to enhanced monitoring on ongoing basis. The above norms may also
be applied to the accounts of family members or close relatives of PEPs.

9.8.6 Further, Bank shall have appropriate ongoing risk management procedure for
identifying and applying enhanced Customer Due Diligence for accounts of PEPs,
customers who are close relatives of PEPs, and accounts of which a PEP is the ultimate
beneficial owner.

9.9 Accounts of non-face-to-face customers

9.9.1 With the introduction of telephone and electronic Banking, increasingly accounts
are being opened by Banks for customers without the need for the customer to visit the
branches.

9.9.2 In the case of non-face-to-face customers, apart from applying the usual
customer identification procedures, branches shall apply specific and adequate
procedures to mitigate the higher risk involved.

9.9.3 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.

9.9.4 In the case of cross-border customers, there is the additional difficulty of

matching the customer with the documentation and the Branches 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.

9.10 Accounts of Migratory workers

9.10.1 The instructions issued by the Govt. for opening of accounts of the migratory
workers for the branches should be strictly followed which are as under:

i. A migratory worker may visit any branch of the bank, servicing the area of his /
her permanent residence for opening a bank account.

ii. The branch shall open his / her account on self-certification basis, or on
introduction basis, and /or on the basis of the documents made available by the
individual including a proof of permanent place of residence, as the case may be, and
allow operation immediately.

iii. The branch at the time of opening such an account may get the details / proof of
permanent place of residence verified through an ‘on-line’ communication to the branch
of the bank servicing the area of permanent domicile of the customer, within 30 days of
opening of an account, within which the customer may be allowed operations as
permissible for ‘small account’ to enable him/her to meet basic day-to-day requirements
of funds.

9.10.2 On receipt of ‘On-line’ verification of documents, the bank branch shall allow full
operational facilities in the account, which are available to a normal account.

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 KYC/ AML/ CFT

9.11 Small Account

9.11.1 The simplest procedure to open a bank account is for a "Small Account". All
customers who for any reason cannot fulfill the stringent KYC requirements laid down by
RBI should be allowed to open such an account. These accounts can be opened with a
Self-attested photograph and the prospective account holder has to sign in the presence
of the Bank officer in the account opening form and the Bank officer has to certify to that
effect.

9.11.2 The small accounts have the following limitations:

i. The aggregate of all credits in a financial year cannot exceed Rs.1.00 lakh,

ii. The aggregate to all withdrawals and transfers in a month cannot exceed Rs.10,
000/-,

iii. The balance at any point of time cannot exceed Rs.50, 000/-,

iv. Foreign remittances are not allowed in the account. However, transfer
transactions are permitted subject to verification of the special report pushed by Project
Office for the genuineness of the transaction, if otherwise; branches should seek
necessary clarification from the account holder.

9.11.3 Small accounts shall remain operational initially for a period of 12 months and
thereafter for a further period of 12 months if the holder of such an account provides
evidence to the bank for having applied for any of the officially valid documents within 12
months of the opening of the account with the entire relaxation provisions to be reviewed
in respect of the account after 24 months.

9.11.4 Any violation of the stipulations mentioned above will result in restraining the
operations in the account after giving due notice to the account holder.

9.11.5 A ‘Small Account’ can be converted into a regular account as soon as the normal
requirements for full KYC are fulfilled.

9.11.6 A small account shall be monitored and when there is suspicion of money
laundering or financing of terrorism or other high risk scenarios, the identity of customer
shall be established through production of ‘officially valid documents’ and the Aadhaar
Number of the customer. Where an Aadhaar number has not been assigned to the
customer, he should submit proof of application of enrolment for Aadhaar along with an
officially valid document.

9.12 Other Guidelines

9.12.1 Branches should not open an account or should close an existing account where
the bank is unable to apply appropriate customer due diligence measures -- i.e. in
instances, where, due to non cooperation of the customer or non reliability of the data /
information furnished or the bank is unable to verify the identity of the client or obtain
the documents required as per the risk categorization. However with a view to avoid
harassment to the customer, the decision to close an account should be taken at the
level of the Zonal Manager, after giving due notice to the customer explaining the
reasons for such a decision.

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Deposits

10. Guidelines for opening new accounts

10.1 Opening of an account amounts to a contract between the Bank and the
Customer, in which the parties assume certain obligations and become entitled to certain
legally enforceable rights. Hence, branches should ascertain whether a prospective
customer has contractual capacity and whether any restriction is imposed by law on his /
her the contractual capacity before opening an account.

10.2 The prospective account holder should normally be required to fill in the account
opening form in the presence of branch official. This means for opening an account, the
customer should come to branches in person and the account should not be normally
opened without a meeting between the Bank official and the customer.

10.3 In the case of a prospective customer who is a corporate or large borrower

enjoying credit facilities from more than one Bank, branches should carry out due
diligence while opening the account. Bank should inform the fact of opening of account to
the consortium leader, if the account is under consortium, or the banks concerned, if it is
under multiple banking arrangement.

10.4 Bank may open current accounts of prospective customers in case no response is
received from the existing bankers after a minimum waiting period of a fortnight. If a
response is received within a fortnight, branches should assess the situation with
reference to the information provided by the Bank concerned on the prospective
customer. Branches are not required to solicit a formal "No Objection" certificate from the
existing bankers consistent with the true freedom to the customer of Banks as well as
needed due diligence by the Bank on the customer.

10.5 Whenever references are received from other Banks for opening accounts with
them for our customers, it should be attended to immediately and our reply should be
sent within a week from the date of receipt of letter. Proper records should be maintained
for having sent our reply for future reference.

10.6 In respect of transfer of current accounts from other banks care should be taken
to see that undesirable accounts are not transferred to us. It is advisable in such cases to
refer to those Banks from whom the accounts are being transferred. Where the account is
being transferred at the solicitation of our Branches, such a reference may be
unnecessary.

10.7 Whenever an employee of another Bank / branch opens an account, a reference

should be made to the employer Bank / branch informing them the fact of opening of the
account.

10.8 New accounts should be opened only with cash. In special cases (e.g., NRI, Govt.
accounts, etc.) cheques on our Bank drawn in favour of the prospective customer may be
accepted for opening the account. No account should be opened with cheques in favour of
some third party and endorsed in favour of the prospective customer.

10.9 If business or residential address of the prospective account holder is outside the
area of operation of the branch or if the introducer is an account holder of another
branch, proper enquiries should be made about the reason for opening of the account and
without verifying the genuineness of the signature of the introducer, no cheque book

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 KYC/ AML/ CFT

should be issued. The Branch Manager has to make more enquiries than usual to test the
credentials of the prospective customer before allowing to open the account.

10.10 KYC once done by one branch of the bank should be valid for transfer of the
account within the bank as long as full KYC had been done for the concerned account.

10.11 Creation of Non-personal CIF

10.11.1 While opening an account for an Association/ Trust/ Partnership Firm/ Company
etc., branches should collect the Account opening form along with all the required KYC
documents for the firm and also for the persons involved viz. registration certificate, PAN
/ address proof of the firm and persons involved etc.,

10.11.2 Branches should obtain the details of entitlements/ share holding/ ownership/
profit sharing/ interest pattern etc. from the entity customers and identify the Beneficial
Owners of the Firm.

10.11.3 Branches should create Non-personal CIF for the firm and personal CIF for all the
persons identified as Sole Proprietor, Beneficial Owners etc.

10.11.4 Thereafter, they should create relationship between the Personal CIF and Non-
personnel CIF in their respective capacity.

10.12 Shifting / Transfer of an Account

10.12.1 Branches may transfer existing accounts from the transferor branch to the
transferee branch without insisting a fresh proof of address and on the basis of a self
declaration from the account holder about his/her current address.

10.12.2 Branches may accept rent agreement duly registered with state Government or
similar registration authority indicating the address of the customer, in addition to other
documents listed as proof of address.

10.13 Obtention of Photographs

10.13.1 Two copies of latest passport size photographs should be obtained from all
account holders opening deposit accounts such as SB, Current account, Fixed Deposit,
RD, MMD, etc. One copy of the photograph obtained should be kept along with the
opening form after obtaining the depositors signature, name and account number on the
reverse of the photograph duly attested by the Officer. The second copy (with the same
details marked therein) should be kept along with the specimen signature card/in a
separate cover. All categories of depositors including non-residents are covered by the
above provisions.

10.13.2 Photographs should be obtained at the time of opening the accounts from the
following type of accounts as follows:

Type of account Photographs to be obtained from

For individuals/Joint Accounts All parties to the account

Partnership firms All Partners

Limited Companies All Directors

Clubs, Associations, Trustees, HUF All members of Managing Committee

1.23
Deposits

10.13.3 Exemption from obtaining photographs.

i. For Accounts of Banks, Government Departments and Local Bodies, the

photographs need not be insisted.

ii. Photograph need not be obtained for accounts of employees of the Bank and for
Term deposits of ` 10,000/- and below.

iii. Photographs need not be returned at the time of closure of the account and they
need to be retained along with other records.

iv. For any waiver of the condition for obtaining photographs from all the
Partners/Directors/Members etc, approval should be obtained from the respective Zonal
Managers.

v. However in such cases the basic guidelines of obtaining photographs from all the
‘authorised signatories’ who are authorised to operate the account are to be followed.

10.14 Introduction
10.14.1 Before implementation of the system of document-based verification of identity,
as laid down in PML Act/Rules, introduction from an existing customer of the bank was
considered necessary for opening of bank accounts. Now that, since the document based
introduction is made mandatory for opening accounts under PML Act/ Rules/ Reserve
Bank’s extant KYC instructions, branches should not insist on introduction for opening
Bank accounts of customers.

10.14.2 However, there might be some persons belonging to low income group both in
urban and rural areas who are unable to produce the required KYC documents about their
identity and address. This leads to their inability to access the banking services and
result in their financial exclusion. In such cases, if a person who wants to open an
account and is not able to produce documents, branches can open account for him with
introduction from another account holder who has been subjected to full KYC procedure
following the below given guidelines:

i. The introducer’s account with the bank should be at least six months old and
should show satisfactory transactions. Photograph of the customer who proposes to open
the account as also his address needs to be certified by the introducer.

ii. The total balances in such accounts cannot exceed Rupees fifty thousand (Rs.50,
000/-) in all the accounts of a customer taken together, and the total credit in all the
accounts taken together is not expected to exceed Rupees one lakh (Rs.1,00,000/-) in a
year

iii. Such an account again can be converted into a regular account as soon as the
requirements for full KYC are fulfilled.

10.15 Proprietary Concerns

Additional care should be exercised by the branches while opening account in the
name of sole-proprietorship concerns. If the request is to open accounts in impersonal
names (e.g. Chennai Stores) or in any name other than the sole proprietor’s own name,
the fact that the applicant is really the sole- proprietor of the concern should be verified
from independent sources. While opening the accounts of the sole proprietary concern, as

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 KYC/ AML/ CFT

a customer identification procedure, branches should verify and obtain any two of the
documents mentioned in Annexure No 1.6.

10.16 Authority to authorise opening of new accounts

10.16.1 Opening of new deposit accounts (Current, Savings and Term deposits) shall be
permitted only if authorised by following officials.

Level of Category of Branch Official designated to authorise

Risk opening of new account

Low All Categories Officer in charge of the respective

section

Medium Small and Medium Asst. Branch Manager / Branch

Manager

Large & Very Large Manager / Sr. Manager / Asst. Br.

Manager / Br. Manager

Exceptionally Large Senior Manager/ Chief Manager/

Branch Manager

High Small, Medium, Large and Very large Branch Manager

Exceptionally Large Chief Manager/ Branch Manager

Accounts where the customers are Zonal Manager

Politically Exposed Persons

10.16.2 In case of Extension Counters, for low risk and medium risk customers, the
Officer in charge of the Extension Counter may authorise opening of an account.
However, for high risk customers, it should be authorised by the main branch to
which the extension counter is attached.

10.17 Issue of Cheque Books for Newly Opened Accounts

10.17.1 Cheque book should be issued with the written authority of BM / ABM / Officer-
in-charge of the Department only.

10.17.2 The details of the first cheque book issued to the customer should be recorded in
the account opening form.

10.17.3 A cheque book issued in respect of a newly opened account should be stamped
with the notation ‘New Account’.

10.17.4 Collection of instruments in Newly Opened Accounts

i. For accounts opened based on introduction, pending confirmation from the

introducer, no cheque / draft should be collected in respect of an account

a introduced by officials of another branch

b where the introducer did not call on the Branch at the time of opening of the
account.

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10.18 Quoting of PAN

10.18.1 As per clause (C) of rule 114B of the Income Tax Rules 1962, it is mandatory for
the customers to quote the PAN (Permanent Account Number) ,

i. in the account opening forms pertaining to Time deposits exceeding ` 50,000

and/or

ii. for opening an account

iii. Payment in cash for Purchase of bank drafts or pay orders or banker’s cheques
for an amount exceeding fifty thousand rupees on any one day.

iv. Deposit in cash for amount exceeding fifty thousand rupees.

v. Payment in cash in connection with travel to any foreign country or payment for
purchase of any foreign currency at any one time for an amount exceeding fifty thousand
rupees

10.18.2 The PAN of the customer (whether individual or otherwise) shall be noted in the
respective account opening form.

10.18.3 In case PAN has not been allotted or the person is not an Income Tax assessee, a
declaration in Form No.60, should be obtained.

10.18.4 Simultaneously PAN number or date of declaration in Form No.60 should be

entered in the account opening form and also in the system by the branches.

10.18.5 Branches should verify the PAN numbers given by the account based as well as
walk-in customers since, dummy / fictitious PAN numbers might be given by them.

10.18.6 PAN numbers / Form 60 need to be obtained while receiving cash credit of ‘.
50000 and above for the credit of an account / demand draft / NEFT / RTGS etc, either as
a single transaction or multiple transactions.

10.18.7 PAN card copy should be obtained and correct PAN entered in the system in the
structured format without any space in between the characters or junk characters like
comma/ full stop etc; either prefixed or suffixed.

10.18.8 The details of name, address, phone number etc. of purchaser / remitter should
invariably be obtained in the application form and captured in the system.

10.18.9 While opening an account, branches should ensure that the customer is not
opening with different IDs for the purpose of splitting transactions. To find out whether
the proposed customer is already having an account with us, branches shall make use of
the link provided in the HELP DESK for getting the details of the CIF tagged to a given
mobile number or to PAN number.

10.19 Dispatch of ‘letter of thanks’ to new customers

10.19.1 Banks should send a Letter of Thanks (Annexure 1.7) to all SB/Current account
customers in a closed cover under certificate of posting, not later than the next working
day of opening of the account. Officer signing such letters should ensure that the address
thereon is complete and correct.

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10.19.2 Officer-in-charge of SB/current account section should record under his initials
the date of dispatch of the letter in the account opening form after verifying the dispatch
register and also in the ‘Remarks Column’ of ‘Register of Accounts Opened and Closed’.

10.19.3 In cases where letters of thanks are returned undelivered for the reasons "No
such address, No such person/addressee" and alike,

i. ‘Caution’ should be noted in the account and in the ‘Register of Accounts Opened
and Closed’.

ii. Branch Manager/Asst. Branch Manager/any other officer deputed for this purpose
should call at the address given in the account opening form to verify whether the reason
for non-delivery is correct.

iii. Introducer, if any should be immediately contacted to verify the bonafides of

introduction and his personal knowledge about the antecedents of the customers.

iv. The nature of credits into the account should be probed into. In respect of credits
by way of Money Transfers, Demand Drafts, the issuing branch should be contacted for
the genuineness of the instruments. In respect of credits by way of realisation of
outstation cheques, drawee/realising branch should be contacted for the genuineness of
the realisation of the credits.

v. The debits in the account should not be allowed without establishing beyond
doubt the bonafides of the customer.
 Note: Branches may send similar letters to an introducer also in case he/she was not
physically present while introducing the customer.

10.20 Account in fictitious names

10.20.1 When it is established beyond doubt that the account was opened in fictitious
name and address or when a fraud is suspected to have been perpetrated in an account,
the staff working at the counter should be confidentially advised to act in a discreet
manner. The assistance of Police may be taken for apprehending the culprit when he calls
on the branches for putting through some transactions.

10.20.2 The nature of credits / debits in the account should also be probed into. Care
should be taken to see that all the related documents / vouchers are kept in the joint
custody of BM/ABM and officer in charge so as to ensure that the documents are not
tampered with. A detailed report should be sent to Zonal Office concerned with copy
marked to CO: Vigilance Department immediately.

10.21 Fixing of Threshold Limits

In the CIF Opening screen for individual customers, branches should enter the
‘Annual Income’ as declared by the customer in the CIF opening form. For non-personal
customers, branches should enter the annual turnover declared by the customer.

10.21.1 As per the Standard Operating Procedure of KYC/AMT/CFT, the threshold limit
should be fixed based on the annual income / annual turnover. Now that the annual in-
come is obtained at the CIF level, the threshold limit has also been fixed at the CIF level,
which will be applicable to the primary accounts under the CIF.
Customer Risk Category Threshold Limit
Individual Low 25% of annual income with a minimum of Rs.50,000
and maximum of Rs.20.00 Lakhs

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Individual Medium 25% of annual income with a minimum of Rs.50,000

and maximum of Rs.15.00 Lakhs
Individual High 25% of annual income with a minimum of Rs.50,000
and maximum of Rs.10.00 Lakhs
Entities Low 1/12th of the annual turnover with a minimum of
Rs.5,00,000/- and maximum of Rs.50,00,000/-
Entities Medium 1/12th of the annual turnover with a minimum of
Rs.4,00,000/- and maximum of Rs.50,00,000/-
Entities High 1/12th of the annual turnover with a minimum of
Rs.3,00,000/- and maximum of Rs.50,00,000/-

10.21.2 The threshold limit will be calculated by the system as per the table above.

10.21.3 Any transaction breaching the threshold limit should be looked into with extra
caution and the accounts should be monitored by branches for suspicious transactions, if
any.

10.21.4 To facilitate the branches in monitoring the transactions, a report of such trans-
actions which breach the threshold limit will be made available to branches to closely
monitor the accounts. Suspicious transactions, if any, should be reported to CO/AML Cell
as per extant guidelines.

10.21.5 The threshold limits may be reviewed and revised based on experience gained
and requirements of Top Management, Government, RBI and other Statutory Authorities.

11. Monitoring of Transactions

11.1 Branches 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 of the client, his business and risk profile and
wherever necessary, the source of funds. Monitoring customer activity and transactions
that take place through a relationship helps the branches to know their customers, assess
risk and provides greater assurance that the Bank is not being used for the purposes of
financial crime. Thus monitoring means analysis of a customer’s transactions to detect
whether the transactions appear to be suspicious from an AML or CFT perspective.

11.2 Transaction involving financing of the activities relating to terrorism includes

transaction involving funds suspected to be linked or related to, or to be used for
terrorism, terrorist act or by a terrorist, terrorist organisation or those who finance or are
attempting to financing of terrorism.

11.3 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, branches shall review the due diligence
measures including verifying again the identity of the client and obtaining information on
the purpose and intended nature of the business relationship, as the case may be.

11.4 Branches should have an understanding of the normal and reasonable activity of
the customer so that they have the means of identifying transactions that fall outside the
regular pattern of activity and normal threshold limits assigned for Transaction Levels

11.5 For effective Monitoring of transactions, branches should pay special attention on
the following aspects:

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11.5.1 Transactions which are unusually large & complex which have no apparent
economic or visible lawful purpose.

11.5.2 Transactions that involve large amounts of cash inconsistent with the normal and
expected activity of the customer.

11.5.3 Very high account turnover inconsistent with the size of the balance maintained
may indicate that funds are being ‘washed’ through the account.

11.5.4 Unusually large number of Transactions in an account indicating significant

deviation from known transaction profile of the customers.

11.5.5 Transaction with jurisdictions included in Financial Action Task Force (FATF)
Notifications.

11.5.6 Deposit of third party cheques, drafts, etc. in the existing and newly opened
accounts followed by cash withdrawals for large amounts.

11.6 High-risk accounts should be subjected to intensified monitoring based on certain

key indicators such as the country of origin, sources of funds, the type of transactions
involved and other risk factors for such accounts.

11.7 Branches, while monitoring the transaction, shall determine whether a client is
acting on behalf of a beneficial owner, identify the beneficial owner and take all
reasonable steps to verify his identity. Branches should not open an account (or should
consider closing an existing account), when it is unable to apply appropriate Customer
Due Diligence measures. In the given circumstances when a branch believes that it would
no longer be satisfied that it knows the true identity of the account holder, the branch
should also file an STR with the respective CO: AML Cell through the Zonal Office.

11.8 Review of Customer Risk Categorisation (CRC)

11.8.1 Branches should review risk categorization of accounts periodically and apply
enhanced due diligence measures which are mandatory. Such review of risk
categorization of customers should be carried out at a periodicity of not less than once in
six months.

11.8.2 Since CRC is an ongoing process, and the half yearly Risk Review Dates for
completing the CRC Review have been given as 31st January and 31st July every year.

11.8.3 During such review, the risk assigned to an existing customer may undergo
change depending upon the changes in the parameters, constituting his profile. The
process of customer risk categorization has been automated and the risk is amended
based on customer type and turnover for the preceding one year.

11.8.4 The Turnover / Income Criteria for Customer Risk Categorisation spelt out in Para
No. 10 should be adopted by the branches for Review of Customer Risk Categorization as
this is the important and quantifiable parameters for review.

11.8.5 Information Technology Department shall push the reports furnishing list of
customers where the risk has been amended on account of breaching the turnover
criteria to the branch reports. Branches shall scrutinise these accounts and adhere to the
guidelines stipulated for high risk customers such as enhanced due diligence, intensive
monitoring of transactions in these accounts and periodic KYC updation.

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Deposits

11.8.6 The above mentioned Review of Customer Risk Categorisation should be in

addition to branch level override, based on specific inputs from the Customer or others,
such as change in Constitution etc.

11.9 Multi Level Marketing Firms (MLMs)

11.9.1 Wherever large number of cheque books has been issued to Multi Level
Marketing firms, the relative decision may be reviewed in the light of the following:

i. Whether the cheque books have been issued to customers on the basis of their
express request and after following the internal processes laid down in the matter.

ii. Whether the number of cheque books is consistent with / matching the profile of
the customers as also their nature of business operations.

11.9.2 Even where the volume of transactions / profile of the customers apparently
justify the number of cheque books issued, special ongoing monitoring of the operations
in the accounts of such types of firms should be made by the branches especially if large
volumes of small cash deposits are being made in those accounts and withdrawals are
being made there from, through cheques written for small amounts, either across the
counters or through clearing.

11.9.3 In respect of such account holders, branches may, in specific cases, call for the
data from the account holders on the number and aggregate amount of post dated
cheques issued. The data/ information so collected should be analyzed in select cases to
rule out the possibility of the firms being engaged in deposit taking activities. Certain
indicative parameters for selecting accounts for further scrutiny and action are the
bunching of dates of the post dated cheques, the uniformity in the amounts of cheques
etc.

11.9.4 These data should be analyzed together with data on cash deposits of small
amounts on previous distant dates resembling the deposit contracting / mobilization
dates in terms of similar bunching and uniformity of amounts.

11.9.5 Unusual operations noticed during the above review should be immediately
reported to their respective Zonal Offices who shall file STR for reporting to other
appropriate authorities such as Financial Intelligence Unit (FIU-IND).

11.10 Money Mules

11.10.1 "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.

11.10.2 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

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and contact details of such mules are found to be fake and not up to date, making it
difficult for enforcement agencies to locate the account holder.

11.10.3 In case, if branches open the accounts with partial compliance / non-compliance
of KYC norms, unscrupulous persons may misuse this situation for money laundering
operations as "money mules" and it will be difficult to locate the account holder and bank
will be exposed to high risk. Hence, branches should meticulously follow the KYC/ AML/
CFT guidelines while opening the accounts itself.

11.11 Closure of accounts

11.11.1 Where the branch is unable to apply appropriate KYC measures due to non-
furnishing of information and / or non co-operation by the customer, branch 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.
Branches should take such decisions on getting the approval of the Zonal Manager.

11.12 Introduction of New Technologies - Credit cards/ debit cards/smart cards/gift

cards/Travel Cards/ Mobile Wallet/ Net banking/ Mobile Banking/ RTGS/NEFT/IMPS, etc.
11.12.1 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. Branches should comply with all KYC/ AML/ CFT guidelines issued from time to
time, before issuing the add-on / supplementary cards also to the customers. . Branches
should ensure that appropriate KYC procedures are duly applied before introducing new
products/ services/ technologies.

11.13 Customer due diligence for allotment of Lockers

11.13.1 Branches should carry out customer due diligence for both new and existing
customers under the above category as per standards prescribed for Medium Risk
customers. If the customer is classified in a high risk category, customer due diligence as
per KYC norms applicable to such higher risk category should be carried out.

11.13.2 Measures for lockers which have remained not operated are as follows:

i. Where the lockers have remained not operated for more than three years for
medium risk category or one year for a higher risk category, branches should
immediately contact the locker-hirer and advise him to either operate the locker or
surrender it. This exercise should be carried out, even if the locker hirer is paying the
rent regularly.

ii. Branches should also ask the locker hirer to give in writing the reasons why
he/she did not operate the locker. In case the locker hirer has some genuine reasons as
in the case of NRIs or persons who are out of town due to a transferable job etc.,
branches may allow the locker hirer to continue with the locker.

iii. In case the locker hirer does not respond nor operate the locker, branches should
consider break opening the locker, after giving due notice to him/her.

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Deposits

12. Risk Management

12.1 CO: Inspection Department should review the KYC / AML / CFT Policy of the Bank
on an annual basis. The Policy shall provide the broad framework of KYC guidelines and
appropriate procedures to be followed by the Branches so as to ensure that an effective
KYC programme is put in place that covers proper management oversight, systems and
controls, segregation of duties, training and other related matters. CO: Inspection shall
also regularly revise the procedures for creating risk profiles of the existing and new
customers and apply various anti money laundering measures keeping in view the risks
involved in a transaction, account or Banking / business relationship.

12.2 Banks’ internal audit and compliance functions have an important role in
evaluating and ensuring adherence to the KYC / AML policies and procedures. Concurrent
/ Internal Auditors should specifically check and verify the application of KYC procedures
at the branches and compliance levels with the statutory requirements under PMLA and
comment on the lapses observed in this regard. The compliance in this regard should be
put up by CO: Inspection Department before the Audit Committee of the Board on
quarterly intervals.

13. Combating Financing of Terrorism (CFT)

13.1 Combating Financing of Terrorism is an Obligation under Unlawful Activities
Prevention Act 1967 - Amendment & order dated August 27, 2009.

13.2 In terms of PMLA Rules, 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.

13.3 As and when list of individuals and entities, approved by Security Council
Committee established pursuant to various United Nations’ Security Council Resolutions
(UNSCRs), are released, CO: AML Cell should update the consolidated list of individuals
and entities in the Help Desk. The list is also updated in the AML server. While
authorising the CIF opening queue, the CBS gives the probable matches of the name with
the caution lists, with percentage of match. Branches should ensure that the name/s of
the proposed customer does not appear in the list ported in CBS Help Desk. Full details of
accounts bearing resemblance with any of the individuals / entities in the list should
immediately be intimated to RBI and FIU-IND through CO: AML Cell.

13.4 Branches shall strictly follow the procedure laid down in the UAPA Order dated
August 27, 2009 issued by Government of India for implementation of Section 51 A of
the UAPA relating to the purposes of prevention of, and for coping with terrorist activities.
and ensure compliance with the same.
13.4.1 In line with the provisions contained therein, CO: AML Cell maintains updated list
of individuals and entities subject to UN sanctions (referred to as designated lists) in
electronic form and branches should 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.

13.4.2 In case, the particulars of any of their customers match with the particulars of
designated individuals / entities, the Branches shall immediately not later than 24 hours

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 KYC/ AML/ CFT

from the time of finding out such customer, inform through the gateway ported in the
Help Desk, with 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 respective Zonal Office. In turn Zonal Office should report to CO: AML Cell for
onward reporting to The Joint Secretary, Ministry of Home Affairs.

13.4.3 CO: AML Cell shall also send a copy of the communication mentioned in (2)
above to the UAPA Nodal Officer of RBI, Chief General Manager, Department of Banking
Operations and Development, RBI, Mumbai.

13.4.4 CO: AML Cell shall also send a copy of the communication mentioned in (2)
above to the UAPA Nodal Officer of the State / UT where the account is held as the case
may be and FIU-India.

13.4.5 In case, the match of any of the customers with the particulars of designated
individuals / entities is beyond doubt, the Branches would prevent designated persons
from conducting financial transactions, under intimation to CO: AML Cell for reporting to
The Joint Secretary, Ministry of Home Affairs.

13.4.6 CO: AML Cell shall also file a Suspicious Transaction Report (STR) with FIU-IND
covering all the transactions in the accounts covered by paragraph (2) above carried
through or attempted as per the prescribed format.

13.4.7 Branches shall take into account risks arising from

i. jurisdictions viz. Iran and Democratic People’s Republic of Korea that are subject
to FATF call on its members and others to apply counter-measures to protect the
international financial system from the on-going and substantial money laundering and
terrorist financing (ML/TF) risks emanating from them and

ii. other jurisdictions that are subject to FATF calls on its members to consider the
risks arising from the deficiencies associated with them viz. Bosnia and Herzegovina,
Democratic People’s Republic of Korea, Ethiopia, Iran, Iraq, Sri Lanka, Syria, Trinidad and
Tobago, Tunisia, Vanuatu and Yemen, identified in FATF Statement. (List of high risk and
non-cooperative jurisdictions taken from www.fatf-gafi.org)

14. Correspondent Banking

14.1 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. CO:
International Division should gather sufficient information to understand fully the nature
of the business of the correspondent / respondent Bank. Information on the other Bank’s
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 correspondent’s/respondent’s
country may be of special relevance. Similarly, CO: International Division should try to
ascertain from the publicly available information whether the other Bank has been
subject to any money laundering or terrorist financing investigation or regulatory action.
The responsibilities of each Bank with whom correspondent Banking relationship is
established should be clearly documented. In the case of payable-through-accounts, the

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

15. Guidelines for the transactions relating to Foreign Exchange

15.1 For purchase of foreign currency notes and / or TCs from customers for any
amount less than USD 200 or equivalent, photocopies of the Identity document need not
be obtained. However, full details of the ID should be maintained.

15.2 For purchase of foreign currency notes / TCs from customers for any amount in
excess of USD 200 or its equivalent, the IDs should be verified and a copy retained.

15.3 Requests for payment in cash in Indian Rupees to resident customers towards
purchase of foreign currency notes / TCs from them may be acceded to the extent of only
USD 1000 or its equivalent per transaction.

15.4 Where amount of forex tendered for encashment by NRI or person returning from
abroad, exceeds the limit prescribed for CDF, branch should invariably insist for
production of the declaration in CDF.

15.5 In case of sale of foreign exchange, irrespective of the amount involved, the
passport of the customer should be insisted upon for identification and forex should be
sold only on personal application and after verification of ID. A copy of ID has to be
retained by branch.

15.6 Norms to be followed at branches in case of receipt of regular cross border

inward remittances -
15.6.1 Prepare a profile for each new customer where regular cross-border inward
remittances viz. Xpress Money / Money Gram etc. are received based on risk
categorisation. The profile may contain information relating to customer’s identity, social
/ financial status etc.

15.6.2 In case of customers with high risk intensive due diligence has to be applied.

15.6.3 Customer identification data should periodically be updated.

15.6.4 Sufficient identification data has to be obtained to verify the identity and his
address / location.

15.6.5 Any one of the documents for identification of the customer and for correct
address, which provides customer information to the satisfaction of the Branch Manager,
will suffice.

15.6.6 Identification documents should be verified and copy retained.

15.6.7 Maintain a register to enter the purpose, number of remittance during the
calendar year.

15.6.8 The concurrent auditor shall check all cross border inward remittance
transactions under Xpress Money and Money Gram to verify that they have been
undertaken in compliance with the anti-money laundering guidelines and have been
reported whenever required to the concerned authorities.

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 KYC/ AML/ CFT

15.6.9 The above list is only indicative and not exhaustive and should strictly follow the
extant RBI guidelines.

15.7 Requests for payment in cash by foreign visitors / NRIs may be acceded to USD
3000 or its equivalent.

15.8 Payment in excess of ` 50,000 towards sale of FX should be received by way of

crossed cheque. It can be received through debit cards / credit cards provided
KYC/AML/CFT guidelines are complied with, amount is within limit and purchaser and
card holder is one and the same person.

15.9 Branches should refer CO: ID Circulars issued from time to time for updated
guidelines pertaining to FX Transactions.

15.10 KYC / AML Norms should be followed in case of Rupee Drawing Arrangement
including both Draft and Electronic Funds transfer.
15.10.1 By Nodal branch: Treasury Branch, which is the Nodal branch for Rupee Drawing
Arrangement, should ensure that

i. Proper remitter details and purpose of remittance in case of high value

transaction / DDs are ascertained and recorded

ii. The details of sudden spurt in remittance in favour of a single beneficiary and the
reason for the same are also recorded.

15.10.2 By Paying branches

i. KYC norms of beneficiary have to be strictly followed.

ii. Purpose of each remittance has to be ascertained from the beneficiary (in case
the same is not printed on the DD) and branch has to record the same on the back of
each instrument.

iii. List of permitted transactions, as given by RBI, is enumerated below for the
benefit of paying branches:

a Credit to Non-Resident (External) Rupee accounts maintained by Non-Resident

Indians in Indian Rupees.

b Payments to families of non-resident Indians.

c Payments in favour of Insurance companies, Mutual Funds and the Post Master
for premia / investments.

d Payments in favour of bankers for investments in shares, debentures.

e Payment to Co-operative Housing Societies, Government Housing Schemes or

Estate Developers for acquisition of residential flats in India in individual names subject
to compliance of regulations thereof by the Non-resident Indians.

f Payments of tuition / boarding, examination fee etc. to schools, colleges and

other educational institutions.

g Payments to medical institutions and hospitals for medical treatment of NRIs /

their dependents and nationals of Gulf Countries in India.

h Payments to hotels by nationals of Gulf countries / NRIs for their stay.

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Deposits

i Payments to travel agents for booking of passages of NRIs and their families
residing in India towards their travel in India by domestic airlines / rail etc.

j Trade transactions upto ` 2.00 lacs per transaction.

 Note: (i) Disbursement of cash should not be allowed in case of remittances received
under Rupee / Foreign Currency Drawing Arrangements.
iv. In case of high value Drafts, purpose of remittance and the remitter details have
to be recorded.

15.11 KYC / AML Norms should be followed in case of Franchisee arrangement.

15.11.1 Constant touch with the Franchisees shall be maintained by the branches which
have entered into Franchisee Arrangement with Restricted Money Changers (RMCs).
Franchiser branch shall ensure that Franchisees are displaying the names of the Bank and
branch in their offices, and that they are authorized only to purchase foreign currency.
Branches should ensure that the RMCs also are adhering to the RBI guidelines on KYC /
AML/ CFT.

15.12 Correspondent relationship with a "Shell Bank"

15.12.1 CO: International Division 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. CO: ID should also guard against establishing
relationships with respondent foreign financial institutions that permit their accounts to
be used by Shell Banks. Bank should not enter into relationship with shell banks and
before establishing correspondent relationship with any foreign institution. CO: ID should
take appropriate measures to satisfy themselves that the foreign respondent institution
does not permit its accounts to be used by Shell Banks. CO: ID should be extremely
cautious while continuing relationships with respondent Banks located in countries with
poor KYC standards and countries identified as ‘non-cooperative’ in the fight against
money laundering and terrorist financing. CO: ID should ensure that their respondent
Banks have anti money laundering policies and procedures in place and apply enhanced
‘due diligence’ procedures for transactions carried out through the correspondent
accounts.

15.13 Applicability to branches and subsidiaries outside India

15.13.1 These guidelines shall apply to the branches abroad, to the extent local laws
permit. When local applicable laws and regulations prohibit implementation of these
guidelines, the same should be brought to the notice of Reserve Bank of India. In case
there is a variance in KYC/AML standards prescribed by the Reserve Bank of India and
the host country regulators, branches should adopt the more stringent regulation of the
two.

15.14 Wire Transfer

15.14.1 Banks use wire transfers 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.

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

i. 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.

ii. Cross-border wire 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.

iii. 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.

iv. 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.

15.14.3 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 it as necessary. To facilitate identification and reporting of suspicious
transactions to FIU--IND the beneficiary bank should obtain the information of the
Originator. Accordingly, bank must ensure that all wire transfers are accompanied by the
following information:

15.14.4 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.

15.14.5 Domestic wire transfers

i. Information accompanying all domestic wire transfers of ` 50000/- (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.

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ii. If a Bank has reason to believe that a customer is intentionally structuring wire
transfer to below ` 50000/- (Rupees Fifty Thousand) to several beneficiaries in order to
avoid reporting or monitoring, the branches must insist on complete customer
identification before effecting the transfer. In case of non co-operation from the
customer, efforts should be made to establish his identity and Suspicious Transaction
Report (STR) should be made 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.

15.14.6 Exemptions

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

15.14.7 Ordering Bank

i. 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 five years.

15.14.8 Intermediary Bank

i. 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
five years (as required under Prevention of Money Laundering Act, 2002) by the receiving
intermediary Bank of all the information received from the ordering Bank.

15.14.9 Beneficiary Bank

i. The lack of complete originator information in the wire transfers 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 branch should
take up the matter to CO: International Division to consider restricting or even
terminating its business relationship with the ordering bank.

15.14.10 Trade Based Money Laundering:

i. Trade Based Money Laundering has been recognized as one of the main methods
by which proceeds of crime and unaccounted money may be moved cross-border by
criminal organizations and terrorist financiers for disguising its origin and integrating into
formal economy.

ii. Basic techniques of TBML include

a Over-invoicing

b Under-Invoicing

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c Multiple invoicing by issuing more than one invoice for the same goods

d Short-shipping - Seller ships less than the invoiced quantity or quality of goods

e Over-shipping - Seller ships more than the invoiced quantity or quality of goods

f Phantom shipping - No goods are shipped and all documentation is completely

falsified.

15.14.11 With a view to recognize the indicators which may help in identifying non
genuine trade transactions out of the billions of trade transactions, without affecting the
free flow of trade, FIU-IND had constituted a working group of senior bankers. Based on
the recommendations of the working group, certain red flag indicators have been
identified for finding out suspicious transactions, which may be used at different levels of
transactions for identifying suspicious TBML. The list of Red Flag Indicators on TBML is
furnished in Annexure 1.8.

15.14.12 Branches are advised to take note of the Red Flag Indicators with a view to
identify suspected TBML transactions and if found so, then the cases should be brought to
the notice of CO: AML Cell for filing suspicious transaction report with FIU-IND.

15.14.13 Import and export documentation in Customs takes place through Indian
Customs EDI System. The branches can have access to information in the Indian
Customs EDI Systems (ICES) through ICEGATE (www.icegate.gov.in) portal which all
stake holders use regularly. The status of any shipping bill or Bill of Entry can be checked
by giving the Shipping Bill or Bill of entry number, date and port of export and branches
are requested to ensure the following to prevent frauds.

i. To verify every Shipping Bill online through www.icegate.gov.in before

discounting relevant bills.

ii. To verify the Shipping Bills in cases where relevant bills have been discounted
and amount is outstanding.

15.14.14 Branches are advised to meticulously scrutinize the documents submitted by the
customers, specifically on the lines of directions given above and undertake required due
diligence in order to prevent processing with forged and bogus documents.

16. Obligations of Banking Companies under Prevention of

Money Laundering Act 2002 & its Rules
16.1 Prevention of Money Laundering Act which is the first step in the anti-money
laundering legislation in India came to effect on 1st July 2005. The Act criminalizes
money laundering and also provides for freezing and confiscation of assets concerned in
money laundering. Appointment of various authorities including Financial Intelligence
Unit is also covered in its provisions. The Act also lays down obligations of banks in
maintaining records of certain prescribed transactions and reporting such transactions to
FIU-IND. This also lists out the prescriptive offences, which will come under the purview
of the Act.

16.2 Nomination of Principal Officer

16.2.1 In terms of the guidelines issued under PMLA & the Rules there under Banks
should appoint a senior management officer to be designated as Principal Officer who

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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. In our Bank, presently General Manager (I&C) is the Principal Officer of our
Bank pursuant to Board approval, in this regard whose obligations inter alia include the
following:

i. The Principal Officer should oversee and ensure overall compliance with the
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 from time to time.

ii. Principal Officer 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

iii. The Principal Officer will be responsible for timely submission of CTR, NTR, CBWT
and reporting of STR & CCR to FIU-IND.

16.3 Preservation and Maintenance of records of transactions / Information

16.3.1 Government of India, Ministry of Finance, Department of Revenue, vide its
notification dated July 1, 2005 in the Gazette of India, has notified the Rules under the
Prevention of Money Laundering Act (PMLA), 2002. Section 12 of the PMLA, 2002 casts
certain obligations on the Banking companies in regard to preservation and reporting of
customer account information.

16.4 Maintenance of records of transactions

16.4.1 Branches should maintain proper record of transactions prescribed under Rule 3
of the said Act, as mentioned below:

i. all cash transactions of the value of more than Rupees Ten Lakhs or its
equivalent in foreign currency;

ii. 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 such
transactions exceed Rupees Ten Lakh;

iii. 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 transaction

iv. all cross border wire transfers of the value of more than rupees five lakhs or its
equivalent in foreign currency where either the origin or destination of fund is in India,
and

v. all suspicious transactions whether or not made in cash and by way as

mentioned in the Rules.

16.5 Illustration for Integrally connected cash transactions [referred at (ii) above] -

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16.5.1 The following transactions have taken place in a branch during the month of Sep,
2018:

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

BF - 8,00,000.00

02/09/2018 Cash 5,00,000.00 3,00,000.00 6,00,000.00

07/09/2018 Cash 40,000.00 2,00,000.00 7,60,000.00

08/09/2018 Cash 4,70,000.00 1,00,000.00 3,90,000.00

Monthly summation 10,10,000.00 6,00,000.00

16.5.2 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 ` 10 lakhs. However, the Bank should report only the debit transaction
taken place on 02/09/2018 & 08/09/2018. The debit transaction dated 07/09/2018
should not be separately reported by the Bank, which is less than ` 50,000/-

16.5.3 All the credit transactions in the above example would not be treated as
integrally connected, as the sum total of the credit transactions during the month does
not exceed ` 10 lakhs and hence credit transaction dated 02, 07 & 08/09/2018 should not
be reported by the Bank.

16.6 Information to be preserved

16.6.1 Branches should maintain the information in respect of transactions referred to in
Rule 3 of PMLA, 2002 which is as follows:

i. The nature of the transactions;

ii. The amount of the transaction and the denominated currency

iii. The date on which the transaction was conducted; and

iv. The parties to the transaction

16.7 Preservation of records

16.7.1 Branches should maintain the records containing information in respect of
transactions referred to in Rule 3 of the PML Act, for five years from the date of cessation
of the transactions between the client and the Bank, both domestic or international,
which will permit reconstruction of individual transactions (including the amounts and the
type of currency involved, if any) so as to provide, if necessary, evidence for prosecution
of persons involved in criminal activity. The expression ‘cessation of the transaction’
means termination of an account or business relationship.

16.7.2 Records / reports / data / ledgers etc. should be preserved, either in hard or in
soft form, for the period mentioned in Document Handling and Retention Policy of the
Bank in retrievable condition.

16.7.3 Branches should ensure that records pertaining to the identification of the
customer and his address (e.g. copies of documents like Aadhaar, 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 five years after

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the business relationship is ended. The records of the identity of clients should be
maintained in both hard and soft copies and include Records of the Identification data,
Account files and Business Correspondence. Bank should maintain the record of identity
and current address or addresses including permanent address or addresses of the client,
the nature of business of the client and his financial status. The identification records
and transaction data should be made available to the competent authorities upon
request.

16.7.4 Branches shall 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 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 five years.

16.8 Details regarding mandatory filing of Reports to FIU-IND

16.8.1 In terms of the PMLA rules, the following reports should be sent to the Director,
Financial Intelligence Unit-India (FIU-IND), New Delhi in respect of transactions referred
to in Rule 3:

i. Cash Transaction Report (CTR)

ii. Suspicious Transaction Report (STR)

iii. Non Profit Organisations Transaction Report (NTR)

iv. Cross Border Wire Transfer Report (CWTR)

v. Counterfeit Currency Report (CCR)

16.9 Cash Transaction Report (CTR)

16.9.1 The Cash Transaction Report (CTR) is being generated centrally for all the
branches at Project Office and AML Cell will file the same in soft copy along with the
summary schedule, to the Financial Intelligence Unit (FIU-IND), New Delhi duly signed by
the Principal Officer of the Bank every month, before 15th of every succeeding month.

16.9.2 While filing CTR, details of individual transactions below Rupees Fifty thousand
need not be furnished.

16.9.3 CTR should contain only the transactions carried out by the Bank on behalf of
their clients/customers excluding transactions between the internal accounts of the Bank.

16.9.4 Project Office should push the monthly report of CTR to the respective branches
and Zonal Offices as a month end report on or before 5th of every succeeding month.

16.9.5 Zonal Offices should obtain a compliance certificate every month from all its
branches for having verified the CTR / NTR, Transaction wise/ Account wise for any
Suspicious Transactions, and submit a consolidated compliance certificate every month to
CO: AML Cell on or before 10th of every succeeding month.

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16.9.6 A copy of the monthly CTRs/ NTRs submitted to FIU-Ind should be made
available at the concerned branch for production to auditors/inspectors, when asked for.

16.10 Suspicious Transaction Reports (STR)

16.10.1 Suspicious Transactions means a transaction including an attempted transaction,
whether or not made in cash which, to a person acting in good faith-

i. 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

ii. appears to be made in circumstances of unusual or unjustified complexity or

iii. appears to have no economic rationale or bonafide purpose or

iv. gives rise to reasonable ground of suspicion that it may involve financing of the
activities relating to terrorism.

16.10.2 While determining suspicious transactions, branches should be guided by

definition of suspicious transaction contained in PMLA Rules as amended from time to
time.

16.10.3 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 transaction amount.

16.10.4 Branches should make STRs if they have reasonable ground to believe that the
transaction involve proceeds of crime generally irrespective of the amount of transaction
and/or the threshold limit envisaged for predicate offences in part B of Schedule of PMLA,
2002.

16.10.5 Branches should verify the customers identity and address 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. Further, if the
branch has a reason to believe that customer is intentionally structuring a transaction
into series of transactions below the threshold of ` 50000/- the branch should verify the
identity and address of the customer and also consider filing a Suspicious Transaction
Report (STR).

16.10.6 The Suspicious Transaction Report (STR) should be furnished 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.

16.10.7 Branches should not put any restrictions on operations in the accounts where an
STR has been made. Moreover, it should be ensured that there is no tipping off to the
customer at any level.

16.10.8 Alert Indicators (Customer Behavioral based) for identifying at Branch level

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i. Broad categories of reason for suspicion and examples of suspicious transactions

based primarily on Customer Behavioral Patterns given in Recommendations of IBA
Working Group are given as Annexure 1.9, which are Red Flag Indicators for Branches.

ii. Besides the indicative list of Customer Behavioural based Alert Indicators,
Branches are also required to be observant regarding transactions by Walk-in Customers
structured below threshold limits to avoid disclosure of information required under
statutes - cash transactions kept below ‘.50000/ to avoid furnishing Pan No etc,

16.10.9 Branches shall make use of the on line tools provided in AML Gateway - CBS
Helpdesk for submitting STRs to AML Cell at Corporate Office.

16.11 Non-Profit Organization Transaction Reports (NTR)

16.11.1 PMLA Amendment Rules 2009 defines ‘Non-Profit Organization’ as any Entity or
Organization that is registered as a trust or a society under the Societies Registration Act,
1860 (21) of 1860 or any similar State legislation or a company registered under Section
8 of Companies Act 2013.

16.11.2 All transactions involving receipts by ‘Non-Profit Organizations’ (Accounts) of

value more than rupees ten lakhs or its equivalent in foreign currency should be filed
every succeeding calendar month with FIU-Ind before 15th of every month.

16.11.3 Project Office shall push the monthly report of NTR to the respective branches
and Zonal Offices as a month end report on or before 5th of every succeeding month.

16.12 Cross Border Wire Transfer Reports (CWTR)

16.12.1 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.
The report is to be filed to FIU-India every month by 15th of the succeeding month

16.13 Counterfeit Currency Report (CCR)

16.13.1 All cash transactions, where forged or counterfeit Indian currency notes have
been used as genuine should be reported immediately by the branches / currency chest
to AML Cell Corporate Office through their respective Zonal Offices, in the prescribed CCR
format.

16.13.2 Zonal Offices in turn shall send the CCR to CO: AML Cell, within 3 days from the
date of detection of such transactions by the Branches / Currency Chests.

16.13.3 CO: AML Cell should file the CCR with FIU-IND, duly approved by the Principal
Officer of the Bank. These cash transactions should also include transactions where
forgery of valuable security or documents has taken place and may be reported to FIU-
IND in plain text form.

16.14 Value threshold and the time threshold for the above reports are given below in
a tabular form for the benefit of the branches:
S. No Report Value Threshold Time Threshold

01 CTR i. All cash transactions of the Every month by 15th of the

value of more than Rupees Ten succeeding month
lakh or its equivalent in foreign

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S. No Report Value Threshold Time Threshold

currency; OR

ii. All series of cash transactions

integrally connected to each other
which have been valued below
Rupees Ten lakh or its equivalent
in foreign currency where series of
transactions have taken place
within a month and the aggregate
value of such transactions exceeds
Rupees Ten lakh.

02 STR All Suspicious Transactions Within seven days of

including an attempted arriving at a conclusion that
transaction, whether or not made a transaction is of
in cash. Suspicious in nature.

03 NTR All transactions involving receipts Every month by 15th of the

by ‘Non Profit Organizations’ of succeeding month
value more than rupees ten lakhs
or its equivalent in foreign
currency.

04 CWTR All cross border wire transfers of Every month by 15th of the
the value of more than rupees five succeeding month
lakhs or its equivalent in foreign
currency where either the origin or
destination of fund is in India.

05 CCR All cash transactions where forged Every month by 15th of the
or Counterfeit Indian Currency succeeding month
notes have been used as genuine
and where any forgery of a
valuable security has taken place.

17. Centralised Anti-Money laundering Monitoring Cell

17.1 CO: AML Cell caters to the various Regulatory / Statutory requirements regarding
AML Monitoring and Reporting obligations.

17.2 As part of AML Monitoring, branches should exercise ongoing due diligence with
regard to the Business relationship with the clients 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 the source of funds and Banking Channels are not used for
money laundering or terrorist financing. To facilitate compliance with the above Statutory
& Regulatory requirements, an AML Software Application "finDNA" has been implemented
to trigger Alerts based on the incidence of certain scenarios.

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17.2.1 Scenarios are patterns configured in the system for monitoring the transactions
to identify the suspicious transactions for filing STR to FIU-IND. Scenarios are designed in
order to track the Value, Volume, and Velocity of the transactions conducted in the
customer’s account. IBA Working Group has recommended for implementation of 54
Transaction based Red Flag Indicators.

17.2.2 The List of these 54 Alert Indicators is given in Annexure 1.10.

17.3 Alerts Management Process at Centralised AML Cell involves analysis of

customer’s transactions that have triggered the Alerts to ascertain whether the same has
characteristics of a suspicious transaction from an AML or CFT perspective and for this the
available information in CBS is verified. In case certain additional inputs are required
regarding the KYC / Transaction Data Branches are contacted by AML Cell through AML
Gateway in CBS Help Desk.

17.4 Merely seeking information about a particular transaction as part of the due
diligence should not tantamount to ‘tipping off’. This is so because most of the customers
are well aware of the statute on money laundering and legal provisions involving
obligations of banks thereon.

17.5 On receipt of Alerts, Branches should scrutinise the alerts generated accounts for
the relevant parameters and submit their reply through AML secured Gateway within 2
days positively to take a view on the same. The timelines should strictly complied with by
the branches as delayed submission of STR may attract penal provisions of the statute.

18. Customer Education

18.1 For Customer Profiling, which is an essential component of Customer

Identification Process, some additional information on the customers is required by the
Branches. In order to have an adequate control over AML, it is quite essential that
Customers do appreciate that KYC information sought by Banks contributes to the fight
against terrorism which has taken alarming proportions globally and do not perceive the
same as an impediment to their banking needs. To promote this understanding, KYC
checks at the Branch level should be done in a customer-friendly way and Banks’
procedures and staff must be oriented and sensitised to impart such awareness to the
Customers.

19. Central KYC Registry (CKYCR):

19.1 Government of India vide their Notification dated November 26, 2015 authorised
the Central Registry of Securitisation Asset Reconstruction and Security Interest of India
(CERSAI), set up under sub-section (1) of Section 20 of the Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (54 of
2002), to act as and to perform the functions of the Central KYC Records Registry under
the said rules, including receiving, storing, safeguarding and retrieving the KYC records in
digital form of a "client", as defined in clause (ha) of sub-section (1) of Section 2 of the
Prevention of Money-Laundering Act, 2002.

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19.2 As per Prevention of Money-laundering (Maintenance of Records) Amendment

Rules, 2015, Rule 9 (1A), every reporting entity shall within ten days after the
commencement of an account-based relationship with a client, file the electronic copy of
the client’s KYC records with the Central KYC Registry.

19.3 Apart from the data captured pertaining to a customer, the scanned copies of the
following are also to be uploaded to CKYCR, on a daily basis.
19.3.1 Proof of Identity

19.3.2 Proof of Address

19.3.3 Photo

19.3.4 Signature

19.4 A 14 digit unique KYC identifier will be generated for new customer records
uploaded by the Bank to the CKYCR and notified to the reporting entity. For "Small
Accounts" the KYC identifier will additionally have a prefix "S". For simplified Measures
Accounts" the KYC identifier will additionally have a prefix "L".

19.5 CKYCR will run a deduplication process based on PAN and Aadhaar and intimate
the KYC Identifier if the customer record uploaded by our Bank is already available in the
CKYCR.

19.6 Bank/Branches can download the KYC record from the KYC Registry, for the KYC
Identifier.

19.7 The KYC data of a customer obtained from the Central KYC Registry should not
be used for any purpose other than verifying the identify or address of the client and KYC
records or any information contained therein should not be transferred to any third party
unless authorised to do so by the client or by the Regulator or by the Director.

19.8 The Bank which performed the last KYC verification or sent updated information
in respect of a client shall be responsible for verifying the authenticity of the identity or
address of the client.

20. Reporting Requirement under Foreign Account Tax

Compliance Act (FATCA) and Common Reporting Standards
(CRS)
20.1 With an objective to address the problem of usage of offshore financial accounts
for tax evasion and avoidance, India has signed Inter-Governmental Agreement (IGA)
with the USA for implementing the Foreign Account Tax Compliance Act (FATCA) enacted
by the USA. Further, India has also signed Multilateral Competent Authority Agreement to
implement Automatic Exchange of Information based on Common Reporting Standard
(CRS). These developments enabled the Indian tax authorities to automatically receive
information of Indian residents who have stashed assets in foreign participating
jurisdictions. For implementation of FATCA and CRS in India, necessary legislative
changes have been carried out in the Income-tax Act/ Rules, so as to collect and provide
relevant information to the foreign tax authorities.

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20.2 Reportable accounts:

20.2.1 Generally, balances held by reportable account holders under all types of liability
products (e.g. savings bank, term deposits, etc) will be reported. Certain types of
accounts like no frills accounts, pension accounts, accounts opened under senior citizens
savings scheme, etc. are excluded from reporting. For a wider definition, branches are
advised to go through the guidance notes and directives issued by the Nodal
Authority/Regulator from time to time. Such directives are available in public domain.
Clarifications can be sought from the Principal Officer, only after exhausting reference
material available in public domain.

20.3 Reportable Person:

20.3.1 A reportable person may be a specified US person or a person who is tax resident
in other countries in respect of CRS reportable account. The reportable person could be
an individual, group of individuals (joint accounts) or an entity or a controlling person of
the entity. For a wider definition/understanding, branches may refer to the guidelines
issued by the Nodal Authority / Regulator. In general, for the account holder, one may
generally apply the tax residency status of the individual/entity/controlling person to
determine whether the account holder would be reportable or not under FATCA/CRS
rules. Further, in the case of controlling persons, branches may have to pierce through
the corporate veil to detect the beneficial owners and find out whether they would be
reportable under the Regulations. For this purpose, branches may be guided by circular
instructions/PMLA notifications issued by the RBI from time to time.

20.3.2 The following criteria, inter alia, may be used to identify the controlling persons
in a passive Non-financial entity.

i. Person having 25% (or) more of share in the Entity

ii. Person having 25% (or) more of Voting Rights in the Entity

iii. Person having right to appoint the majority of the Directors of the Board of
Directors

iv. Person having the right to execute significant influence or control over the Entity

v. Person having the control over the day-to-day activities of the Entity

vi. Senior Managing Official of the Entity

20.3.3 In the case of accounts held by trusts, HUFs, etc., detailed instructions have
been given in the guidance notes to classify whether they would be entity accounts or not
and in case of doubt, branches may refer to the Corporate Office and seek clarification on
classification of an account holder.

20.4 Due diligence Procedure:

20.4.1 The Bank needs to identify the reportable accounts by carrying out the due
diligence procedures. Due diligence procedure encompasses identification of an account
(as reportable or otherwise), based on certain indicia, curing the same by obtaining
necessary declaration/certification and recording these particulars in the Bank’s records.
Due diligence may also necessitate personal verification of an account holder, in case of
high value accounts.

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20.4.2 There are different due diligence procedures for accounts held by individuals and
accounts held by entities, as also whether an account is a pre-existing or new account
under FATCA /CRS rules. The due diligence procedure is also dependent on the balance in
the account (high value or low value). Branches may refer to the circular instructions
and guidance notes issued from time to time to determine the type/nature of due
diligence procedure to be applied. Similarly, certain types of accounts based on
balance/nature (known as exempted accounts) are not required to be reported and hence
such accounts need not be reviewed for the purpose of completing due diligence. Indicia
checking is required to be carried out electronically and where correct / full details are
not available through electronic search, a physical search of documents is required to be
carried out by the operating units. In view of this, it is extremely important for the
branches to capture vital data in the Bank’s core banking solution to obviate the need for
carrying out a physical search.

20.5 Indicia curing and completion of documentation:

20.5.1 For accounts opened from 1st July 2014, branches should ensure that tax
residency and other vital particulars are obtained/captured at the time of opening of the
account. As regards pre-existing accounts, branches have to take extra efforts to identify
reportable accounts, in as much as many of the indicia have not been captured correctly
in the Core Banking System at the time of migration. As an example, branches may look
out for existence of tax residency/nationality status for such accounts, periodic
outward/inward remittances occurring in an account where residency details are not
captured properly, accounts operated by power of attorney holders for whom KYC
formalities have not been completed, etc. Similarly, in case of an existing account,
whenever an account holder approaches the bank changing certain static particulars like
address, phone number, email-id, etc. branches have also to check /update tax-residency
status and promptly report "change of status" to the Corporate Office for reporting such
account holders on the basis of changed residency status and an audit trail of such
change should be recorded.

20.6 Due Diligence Procedure for High Value Individuals’ Accounts, where the
Aggregate Balance is USD Equivalent exceeding 1 Million:
20.6.1 The Branch Manager (or) the Account Manager/Relationship Manager has to
verify the paper records available with the Bank, apart from Electronic Indicia Check to
ensure that the correct tax residency status of the Account Holder and he/she has to
make discreet enquiries, wherever necessary to decide on the reportable nature of the
High Value Account Holder. The certificate from the Branch Manager for each High Value
Account Holder/Accounts has to be preserved in Branch for audit Purposes.

20.7 Advices to account holders at the time of indicia checking, indicia curing and
documentation:
20.7.1 It is the stated policy of our Bank that we would comply with all the statutory
rules and regulations framed by the Government and its statutory bodies. Under the
circumstance, it is the responsibility of branches to ensure that at no point of time, they
give any advice to the account holder which may result in a reportable account not
getting reported under FATCA & CRS Regulations. It may so happen that the account
holder may approach the branches for guidance on tax matters under the Regulations. In
such circumstances, the branches may advise the account holder concerned to approach

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their tax advisers for any course of action to be adopted by them. The Bank or its
employees are not expected to be a party to the tax evasion/avoidance.

20.8 Accounts of Non Participating Financial Institutions (NPFI) and Passive Non-
Financial Entities:
20.8.1 In case of Financial Institutions, branches should get the GIIN details and record
the same in the Bank records. If the FI does not provide GIIN details, it will be treated as
an NPFI and the details of such NPFI should be reported to Corporate Office for reporting
in 61B along with the payments made to them. In the case of Non Financial Entities, the
nature/quantum of passive assets and passive income has to be considered as the basis
for determining the entity as Passive Non-Financial Entity.

20.8.2 In the case of Passive Non-Financial Entity, due diligence has to be conducted on
the controlling persons and they have to be reported if they are tax resident outside
India. If the Passive Non-Financial Entity doesn’t provide the list of controlling persons
and there are reasons to believe that the controlling persons could be of tax residents
outside India, the Branch Manager has to verify the paper records and the information
available in the Public domain to ascertain the FATCA/CRS status of the controlling
persons to arrive at the reportable nature of the controlling persons. Evidential
documents scrutinized by the Branch Manager have to be preserved at the Branch level
for review by the auditors/regulators.

20.9 Timeline for completion of due diligence:

20.9.1 Timelines have been advised by the Nodal Authority for completion of due
diligence in respect of all account holders, more specifically in case of pre-existing
accounts. Branches should take every effort to complete this exercise, failing which the
accounts of such account holders need to be closed. Branches should be on the lookout
for issue of instructions in this regard and keep sensitizing the account holders on the
need to complete due diligence in a timely manner.

20.10 Aggregation:
20.10.1 For the purpose of determining aggregate balance or value of financial accounts,
the bank will be required to take into account all financial accounts maintained by the
Account Holder, related parties/entities and to this extent, it would be necessary for the
branches to ensure that separate customer-ids are assigned to all joint account
holders, controlling persons and beneficial owners. Our Bank determines the identity of a
customer by the unique Customer Id allotted for each individual/entity and hence
aggregation is done Customer ID-wise.

20.10.2 Individual Accounts, Joint Account and Sole Proprietor’s account will be treated
as Accounts of Individuals while all other types of accounts will be treated as Accounts of
Entities.

20.10.3 In the case of Joint Accounts, the entire liability in the account will be assigned
for each individual associated with the account as the owner for the purpose of
aggregation of liabilities.

20.11 New Customer On-boarding Procedure:

20.11.1 According to the FATCA/CRS Guidelines, the due diligence of the Customer has to
be completed at the time of opening of the account.

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20.12 Reporting requirements:

20.12.1 After identification, the bank is required to report the details of account holders
and accounts to the Nodal Authority (CBDT) in a pre-defined format. For this purpose,
the bank is required to store the information on reportable account holders and accounts,
both for reporting as also for inspection and verification purposes by the Nodal Authority,
Regulator and Auditors. As a measure of fairness, the Bank also needs to inform/advise
the account holders on the reporting requirements. Such advice to account holders are
done when the branches complete due diligence and documentation and the documents
for Identify Proof and Address Proof are to be obtained and verified as per the document
list provided by CBDT. In the case of Reportable Accounts, the Tax residency
documents/details are to be obtained certifying the Tax Identification Number (TIN),
Issuing Country, etc. as a part of due diligence procedure and the same should be
preserved at branch level.

20.12.2 Reporting to Nodal Authority is an annual exercise and should be completed

within 31st May for the position as on the last day (31st Dec) of the previous calendar
year. The details of account holders/accounts which have been reported will be shared
with the branches for their record, as also to verify/ensure correctness in reporting.

20.12.3 An account holder once reported under FATCA /CRS Compliant category would
continue to be reported till all the accounts of the account holder are closed even when
the aggregate balance is less than the threshold.

20.12.4 The branches should maintain records to capture any changes in the status of
the account holder mainly in tax residency status. The accounts of the account holder
would require to be reclassified according to the due diligence procedures for the purpose
of deciding the reportable nature of the account holder/accounts.

20.13 Process of reporting :

20.13.1 Under the regulations, our Bank is a Reporting Financial Institution (RFI) with
GIIN No.-KZUSS5.99999.SL.356. Our Bank has also registered with CBDT and is
submitting the mandatory report (form 61B) online. Our overseas branches have also
registered with IRS and obtained GIIN numbers as follows:

i. 1. Singapore branch - GIIN No. KZUSS5.99999.BR.702

ii. 2. Srilanka -GIIN No. KZUSS5.99999.BR.144

20.13.2 Both the centres have to comply with the reporting requirement as per the
guidelines of the regulatory authority of the respective countries.

20.13.3 On an ongoing basis, the bank will review its eligible accounts to identify
reportable accounts by applying due diligence rules. The progress in respect of
completing due diligence (viz., obtaining self certification along with necessary
documentary proof where necessary and completing personal verification in case of high
value accounts) is reviewed to ensure error-free reporting of relevant information in
respect of identified reportable accounts in form 61B.

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