ROYAL EBANK KNOW YOUR CUSTOMER POLICY
"Know Your Customer" (KYC) is a set of guidelines aimed at preventing banks from being used intentionally or unintentionally by criminal elements for committing financial frauds, transferring or deposits of funds derived from criminal activity or for financing terrorism. This policy document is a consolidation of various guidelines issued by Reserve Bank as also our Bank for proper identification of an account holder/ customer and for scrutiny/ monitoring of large value cash transaction or transaction of a suspicious nature.
OBJECTIVES OF KYC POLICY
1. To lay down explicit criteria for acceptance of customers.
2. To establish procedures to verify the bona-fide identification of individuals/ non individuals for opening of account.
3. To establish processes and procedures to monitor high value transactions and /or transactions of suspicious nature in accounts.
4. To develop measures for conducting due diligence in respect of customers and reporting of such transactions.
DEFINITION OF CUSTOMER
For the purpose of KYC policy , a “customer” will be defined as :
1. A person or entity that maintains an account and/or has a business relationship with the Bank,
2. One on whose behalf the account is maintained (i.e. the beneficial owner);
3. Beneficiaries of transactions conducted by professional intermediaries such as Stock Brokers, Chartered Accountants, Solicitors etc. as permitted under the law, and
4. Any person or entity connected with a financial transaction which can pose significant reputation or other risks to the Bank, say a wire transfer or issue of a high value demand draft as a single transaction.
1. The Bank will have an elaborate standard for:
(i) obtaining comprehensive information regarding new customers at the initial stage and that of existing customers over a predetermined period, thereby establishing the bonafides of customers opening accounts with the Bank
(ii) for identifying high value transactions and transactions of a suspicious nature and keeping a watch on such transactions as well as for reporting them to law enforcing/ regulatory authorities
2. The Bank will lay down / spell clearly the document requirements and other information to be collected in respect of different categories of customers depending on perceived risk and keeping in mind the guidelines issued by Regulatory Authorities from time to time.
3. The Bank will ensure that a new account is not opened or an existing one is not closed where the Bank is unable to apply due diligence measures i.e. unable to verify the identity and / or obtain documents required as per the risk categorization due to non cooperation of the customer or non- reliability of the data/information furnished to the Bank. It will, however, have suitable built-in safeguards to avoid harassment of the customer. For example, decision to close an account will be taken at the level of controlling office after giving due notice to the customer explaining the reasons for such a decision;
4. The Bank will ensure that circumstance in which a customer is permitted to act or behalf of another person / entity will be clearly spelt out in conformity with the established law and practice of banking as there could be occasions when an account is operated by a mandate holder or where an account is opened by an intermediary in the fiduciary capacity.
5. The Bank will ensure that before opening an account there are adequate checks to ensure that the identity of the customer does not match with any person with known criminal back ground or with banned entities like individual terrorist or terrorist organizations.
Identification is an act of establishing who a person is. In the context of KYC it means establishing who a person purports to be and will involve identifying the customer and verifying his / her identities by using reliable and independent source documents, data or information. For this purpose the Bank will obtain sufficient information necessary to establish to its satisfaction the identity of each new customer, whether regular or occasional and the purpose of the intended nature of banking relationship.
In case of customers that are natural person the Bank will obtain sufficient identification data to verify:
- (a) the identity of customer
- (b) his / her address / location and
- (c) his/ her recent photograph
The true identity and bonafides of the existing customers and new potential customers opening accounts with the Bank and obtaining basic background information would be of paramount importance. The customer identification will be through an introductory reference from an existing account holder maintaining a satisfactorily conducted account or a person known to the Bank and on the basis of documents provided by the customer or through staff members knowing the potential customer or any other document from the indicative lists given in Annexure for identification and proof of residence. While the above set of documents should normally suffice to establish both the identity and the correct address of the applicant, wherever this is not so applicants will be asked to give an additional document e.g. a letter from the employer giving the correct address, credit card statement etc. In case of joint account, applicants who are not closely related to each other would be required to establish their identity and address independently.
For customers that are legal person or entities the Bank will:
- (a) verify the legal status of the legal person / entity through proper and relevant documents as mentioned in Annexure,
- (b) 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,
- (c) understand the ownership and control structure of the customer and determine who are the natural persons who ultimately control the legal person.
In case of client accounts opened by a professional intermediary the Bank will not only identify the client / beneficial owner but also satisfy itself that the intermediary is regulated and supervised and has adequately system in place to comply with KYC norms. The decision to open accounts of a Politically Exposed Person (PEP) will be taken only at the level of Branch Manager where the branch has another officer and at the level of controlling office where branch manager is the only officer. The PEPs will be defined as individuals who are or have been entrusted with prominent public functions in a foreign country e.g. Heads of States or of Governments, Senior politicians, Govt./ Judicial/ Military officers, senior executives of State owned corporations, important political party officials etc. For various types of non individual the documents stated against their names in Annexure and any other documents/ introduction that the Bank feels necessary to comply with KYC guidelines will be obtained for identification.
VERIFICATION OF GENUINENESS OF ADDRESS
In all instances of opening of new accounts a letter of thanks will be sent by the Bank by registered post at the recorded addresses to all customers and introducers with dual purpose, thanking them for opening the account with the Bank and for verification of genuineness of address furnished by the account holder. Undelivered envelopes in this regard will be followed up closely at the branch level. The branch may also contact the customer at the telephone number provided in the account opening form or other documents to verify the address and other details.
For the purpose of exercising due diligence on individual transactions in accounts, a 'Customer Profile' of individual account holders will be included in the account opening forms. The customer profile will contain information relating to the customers identity, social/ financial status, nature of business activity, information about the customers clients’ business and their location etc. While preparing the customer profile the Bank will take care to seek only such information from the customer which is relevant for the purpose of risk categorization and is not intrusive. The customer profile will be a confidential document and the details contained there in will not be divulged for cross selling or any other purpose. The information will be of two types namely mandatory and optional as stated below:
(A) Mandatory Information
- Source of funds
- Monthly Income
- Annual Turnover
- Date of Birth
- Any relative settled abroad
- Dealings with other banks
- Existing credit facilities
- Assets(approximate value)
- Expected turnover
(B) Optional Information
- Marital Status
- Educational Qualification
- Educational Qualification of spouse
- Details regarding children
- Information like Owns a car/two wheeler, credit card, LIC policy.
The prospective customer will not be insisted upon for providing the optional information.. Wherever Bank desires to collect any information about the customer for the purpose other than KYC requirement, it will not form part of the account opening form. Such information will be collected separately, purely on a voluntary basis in a form prescribed by the Bank after explaining the objective to the customer and taking customer’s express approval for the specific uses to which such information could be put. The Bank will also take care to see that implementation of the KYC guidelines in respect of customer acceptance, identification etc. do not result in denial of opening of new accounts and banking services to general public specially to those who are financially or socially disadvantaged.
The Bank generally insists on “ introduction “ by a known person. Introduction is a process of ascertaining the identity of a person and his acceptability for establishing business relationship and verifying the true identity of the intending customer before opening an account. When the Bank opens an account in the name of a customer, it has to render a number of services, including collection of cheques, in the ordinary course of business. It is, therefore, essential that the Bank is aware of the credentials of the prospective customer such as his profession, business address etc. through proper introduction and verification of antecedents of the account holder in each and every account.
Liabilities of the Introducer
While introduction is not a guarantee by the introducer of the account holder’s transaction with the Bank it will be expected that the introducer is in a position to identify/ trace the account holder in case of need. Therefore, the customers will be advised that they should not introduce any account unless they know the prospective account holder.
The Bank will categorize the customers according to the risk perceived to facilitate undertaking due diligence for the purpose of risk categorization:
(i) Low Risk
Low Risk individuals (other than high net worth) and entities whose identities and sources of wealth can be easily identified and the transactions in whose accounts by and large conform to known profile will be categorized as low – risk customers will include:
- (a) salaried employees whose salary structures are well defined
- (b) people belonging to lower economic strata of the society whose accounts show small balances and low turnover
- (c) Government departments/ Govt. owned companies regulators and statutory bodies etc. In such cases only the basic requirements of verifying the identity and location of customer will be sufficient
(ii) Medium / High Risk
The medium and high risk customers will be categorized on the basis of the customer’s back ground, nature and location of activity, country of origin, sources of funds and client profile. Medium Risk customers will include:
- (a) Non- resident customers
- (b) high net worth individuals,
- (c) trust, charitable organizations, Non Govt. Organization (NGO) and organization receiving donations
- (d) companies having closed family share holding or beneficial ownership.
High risk customer will typically include:
- (a) firms with nominee and Offshore structures
- (b) politically exposed persons (PEPs) of foreign origin
- (c) non face to face to customers and
- (d) person with dubious reputation as per public information available. The Bank will subject accounts of such customers to intensive due diligence.
IDENTIFICATION OF HIGH VALUE/ SUSPICIOUS TRANSACTIONS / TERRORISM FINANCE
Ongoing monitoring is an essential element of effective KYC procedure. Bank can effectively control and reduce its risk only if it has an understanding of the normal and reasonable activity of the customer so that it has the means of identifying transactions that fall outside the regular pattern of activity.
MONITORING OF CASH TRANSACTION
The cash transactions will be monitored in the following manner :
- a. The issuance of travelers cheques, demand drafts , mail transfers, and telegraphic transfer for EUR 5.000,00 and above will be permitted only by debit to customers’ accounts or against cheques and not against cash. Further, the applicants (whether customers or not) for the above transactions for amount exceeding EUR 5.000,00 will be required to submit the nature of transaction.
- b. The transactions involving cash withdrawals and/ or cash deposits for EUR 5.000,00 and above in deposit, cash credit or overdraft accounts will be monitored closely by the branches and record of details of such transactions will be kept in separate register.
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, cheques clearing, Loro/Nostro accounts, money exchange, Forex and wholesale banking, etc. Bank will gather sufficient information to understand fully the nature of the business of the correspondent/ respondent bank. Information on other bank’s management, major business activities, level of AML/ DFT 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 will be of special relevance. Similarly, the Bank will try to ascertain from publicly available information whether the other bank has been subject to any money laundering or terrorist financing investigation or regulatory action. Such relationship will be established only with the approval of a committee of executives headed by the Managing Director / CEO of the Bank while laying down clear parameters for approving such relationships. Proposals approved by the Committee will be invariably be put up to the Board at its next meeting for post facto approval. The responsibilities of each bank with whom correspondent banking relationship is established will be clearly documented. The Bank will also ensure 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. As correspondent bank the Bank will also ensure that the respondent bank is able to provide the relevant customer identification data immediately on request. The Bank will 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). The Bank will also guard against establishing relationships with respondent foreign financial institutions that permit their accounts to be used by shell banks. The Bank will be extremely cautious while continuing relationship 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. The Banks will 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.
Customer Identification and Verification Procedure
Features to be verified and documents that may be obtained from customers:
- Personal ID
- Letter from recognized public authority or public servant verifying the identity and residence of the customer to the satisfaction of bank
- Telephone bill
- Bank account statement
- any other document which provides customer information to the satisfaction of the bank will suffice)
- Legal name and status of the entity (Ltd, Corporation, Partnership, LLc, Holding,etc)
- Certificate of Incorporation
- Registered No. and Address of the entity
- Name of all statutory bodies (President, Directors, Secretary, etc)
- Name of all or majority shareholders
- Authorization to sign behalf the entity
- Power of Attorney grated to a partner or an employee of the firm to transact business on its behalf
- Principal place of business
- Identification of business activities
- Telephone/ FAX Number /E-mail