KYC Standards and Money Laundering Quiz
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Questions and Answers

What is the purpose of KYC standards as specified by the RBI?

  • To facilitate faster loan processing
  • To ensure compliance with tax regulations
  • To enhance customer satisfaction in banking
  • To prevent money laundering and financing of terrorism (correct)

Which document is used by branches for accepting service requests for non-financial customer services?

  • Customer Identification Document
  • Account Opening Form
  • Loan Application Form
  • Customer Request Form (CRF-1) (correct)

What does the term 'money laundering' encompass?

  • Concealing funds obtained from legal business activities
  • Using money from legal sources for illegal activities
  • Only the process of depositing illegal funds
  • Cleansing 'dirty money' through legitimate transactions (correct)

What is the role of CKYCR in the account opening process?

<p>To ensure all new accounts are opened under a unified system (D)</p> Signup and view all the answers

According to the Prevention of Money Laundering Act, 2002, what constitutes an offence of money laundering?

<p>Concealing the source of crime-related funds (B)</p> Signup and view all the answers

Which services are handled at the centralized location (CPC)?

<p>Requests entered through CRM from CRF-1 (A)</p> Signup and view all the answers

What does the acronym E-KYC stand for?

<p>Electronic Know Your Customer (C)</p> Signup and view all the answers

What is one of the main objectives of standardizing customer request forms?

<p>To ensure consistency and efficiency in processing requests (B)</p> Signup and view all the answers

What is required before opening an account for a Politically Exposed Person (PEP)?

<p>Approval from a senior level (C)</p> Signup and view all the answers

What is the primary reason for enhanced monitoring of PEPs' accounts?

<p>To mitigate the high risk associated with their accounts (B)</p> Signup and view all the answers

What should happen if an existing customer becomes a PEP?

<p>Seek senior management's approval to continue the relationship (C)</p> Signup and view all the answers

Who are considered to be Politically Exposed Persons (PEPs)?

<p>Individuals entrusted with prominent public functions in a foreign country (B)</p> Signup and view all the answers

What should be included in the Account Opening Form for PEPs?

<p>Declaration of PEP status or relatives (D)</p> Signup and view all the answers

What should banks avoid when gathering information from PEPs?

<p>Putting customers under inconvenience (C)</p> Signup and view all the answers

What is one of the guidelines regarding the Account Opening Form for PEPs?

<p>It requires clear declaration of PEP or relative status (B)</p> Signup and view all the answers

Which of the following is NOT a type of PEP as defined by the Reserve Bank of India?

<p>Local business owners (B)</p> Signup and view all the answers

What should be verified in addition to KYC documents during the registration of companies?

<p>Company master data from the Ministry of Corporate Affairs (C)</p> Signup and view all the answers

Which entity’s defaulter list should be consulted?

<p>Credit Information Companies (A)</p> Signup and view all the answers

What should be examined to identify the governance of an entity?

<p>The control structure (D)</p> Signup and view all the answers

When banks manage pooled accounts, which clients do these accounts usually represent?

<p>Mutual funds and pension funds (B)</p> Signup and view all the answers

Which type of accounts should not be opened by banks when there is client confidentiality involved?

<p>Accounts of professional intermediaries bound by confidentiality (B)</p> Signup and view all the answers

What should be determined from the source of funds?

<p>The legitimacy of the funds (B)</p> Signup and view all the answers

Which of the following is necessary when funds are co-mingled at the bank level?

<p>Identifying the beneficial owners (B)</p> Signup and view all the answers

In terms of client due diligence, what should branches satisfy themselves about concerning intermediaries?

<p>They are regulated and supervised (A)</p> Signup and view all the answers

What process is compromised if existing account holders do not attest to the new account holder's signature?

<p>Compliance with operational mandates (D)</p> Signup and view all the answers

What is a consequence of not obtaining the new CIF linked to the existing bank account during an addition?

<p>Lack of updated customer records (D)</p> Signup and view all the answers

Why is certification of identification documents critical in account modifications?

<p>To prevent fraudulent activities (C)</p> Signup and view all the answers

What document must be obtained from the Karta in a Joint Hindu Family account?

<p>Declaration from the Karta (B)</p> Signup and view all the answers

What issue arises from not recording a customer's intent regarding nomination appropriately?

<p>Inadequate compliance with regulations (B)</p> Signup and view all the answers

Which of the following is specifically mentioned as not being handed over to depositors?

<p>Acknowledgment of receipt of nomination (B)</p> Signup and view all the answers

What is a consequence of not completing the DA1/DA2/DA3 forms in bank operations?

<p>Inaccurate nominee records (D)</p> Signup and view all the answers

What routine verification is neglected for office bearers of the Self Help Group (SHG)?

<p>KYC verification (A)</p> Signup and view all the answers

What is required from the authorized officer to validate their identity before making a declaration?

<p>A One Time Password (OTP) (A)</p> Signup and view all the answers

What does the application generate after the completion of the process?

<p>A transaction-id/reference-id number (C)</p> Signup and view all the answers

What is the primary requirement for accounts where a politically exposed person (PEP) is the beneficial owner?

<p>To obtain prior approval to continue the business relationship (C)</p> Signup and view all the answers

Which of the following must the authorized officer verify during the account establishment process?

<p>The live photograph matches the document's photo (A)</p> Signup and view all the answers

What is the first step to ensure Enhanced Due Diligence for non-face-to-face customers?

<p>Make payment from a KYC-complied account with another RE (A)</p> Signup and view all the answers

Which group of individuals is classified as Politically Exposed Persons (PEPs)?

<p>Heads of States, senior politicians, and military officers (B)</p> Signup and view all the answers

What information must be gathered about Politically Exposed Persons (PEPs) during account establishment?

<p>Information about sources of funds of family members (D)</p> Signup and view all the answers

In managing accounts of non-face-to-face customers, what must branches ensure concerning the first payment?

<p>It must come from a KYC-complied account at another bank (A)</p> Signup and view all the answers

What additional measures must be applied to customers identified as PEPs?

<p>Enhanced ongoing monitoring (A)</p> Signup and view all the answers

What must happen after the authorized officer verifies the customer's documents?

<p>The CAF is digitally signed and printed (C)</p> Signup and view all the answers

Which of the following is a responsibility of the authorized officer during the verification process?

<p>To ensure all necessary details in the CAF are filled properly (C)</p> Signup and view all the answers

Which of the following statements is true regarding client accounts opened by professional intermediaries?

<p>Clients should be identified at the time the account is opened (D)</p> Signup and view all the answers

What must the authorized officer do after capturing the customer's documents?

<p>Upload the scanned document into the system (D)</p> Signup and view all the answers

Which type of accounts might be held by branches managed by professional intermediaries?

<p>Pooled accounts for entities like mutual funds (A)</p> Signup and view all the answers

What additional procedures must be in place for non-face-to-face customers aside from usual identification?

<p>Specific and adequate procedures to mitigate higher risks (C)</p> Signup and view all the answers

What is an essential factor in managing accounts of non-face-to-face clients?

<p>Identifying the first payment source as safe (A)</p> Signup and view all the answers

Flashcards

Money Laundering

The practice of disguising the origin of illegally obtained money to make it appear legitimate.

Know Your Customer (KYC)

A set of guidelines and procedures designed to identify and verify the identities of customers to prevent financial crime.

Anti-Money Laundering (AML) and Combating of Financing of Terrorism (CFT)

Regulations and standards put in place to combat money laundering and terrorist financing.

Electronic Know Your Customer (E-KYC)

A process used to verify the identity of a customer electronically, typically using digital documents and identity verification tools.

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Risk Categorization

A method of categorizing customers based on their risk profile, considering factors like financial standing, transaction history, and potential for money laundering.

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KYC Updation

The ongoing process of updating customer information to ensure accuracy and compliance with KYC regulations.

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Due Diligence

An investigation conducted to assess the legitimacy of a customer and their business activities.

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Risk Mitigation

Practices implemented to detect and prevent money laundering and fraud by analyzing financial transactions and customer behavior.

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Company Registration Verification

The process of verifying the existence and legitimacy of a company, typically through official records from the Ministry of Corporate Affairs (MCA) in India.

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De-Registered Company List

A list maintained by the Ministry of Corporate Affairs (MCA) detailing companies that are no longer registered in India.

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CIC Defaulter List

A list of companies or individuals identified by the Central Information Commission (CIC) for non-compliance or irregularities.

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Banned Entities by RBI

A list of individuals or entities prohibited from engaging in certain financial activities by the Reserve Bank of India (RBI).

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Control Structure

The structure of a business or organization, including its ownership, management, and control.

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Source of Funds

The process of identifying the origin of funds used by an individual or organization.

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Beneficial Owners

The individuals who ultimately own and control an organization.

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Risk Perception

The assessment of the potential risks associated with a particular client or transaction.

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Politically Exposed Persons (PEPs)

Individuals holding or having held prominent public positions in a foreign country, including heads of state, senior politicians, and military officers.

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Enhanced Monitoring for PEPs

Banks must have enhanced due diligence procedures for PEPs, both for new accounts and existing accounts where the customer later becomes a PEP.

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Customer Due Diligence (CDD)

The process of verifying a customer's identity and understanding their financial activities for risk assessment.

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Non-Face-to-Face Customers

When a bank has not had direct interaction with a customer during account opening, such as with Non-Resident Indians opening accounts remotely.

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Enhanced Due Diligence for Non-Face-to-Face Customers

Additional procedures must be applied for non-face-to-face customers to mitigate higher risks.

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Professional Intermediary

A professional intermediary (like a lawyer or financial advisor) acting on behalf of a client to open an account.

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Pooled Accounts

Bank branches have the option to hold pooled accounts managed by professional intermediaries on behalf of entities like mutual funds.

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First Payment for Non-Face-to-Face Customers

The first payment for new non-face-to-face customers should be made through a KYC-compliant account at another bank, ensuring enhanced due diligence.

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Authorized Officer OTP Verification

A verification process using a one-time password (OTP) sent to the authorized officer's mobile number registered with the RE. This validates the officer's identity and serves as their digital signature on the declaration.

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Document Information Verification

The authorized officer must ensure that the document's information matches the customer's information entered in the CAF.

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Live Photo Verification

The authorized officer takes a live photo of the customer and compares it with the photo on the document.

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CAF Completion Process

The CAF is digitally signed by the authorized officer, printed, signed/thumb-printed by the customer, scanned, and uploaded. The original hard copy is returned to the customer.

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First Payment Verification

The customer's first payment is made through their KYC-compliant account with another RE for extra security and verification.

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Enhanced Due Diligence for PEPs

The process of gathering detailed information on the PEP, including financial sources, family members, and close relatives, before establishing an account relationship.

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PEP Identity Verification

The PEP's identity is verified before accepting them as a customer to ensure they are who they claim to be.

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Attested Signature for Joint Accounts

When adding a new account holder to an existing account, getting the signature of the new account holder attested by existing holders as per the account mandate.

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Deposit Account Change Procedures

Obtaining all necessary documents and approval from the appropriate authority before processing requests for changes in deposit accounts, such as adding/deleting names, changing signatures, or operational instructions.

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Updated AOF Signature

Obtaining a new signature on the updated portion (Part II) of the Account Opening Form (AOF) when a new account holder is added.

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Linking New CIF to Account

Linking the new customer's profile (CIF) to the existing bank account when adding a new account holder.

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Record Keeping and Fraud Detection

Maintaining proper records of modifications made to deposit accounts and sending letters to the existing account holder as a fraud prevention measure.

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Document Verification for Power of Attorney

Obtaining certified copies of required documents for customer identification, including registration certificates, trust deeds, valid proofs of identity and address for individuals holding power of attorney.

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Document Verification for Joint Hindu Family Accounts

Obtaining certified copies of documents like a declaration from the Karta (head of the family), proof of identification of the Karta, and a prescribed joint Hindu family letter signed by all adult co-parceners.

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KYC Verification for SHG

Verifying KYC (Know Your Customer) information of all office bearers of a Self-Help Group (SHG) and extending nomination facilities.

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What are Politically Exposed Persons (PEPs)?

Individuals holding or having held prominent public roles in a foreign country; examples include Heads of State, politicians, senior government and military officials, etc.

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Account Opening for PEPs

Senior management approval is necessary to open an account for a PEP, based on the bank's risk assessment and customer acceptance policy.

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Enhanced Monitoring of PEP Accounts

Ongoing monitoring of PEP accounts is mandatory to detect suspicious activities and prevent money laundering.

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PEP Status Change for Existing Customers

If an existing customer subsequently becomes a PEP, senior management's approval is required to maintain the business relationship.

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PEP Declaration in Account Opening Form

Customer declaration of PEP status is mandatory in the account opening form, with options to indicate if they are a PEP, related to a PEP, or neither.

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Gathering Information from PEP Customers

Financial institutions must collect sufficient information from PEP customers while avoiding undue inconvenience or denial of banking services.

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Risks Associated with PEP Accounts

PEPs' accounts are subject to heightened risk, requiring comprehensive measures to mitigate potential risks like money laundering and corruption.

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RBI KYC Guidelines for PEPs

The Reserve Bank of India's Know Your Customer (KYC) guidelines emphasize the importance of proper due diligence when opening and managing PEP accounts.

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Study Notes

SBI Training Manual - Summary

  • This is a role guide cum certification manual for the Liability Central Processing Centre (LCPC) at SBI, updated March 31, 2024.
  • Role-Based Certifications (RBCs) were introduced in 2018 to equip staff with knowledge and skills for banking challenges.
  • The manual has been updated to include SharePoint, videos, PPTs, quizzes, and booklets for self-learning.
  • Learning objectives are provided at the beginning of each chapter, along with recap questions and sample case studies.
  • The manual aims to equip staff with the expertise needed for their roles, ensuring customer satisfaction and mitigating risks.
  • The manual covers topics such as savings bank/current account opening in a branch, C-KYC introduction, non-personalized welcome kits (NPWKs), foreign accounts tax compliance act (FATCA), and cyber frauds.
  • The manual details KYC guidelines, common irregularities, and compliance aspects for various account types, including individual and entity accounts.
  • KYC policy has four elements: Customer Acceptance Policy (CAP), Risk Management, Customer Identification Procedures, and Monitoring of Transactions.
  • It also defines beneficial owners in different scenarios (e.g., companies, partnerships, and unincorporated associations).
  • The manual outlines the procedures for opening accounts and KYC compliance for different customer types, including politically exposed persons (PEPs).
  • It also addresses small accounts, transactions, and KYC updation procedures (both for individuals and non-individuals), including aspects for non-face-to-face customers.
  • It covers procedures for dealing with different types of customers, including those related to self-help groups (SHGs) and Hindu Undivided Families (HUFs).
  • The manual details procedures for the handling of various KYC documents and provides guidance on dealing with discrepancies.
  • It also provides details of the deemed Officially Valid Documents (OVDs).
  • The manual includes important clarifications and details on various aspects related to KYC updation, including periodic updation of KYC criteria and processes for different customer types (e.g., high-risk, medium-risk, low-risk customers) and different account types.
  • It specifies the required documents, and procedures for different categories of customers and accounts that should be followed by branches and the LCPC.
  • The manual includes illustrative examples of situations and potential discrepancies.
  • The manual provides a detailed index of topics and page numbers.

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LCPC Role Guide Cum Certification Manual PDF

Description

Test your knowledge on the Know Your Customer (KYC) regulations set by the Reserve Bank of India (RBI) and understand the implications of money laundering. This quiz covers critical concepts such as the roles of CKYCR and E-KYC, and guidelines for Politically Exposed Persons (PEPs).

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