Reserve Bank of India (RBI) on February 25, 2016 (bearing ref no. RBI/DBR/2015-16/18 DBR.AML.BC. No.81/14.01.001/2015-16) notified the Know your customer (KYC) Directions, 2016 (KYC Directions, 2016), inter alia, directing that every Regulated Entity shall have a Know your customer (KYC) Policy duly approved by the Board of Directors. These directions have been issued by the RBI in terms of the provisions of Prevention of Money-Laundering Act, 2002 (PMLA) and the Prevention of Money-Laundering (Maintenance of Records) Rules 2005.
In view of the same, Uni-Com Fincorp Private Limited (“Company”) has adopted the said KYC guidelines with suitable modifications depending on the activities undertaken by it. The Company has ensured that a proper policy framework on KYC and AML measures are formulated in line with the prescribed RBI guidelines and duly approved by Board of Directors of Company.
The company shall also communicate its KYC norms to its customers. The company shall ensure that the implementation of the KYC norms is the responsibility of the entire organization.
The company’s Board of Directors and the management team are responsible for implementing the KYC norms hereinafter detailed, and also to ensure that its operations reflect its initiatives to prevent money laundering activities.
Objectives, Scope and Application of the Policy
The objective of KYC guidelines is to prevent the Company from being used, intentionally or unintentionally, by criminal elements for money laundering activities or terrorist financing activities. KYC procedures shall also enable the Company to know and understand its Customers and its financial dealings better which in turn will help it to manage its risks prudently. Thus, the KYC policy has been framed by the Company for the following purposes:
- To prevent criminal elements from using Company for money laundering activities
- To enable Company to know and understand its Customers and their financial dealings better which, in turn, would help the Company to manage risks prudently
- To put in place appropriate controls for detection and reporting of suspicious activities in accordance with applicable laws/laid down procedures
- To comply with applicable laws and regulatory guidelines
- To ensure that the concerned staff are adequately trained in KYC/AML/CFT procedures. This KYC Policy is applicable to all branches/offices of the Company and is to be read in conjunction with related operational guidelines issued from time to time. This Policy includes nine (9) key elements
- Customer Acceptance Policy (CAP)
- Customer Identification Procedures (CIP)
- Monitoring of Transactions
- Risk Management
- Training Programme
- Internal Control Systems
- Record Keeping
- Appointment of Principal Officer
- Reporting to FIU – India
Definition of Customer
For the purpose of KYC policy, a ‘Customer’ means a person as defined under KYC policy of RBI (and any amendment from time to time by RBI) which are at present as under :-
- A person or entity that maintains an account and/or has a business relationship with the bank
- One on whose behalf the account is maintained (i.e. the beneficial owner)
- Beneficiaries of transactions conducted by professional intermediaries, such as Stock Brokers, Chartered Accountants, Solicitors etc. as permitted under the law
- Person or entity connected with a financial transaction which can pose significant reputational or other risks to the bank, say, a wire transfer or issue of a high value demand draft as a single transaction
A “Person” shall have the meaning as defined under KYC policy of RBI (and any amendment from time to time by RBI) which at present is as follows:
‘Person’ shall include:
- An Individual
- A Hindu Undivided Family
- A Company
- A Firm
- An association of persons or a body of individuals, whether incorporated or not
- Every artificial juridical person, not falling within any one of the above person (i to v);
- Any agency, office or branch owned or controlled by any one of the above persons (i to vi)
Beneficial Owner (BO)
As per Government of India Notification dated February 12, 2010 – Rule 9, sub-rule (1A) of PMLA Rules – ‘Beneficial Owner’ means the 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 exercises ultimate effective control over a juridical person.
Determination of Beneficial Owner (BO) The beneficial owner shall be determined as under –
where the client is a company, the beneficial owner is the natural person(s), who, whether acting alone or together, or through one or more juridical person, has a controlling ownership interest or who exercises control through other means.
Explanation. – For the purpose of this sub-clause
- “Controlling ownership interest” means ownership of or entitlement to more than twenty-five percent of shares or capital or profits of the company
- Control” shall include the right to appoint majority of the directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreements or voting agreements
where the client is a partnership firm, the beneficial owner is the natural person(s), who, whether acting alone or together, or through one or more juridical person, has ownership of/entitlement to more than fifteen percent of capital or profits of the partnership;
where the client is an unincorporated association or body of individuals, the beneficial owner is the natural person(s), who, whether acting alone or together, or through one or more juridical person, has ownership of or entitlement to more than fifteen percent of the property or capital or profits of such association or body of individuals
where no natural person is identified under (a) or (b) or (c) above, the beneficial owner is the relevant natural person who holds the position of senior managing official
where the client is a trust, the identification of beneficial owner(s) shall include identification of the author of the trust, the trustee, the beneficiaries with fifteen percent or more interest in the trust and any other natural person exercising ultimate effective control over the trust through a chain of control or ownership; and
where the client or the owner of the controlling interest is a company listed on a stock exchange, or is a subsidiary of such a company, it is not necessary to identify and verify the identity of any shareholder or beneficial owner of such companies.
Customer Acceptance Policy (“CAP”)
Customer Identification means identifying the Customer and verifying his/her identity by using reliable, independent source documents, data or information. Company shall obtain documents as per Annexure-1 for identification and residential proof.
Besides risk perception, the nature of information/documents required would also depend on the type of Customer (individual, corporate etc). For Customers that are natural persons, Company shall obtain sufficient identification with regard to
- Identity of the Customer
- His Address/Location
- Recent photograph
For customers that are legal persons or entities, the Company shall
- Verify the legal status of the legal person/ entity through proper and relevant documents
- Verify that any person purporting to act on behalf of the legal person/entity is so authorized and identify and verify the identity of that person
The Company will formulate and implement a Customer Identification Programme to determine the true identity of its Customers keeping the above in view. The Policy shall also cover the Identification Procedure to be carried out at different stages, i.e. while establishing a relationship; carrying out a financial transaction or when there is a doubt about the authenticity/veracity or the adequacy of the previously obtained Customer Identification data.
Periodic updation : The Company shall periodically update Customer Identification Data after the transaction is entered. The periodicity of updating of Customer Identification data shall be once in ten years in case of Low Risk Category Customers and once in two years in case of High and once in 8 years for Medium Risk Categories.
No Fresh proof will be required at the time of periodic updation if there is no change in the particulars of OVD and a self-declaration in this behalf to be received from Customer.
Monitoring Of Transctions
The Company must pay special attention to all complex, unusually large transactions and all unusual patterns which have no apparent economic or visible lawful purpose. The Company must also have 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 in order to effectively control and reduce the risk. Transactions that involve large amounts of cash inconsistent with the normal and expected activity of the customer should be noted and must be reported to the Corporate Office.The Company shall ensure that it has an appropriate mechanism for monitoring the suspicious transactions. Suspicious Transactions means a transaction whether or not made in cash which, to a person acting in good faith
Gives rise to a reasonable ground of suspicion that it may involve the proceeds of crime
Appears to be made in circumstances of unusual or unjustified complexity
Appears to have no economic rationale or bonafide purpose
Maintenance Of Records of Transactions
- The company shall continue the system of maintaining proper record of transactions as required under section 12 of the PMLA read with Rule 3 of the PML Rules
- The company shall continue to ensure that its branches (if any) maintain proper record of all cash transactions (deposits and withdrawals) of Rs.10 lakhs and above in the prescribed format The internal monitoring system should have an inbuilt procedure for reporting of such cash transactions and those of suspicious nature whether made in cash or otherwise, to the Principal Officer on fortnightly basis. However, there is no need to furnish NIL reports.
Records To Contain The Specified Information
The company shall ensure that the records referred in Rule 3 of the PML Rules contain the following information
- The nature of the transactions
- The amount of the transaction and the currency in which it was denominated
- The date on which the transaction was conducted
- The parties to the transaction
Maintenance & Preservation of Records
In accordance with Section 12 of PMLA, the company will take appropriate steps to evolve a system for proper maintenance and preservation of account information in a manner that allows data to be retrieved easily and quickly whenever required or when requested by the competent authorities. Further, the Company must also preserve and maintain all necessary records pertaining to the identification of the customer and his address (e.g. copies of documents like passports, identity cards, driving licenses, PAN, utility bills etc.) obtained while opening the account and during the course of business relationship for at least ten years from the date of cessation of transaction between the Company and the customer, so as to provide, if necessary, evidence for prosecution of persons involved in criminal activity.
Reporting To Financial Intelligence Unit - India
The company as per the proviso of Section 12 of PMLA wherever it notices a reason to believe that a single transaction or series of transactions are integrally connected to each other and have been valued below the prescribed value so as to defeat the provisions of this section, will furnish to the Director, FIU such information/transaction after retaining a copy for records within the prescribed period at the following address
Financial Intelligence Unit- India
6th Floor, Hotel Samrat
The company assures to strictly comply with all formalities including timely submission of all applicable report and returns in the prescribed format with regards to cash & suspicious transaction qualifying under PML Rules directly to FIU-IND through the designated Principal Officer(s) of the company. However, as had been earlier advised, there is no need for submission of NIL report in respect to the above. Further, the company and its employees shall maintain strict confidentiality of the fact of furnishing/reporting details of suspicious transactions.
The Board of Directors of the Company shall ensure that an effective KYC programme is put in place by establishing appropriate procedures and ensuring their effective implementation. It shall cover proper management oversight, systems and controls, segregation of duties, training and other related matters.
The Company shall, in consultation with their Board, devise procedures for creating Risk Profiles of their existing and new customers and apply various Anti Money Laundering measures keeping in view the risks involved in a transaction, account or business relationship.
Internal Control System
The Company’s internal audit and compliance functions shall have an important role in evaluating and ensuring adherence to the KYC policies and procedures. As a general rule, the compliance function shall provides independent evaluation of the Companies own policies and procedures including legal and regulatory requirements. The Company shall ensure that its audit machinery is staffed adequately with individuals who are well-versed in such policies and procedures. Concurrent / Internal Auditors shall specifically check and verify the application of KYC procedures at the branches and comment on the lapses observed in this regard. The compliance in this regard shall be put up before the Audit Committee of the Board on quarterly intervals.
General Customer Education
Company shall educate Customers on the objectives of the KYC programme so that Customer understands and appreciates the motive and purpose of collecting such information. The Company shall prepare specific literature/ pamphlets, terms and conditions etc. so as to educate the Customer about the objectives of the KYC programme. The front desk staff shall be specially trained to handle such situations while dealing with Customers.
Introduction of New Technologies
Company shall pay special attention to any money laundering threats that may arise from new or developing technologies including online transactions that may favor anonymity, and take measures, if needed, to prevent their use in money laundering. Company shall ensure that any remittance of funds by way of demand draft, mail/telegraphic transfer or any other mode for any amount is affected by cheques and not against cash payment
Applicability to Branches
This Policy shall also be applicable to the branches.
Closure of Accounts/Termination of Financing/Business Relationship
Where Company is unable to apply appropriate KYC measures due to non-furnishing of information and/or non-operation by the Customer, Company shall terminate Financing/Business Relationship after issuing due notice to the Customer explaining the reasons for taking such a decision. Such decision shall be taken with the approval of Chairman & Managing Director or key managerial persons authorized for the purpose.
KYC for the Existing Accounts
While the KYC Policy will apply to all new Customers, the same would be applied to the existing Customers on the basis of materiality and risk. However, transactions with existing Customers would be continuously monitored for any unusual pattern in the operation of the accounts.
Updation in KYC Policy of Company
After taking the due approval from the Board of Directors NBFC shall make the necessary amendments/modifications in the KYC/ AML/ CFT Policy or such other related guidance notes of Company, to be in line with RBI or such other statutory authority’s requirements/updates/ amendments from time to time.
Suspicion of Money Laundering/Terrorist Financing
With a view to preventing NBFCs from being used, intentionally or unintentionally, by criminal elements for money laundering or terrorist financing, it was clarified that whenever there is suspicion of money laundering or terrorist financing or when other factors give rise to a belief that the customer does not, in fact, pose a low risk, Uni-Com Fincorp will carry out full scale customer due diligence (CDD) before opening an account.
Annexure-1 (KYC Dcouments)
For Individuals(for proof of identity)
- Aadhar Card
- Pan Card
- Voter’s Identity Card
- Driving Licence
- Identity card (subject to the bank’s satisfaction)
- Letter from a recognized public authority or public servant verifying the identity and residence of the customer to the satisfaction of bank
- any one document which provides customer information to the satisfaction of the Company will suffice
Correct Permanent Address
- Telephone bill
- Bank Account statement
- Letter from any recognized public authority
- Electricity bill
- Letter from employer (subject to satisfaction of the Company) (Any one document which provides customer information to the satisfaction of the Company will suffice ) One recent passport size photograph except in case of transactions referred to in Rule 9(1)(b) of the PML Rules
- Certificate of incorporation and Memorandum & Articles of Association
- Resolution of the Board of Directors for acceptance of the transaction
- Copy of PAN allotment letter
- copy of telephone Bill In case of an NBFC
- Certificate of Registration issued by RBI In case of a section 25 company
- A copy of the letter issued by the Regional Director
- Name of the company
- principal place of business mailing
- Address of the Company
- Telephone/Fax Number
For trusts & foundations Information required
- Certificate of registration, if registered
- Power of Attorney granted to transact business on its behalf
- Any officially valid document to identify the trustees, settlors, beneficiaries and those holding Power of Attorney, founders/managers/ directors and their addresses
- Resolution of the managing body of the foundation/association
Accounts of Partnership Firms
- Registration certificate, if registered
- Partnership Deed
- Power of Attorney granted to a partner or an employee of the firm to transact business on its behalf
- Any officially valid document identifying the partners and the persons holding the Power of Attorney and their addresses
- Telephone bill in the name of firm/partners
Accounts of Proprietorship Concerns
- Registration certificate (in the case of a registered concern)
- Certificate/licence issued by the Municipal authorities under Shop & Establishment Act
- Sales and income tax returns
- CST/VAT Certificate
- Certificate/registration document issued by Sales Tax/Service Tax/Professional Tax authorities
- Licence issued by the Registering authority like Certificate of Practice issued by Institute of Chartered Accountants of India, Institute of Cost Accountants of India, Institute of Company Secretaries of India, Indian Medical Council, Food and Drug Control Authorities, registration/licensing document issued in the name of the proprietary concern by the Central Government or State Government Authority/ Department, etc. Banks may also accept IEC (Importer Exporter Code) issued to the proprietary concern by the office of DGFT as an identity document for opening of the bank account etc.
- The complete Income Tax return (not just the acknowledgement) in the name of the sole proprietor where the firm’s income is reflected, duly authenticated/ acknowledged by the Income Tax Authorities.
- Utility bills such as electricity, water, and landline telephone bills in the name of the proprietary concern.
Any two of the above documents would suffice. These documents should be in the name of the proprietary concern.