LCPC Role Guide Cum Certification Manual PDF

ROLE GUIDE CUM CERTIFICATION MANUAL Liability Central Processing Centre (LCPC) UPDATED AS ON 31/03/2024 Page 1 of 133 For Internal Circulation Only SBFI, CHETANA Page 2 of 133  FOR...

ROLE GUIDE CUM CERTIFICATION MANUAL Liability Central Processing Centre (LCPC) UPDATED AS ON 31/03/2024 Page 1 of 133 For Internal Circulation Only SBFI, CHETANA Page 2 of 133  FOREWORD Dear Role Holder, Role Based Certifications (RBCs) were introduced in our Bank in 2018 to equip our staff with the knowledge and skills to face the increasing challenges in the Banking Industry. The concept has received wide acclaim and has proved useful in providing focussed understanding of different roles and the proficiencies required to handle them. The emphasis has been on equipping learners with the practical applications along with the theoretical aspects of the subject. The number of RBCs has also been increased with the demand of the times. Based on inputs received from the participants and others associated with process, the manuals, the training, and the evaluation methods have undergone changes in the past few years. With the introduction of share- point, learners now have access, not only to the written matter, but also videos, PPTs, Quizzes, Booklets and other matter which facilitates self- learning and makes content easier to absorb. Chapters will now have the learning objectives at the beginning with a few recap questions and sample case let at the end. This will serve to imbibe information better, and learners will be able to understand its application in real-life situations. We at Strategic Training Unit, are committed to equip our staff with the expertise required in discharging their functions better, thereby ensuring customer satisfaction. This Role Guide cum Certification Manual will provide insights into the role you are currently performing, provide you with conceptual clarity and help in mitigating associated risks. We wish you all the best for a successful and enriching journey in your current role. Stay safe and healthy! With Best Wishes, CHIEF GENERAL MANAGER & HEAD (STU) Page 3 of 133 Certificate Programme Liability Central Processing Centre (LCPC) INDEX Chapter No Topic Page No Savings Bank /Current Account opening in a Branch -Relevant guidelines 1 -Common irregularities & Deviations in External 5-48 Compliance as per value statement in RFIA -Common issues related to Account Opening -Enhanced Due Diligence in some customer type -Important aspects of KYC/AML guidelines C-KYC Introduction - CKYC Process at Branch and relevant Screen 2 Shots 49-65 -Common irregularities in CKYC -CKYC Dashboard and Monitoring Scrutiny of images, Physical AOF at LCPC & Process flow - Reasons of rejection AOFs and Documents sent 3 by the Branches (Observations made by LCPC) 66-86 - Compliance Issues: Bank's Top Management’s observed vide RAR-2019 pertaining to LCPC - Irregularities pointed out during RFIA inspection of LCPCs Non-Personalized Welcome Kits (NPWKs) -NPWK: Relevant guidelines 4 87-97 -NPWK: Process Flow Chart -NPWK: Relevant issues Foreign Accounts Tax Compliance Act (FATCA) and Common Reporting Standards (CRS) - Onus of Compliance and implications of non- compliance - Some irregularities/errors observed at operating units’ level and corrective actions 98-107 5 - Operational Due Diligence for Onboarding of New Individual & Entity Accounts - Relationship Manager and his Roles and Responsibilities 6 CYBER FRAUDS AND PREVENTION STRATEGIES 111-132 Page 4 of 133 Chapter-1: Savings Bank /Current Account opening in a Branch Learning Objectives: To understand the KYC Guidelines and its implement in true spirit while opening the Savings Bank and Current Accounts of different constituents. Getting conceptual understanding and rationales for other related issues such as E-KYC, Risk Categorisation, KYC updation, Due Diligence in various types of customers, some common irregularities observed by RFIA to avoid recurrence, and this is how to mitigate the risk and enhance the compliance level. Contents: At present the following services are offered through LCPC 1. Opening of account by branches through C-KYCR process – i.e., post CKYCR. In this case all the new accounts that shall be opened will be through the process of CKYCR / and using new account opening forms only. 2. There are other Non-financial Customer Services requests that have been distributed to be handled between Branch and LCPC. The bank has standardised the Customer requests form (CRF-1 and CRF-2) and each set of CRF contains 2 pages namely Part A and Part B. The service requests received through CRF-1 will be accepted at Branch and will be entered in CRM for further processing at a centralized location (CPC). Whereas the service requests accepted through CRF- 2 will be executed at the Branch. In this chapter we shall see which all services are to be handled at branch and LCPC. Let us begin this chapter with KYC guidelines RBI has specified KYC standards. KYC standards are required under Anti Money Laundering (AML) and Combating of Financing of Terrorism (CFT). Section 3 of the Prevention of Money Laundering Act, 2002 (PMLA) has defined the “offence of money laundering” as under: “Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime (including its concealment, possession, acquisition or use) and Page 5 of 133 projecting or claiming it as untainted property shall be guilty of offence of money laundering”. Money launderers use the banking system for cleansing ‘dirty money' obtained from criminal activities with the objective of hiding/disguising its source. The term money laundering would also cover financial transactions where the end use of funds goes for financing of terrorism irrespective of the source of the funds. Section 12 of PMLA places the following obligations on the Bank:- i.maintaining a record of prescribed transactions ii.furnishing information of prescribed transactions to the specified authority iii.verifying and maintaining records of the identity of its clients (in other words complying with the KYC requirements) and identifying the beneficial owners, if any, of such clients iv.Preserving records in respect of (i) and (ii) above for a period of five years from the date of transactions, and in respect of (iii) above for a period of five years after the cessation of relationship with the clients in respect of account opening forms and KYC documents. The KYC policy has the following four elements i.Customer Acceptance Policy (CAP) – it lays down the criteria for accepting a customer (natural or juridical). The idea is that no account should be opened in anonymous / fictitious / benami names which may later on be used for money laundering. ii.Risk Management – under this all the customers are categorised under Low, Medium and High-Risk category based on criteria given. This is meant for monitoring of accounts. iii.Customer Identification Procedures (CIP) - Customer identification means undertaking customer due diligence (CDD) measures (either simplified or enhanced due diligence) while commencing an account-based relationship including identifying and verifying the customer and the beneficial owner on the basis of one of the Officially Valid Documents (OVDs). iv.Monitoring of Transactions – based on complexity / trend / unusual pattern of transactions in the account Suspicious Transaction Report (STR) / Suspicious Activity Report (SAR) / Cash Transactions Report (CTR) / Counterfeit Currency Page 6 of 133  Report (CCR) / Non-Profit Organisations Transactions Report (NTRs) or Cross Border Wire Transaction Report, shall be filed with Financial Intelligence Unit – India (FIU-IND). The reports may be system generated or subjective (escalated based on alerts or information outside the system). There are certain definitions that help us understand the KYC directions clearly: 1. Beneficial Owner(BO) Beneficial owner is an individual who ultimately owns or controls a client of a reporting entity or the person on whose behalf a transaction is being conducted (a) W here the customer is a company, the beneficial owner is the natural person(s),who, whether acting alone or together, or through one or more juridical persons, has/have a controlling ownership interest or who exercise control through other means. “Controlling ownership interest” means ownership of/entitlement to more than 10percent of the 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 i ncluding by virtue of their shareholding or management rights or shareholders agreements or voting agreements. (b) Where the customer 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/have ownership of/entitlement to more than 10 per cent of capital or profits of the partnership. (c) Where the customer 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/have ownership of/entitlement to more than 15 per cent of the property or capital or profits of the unincorporated association or body of individuals. (d) Where the customer is a trust, the identification of beneficial owner(s) shall include identification of the author of the trust, the trustee, the beneficiaries with 10%or more interest in the trust and any other natural person exercising ultimate effective control over the trust through a chain of control ownership. Exemption from identification of BO: The exemption from BO identification has been aligned with that provided in the PML Rules, 2005, such that where the customer or the owner of the Page 7 of 133 controlling interest is (i) an entity listed on a stock exchange in India, or (ii) is an entity resident in jurisdictions notified by the Central Government and listed on stock exchanges in such jurisdictions, or (iii) is a subsidiary of such listed entities; it is not necessary to identify and verify the identity of any shareholder or beneficial owner of such an entity SL Type Beneficial Steps to be undertaken Documents from No of Owner(s) where Custo Beneficial Owner mer is verified g. Self The Office a) Customer Information sheet to be obtained from each Office Bearer. b) Customer Due Resolution of the Help Bearers e.g. Diligence to be carried out for each Office Bearer as is required in case of an Individual SHG Groups President, Customer. KYC details of each of the Office Bearer along with one copy of Officially Valid (SHGs) Secretary and/or Document (OVD), PAN/Form 60 and photograph to be obtained. c) CIF of the office Treasurer or the bearer to be created as per the information given in the Customer Information sheet and Group Leaders linked with SHG account. d) In case of Legacy accounts, the Office Bearers may already will be the be maintaining individual accounts with the branch and thus, already have CIF beneficial number(s). In such cases, the CIF, already available in CBS, shall be linked with the CIF of owners. the SHG, and new AOF / CIS / KYC Documents etc. shall not be insisted. h. Hindu Karta a) Customer Information sheet to be obtained from Karta of HUF. b) Customer Due HUF Deed Undivi Diligence to be carried out for Karta of HUF as is required in case of an Individual ded Customer. KYC details of Karta along with one copy of Officially Valid Document (OVD), Family PAN/Form 60 and photograph to be obtained. c) CIF of Karta to be created as per the information given in the Customer Information sheet and linked with HUF account. d) In case of Legacy accounts, the Karta of HUF may already be maintaining individual account with the branch and thus, already have CIF number. In such cases, the CIF of Karta, already available in CBS, shall be linked with the CIF of the HUF, and new AOF / CIS / KYC Documents etc. shall not be insisted. Further it may be noted that: a) Annexure II or IV is not required to be obtained in case of HUF / SHG customers. Small Account: means a savings account which is opened in terms of subrule (5) of the PML Rules, 2005.Small Accounts entails following limitations: (a) the aggregate of all credits in a financial year does not exceed Rupees one lakh. (b) the aggregate of all withdrawals and transfers in a month does not exceed Rupees ten thousand; and (c) the balance at any point of time does not exceed Rupees fifty thousand. [Provided, that this limit on balance shall not be considered while making deposits through Government grants, welfare benefits and payment against procurements.] (xxi) Transaction: means a purchase, sale, loan, pledge, gift, transfer, delivery or the arrangement thereof and includes: (a) opening of an account. (b) deposits, withdrawal, exchange or transfer of funds in whatever currency, whether in cash or by cheque, payment order or other instruments or by electronic or other non-physical means. (c) the use of a safety deposit box or any other form of safe deposit (d) entering any fiduciary relationship. (e) any payment made or received, in whole or in Page 8 of 133 part, for any contractual or other legal obligation; or (f) establishing or creating a legal person or legal arrangement. (xxii) Video based Customer Identification Process (V-CIP): An alternate method of customer identification with facial recognition and customer due diligence by an authorised official of the Bank by undertaking seamless, secure, live, informed, consent based audio-visual interaction with the customer to obtain identification information required for CDD purpose, and to ascertain the veracity of the information furnished by the customer through independent verification and maintaining audit trail of the process. Such processes complying with prescribed standards and procedures shall be treated on par with face-to-face CIP process For further details, please refer to the Standard Operating Procedure (SOP) Operations in BSBD- Small Accounts (Liberalised KYC), Annexure-I in terms of Cir. No. NBG/FI & MM/BC/CSP/11/2021 – 22 Dated 22 Oct 2021 e-Circular Department: OPERATIONS - KYC Sl.No.: 358/2023 - 24 Circular No.: R&DB/OPS-KYC/KYC/3/2023 - 24 Date: Mon 24 Jul 2023 Officially Valid Document (OVD): means the Passport, the Driving Licence, Proof of possession of Aadhaar Number, the Voter's Identity Card issued by the Election Commission of India, Job Card issued by NREGA duly signed by an officer of the State Government and Letter issued by the National Population Register containing details of name and address. Provided that, (a) where the customer submits his proof of possession of Aadhaar number as an OVD, he may submit it in such form as are issued by the Unique Identification Authority of India. (b) where the OVD furnished by the customer does not have updated address, the following documents or the equivalent e-documents thereof 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. Clarification: The Page 9 of 133 Deemed OVD should be in the name of the customer (c) the customer shall submit OVD with current address within a period of three months of submitting the documents specified at ‘b’ above (d)where the OVD presented by a foreign national does not contain the details of address, in such case the documents issued by the Government departments of foreign jurisdictions and letter issued by the Foreign Embassy or Mission in India shall be accepted as proof of address. Explanation-1: For the purpose of this clause, a document shall be deemed to be an OVD even if there is a change in the name subsequent to its issuance provided it is supported by a marriage certificate issued by the State Government or Gazette notification, indicating such a change of name. 11 | P a g e K Y C Policy Version: 2023/2.0 (xvi) Offline verification: shall have the same meaning as assigned to it in clause (pa) of section 2 of the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016 (18 of 2016). UPDATION/ PERIODIC UPDATION OF KYC Bank shall adopt a risk-based approach for periodic updation of KYC. However, periodic updation shall be carried out at least once in every two years for high-risk customers, once in every eight years for medium risk customers and once in every ten years for low-risk customers from the date of opening of the account / last KYC updation. Individuals: i.No change in KYC information: In case of no change in the KYC information, a self-declaration from the customer in this regard shall be obtained through customer’s email-id registered with the Bank, customer’s mobile number registered with the Bank, ATMs, digital channels (such as online banking / internet banking, mobile application of Bank), letter etc. ii. Change in address: In case of a change only in the address details of the customer, a self-declaration of the new address/ self-declaration along with copy of an OVD shall be obtained from the customer through customer’s email-id registered with the Bank, customer’s mobile number registered with the Bank, ATMs, digital channels (such as online banking / internet banking, mobile application of Bank), letter etc as under: a) Customers who have undergone Aadhaar based e-KYC authentication and wants to provide a current address which is different from the address as per the identity information available in the Central Identities Data Repository of UIDAI, a self-declaration by the customer to that effect shall be obtained. b) For all other customers, Self- declaration along with copy of an OVD (with current address) shall be obtained from the customer. iii) Accounts of customers, who were minor at the time of opening account, on their becoming major: In case of customers for whom account was opened when they were minor, fresh photographs shall be obtained on their becoming a major and at that time it shall be ensured that CDD documents as per the current CDD standards are available with the Bank. Wherever required, Bank may carry out fresh KYC of such customers i.e., customers for whom account was opened when they were minor, on their becoming a major. iv. Aadhaar OTP based e-KYC in non-face to face mode has been permitted to be used for periodic Updation. To clarify, conditions stipulated in Section 8.5.3 are not applicable in case of Updation/periodic Updation of KYC through Aadhaar OTP based e-KYC in non-face to face mode. Declaration of current address, if the current address is Page 10 of 133 different from the address in Aadhaar, shall not require positive confirmation in this case. Bank shall, however, ensure that the mobile number for Aadhaar authentication is same as the one available with it in the customer’s profile, in order to prevent any fraud. Customers other than individuals: (i)No change in KYC information: a. In case of no change in the KYC information of the Legal Entity (LE) customer, a self-declaration in this regard shall be obtained from the LE customer through its email id registered with the Bank, ATMs, digital channels (such as online banking / internet banking, mobile application of Bank), letter from an official authorized by the LE in this regard, board resolution etc. b. Further, it shall be ensured during this process that Beneficial Ownership (BO) information available with them is accurate and shall update the same, if required, to keep it as up to date as possible. ii) Change in KYC information: In case of change in KYC information, Bank shall undertake the KYC process equivalent to that applicable for onboarding a new LE customer. Additional measures: In addition to the above, Bank shall ensure that, i. The KYC documents of the customer as per the current CDD standards are available with them. This is applicable even if there is no change in customer information but the documents available with the Bank are not as per the current CDD standards. Further, in case the validity of the CDD documents available with the Bank has expired at the time of periodic updation of KYC, Bank shall undertake the KYC process equivalent to that applicable for on boarding a new customer. ii. Customer’s PAN details, if available with the Bank, is verified from the database of the issuing authority at the time of periodic updation of KYC. iii. Acknowledgment is provided to the customer mentioning the date of receipt of the relevant document(s), including self-declaration from the customer, for carrying out periodic updation. Further, it shall be ensured that the information/ documents obtained from the customers at the time of periodic updation of KYC are promptly updated in the records / database of the Bank and an intimation, mentioning the date of updation of KYC details, is provided to the customer. iv.KYC Updation can be done by non-home branches also v. Bank shall advise the customers that in order to comply with the PML Rules, in case of any update in the documents submitted by the customer at the time of establishment of business relationship / account-based relationship thereafter, as necessary, customers shall submit to the REs the update of such documents. This shall be done within 30 days of the update to the documents for the purpose of updating the records at Bank’s end. vi. The KYC data pertaining to accounts of individual customers and Legal Entities (LEs), at the time of periodic updation or when the updated KYC information is obtained / received from the customer is to be uploaded to CKYCR in respect of all accounts. 8.10. LEGACY ACCOUNTS: Existing customers who are already having an account-based relationship with the Bank shall submit the Permanent Account Number (PAN) or equivalent e documents thereof or Form 60 by such date as may be notified by the Central Government, failing which the account shall temporarily cease to be operational till the time the PAN or equivalent e-documents thereof or Form 60 is submitted by the customer. Explanation -1: Before the account ceases to be temporarily operational, Bank shall give the customer accessible notice and a reasonable opportunity to rectify the position. Explanation-2: “Temporary ceasing of operations” in an account means the temporary suspension of all transactions or activities in relation to that account by the Bank till such time the customer complies with the provisions of this clause. In case of asset accounts such as loan accounts, for the purpose of ceasing the operation in the account, only credits shall be allowed. Explanation-3: Page 11 of 133 If such a customer gives notice in writing that he/she does not want to submit the PAN or equivalent e-documents thereof or Form60, the account of the customer with the Bank shall be closed, and all obligations due in relation to the account shall be appropriately settled after establishing the identity of the customer, in the manner specified by Bank.. Type of KYC document required Customer Proprietary 1. Minimum 2 documents issued in the name of Proprietary Concerns Concern from the following list of documents along with OVD and PAN/Form 60 of the proprietor Registration certificate (These 2. Certificate/license issued by the Municipal Authorities under guidelines Shop & Establishment Act. apply to all new 3. Sales and Income Tax returns. 4. CST/VAT/GST Certificate (provisional/ customers, as Final) well as 5. Certificate/registration document issued by Sales accounts of Tax/Service Tax/Professional Tax authorities. 6. IEC (Importer/Exporter Code) issued to the Proprietary existing Concern by the Office of Director General of Foreign Trade customers. The (DGFT), or Licence/certificate of practice issued in the name KYC of the proprietary concern by any professional body documents as incorporated under a statute. in the name of Proprietary Concern. per these 7. The complete Income Tax Return (not just the guidelines for acknowledgement) in the name of the sole proprietor where the existing the firm’s income is reflected duly authenticated/ acknowledged by the Income Tax authorities. accounts 8. Utility bills such as electricity, water and landline telephone should be bills in the name of the proprietary concern. obtained and In cases where the Branch / Office is satisfied that it is not possible to furnish two such documents, they may accept only the KYC one of those documents as proof of business/activity. Provided particulars Branch / Office undertake contact point verification and collect should be such other information and clarification as would be required to establish the existence of such firm and shall confirm and satisfy updated) itself that the business activity has been verified from the address of the proprietary concern. Limited 1. Certificate of Incorporation dated …………………………………………… (for inspection and Page 12 of 133 Company return). A copy of the same is Retained. 2. Memorandum of Association registered on …………………………………………………… and Articles of Association dated ………………………… obtained. 3. A resolution from the Board of Directors and Power of Attorney granted to its managers, officers or employees to transact on its behalf. 4. PAN. (Note: PAN is mandatory for companies. Form 60 is not acceptable.) 5. (a) An OVD and (b) Pan or Form 60 issued to managers, officers or employees holding an attorney to transact on the company’s behalf. Other Documents 6. A declaration containing the names of all the beneficial owners together with their shareholding / controlling interest / stake duly signed by the authorized signatory. (Annexure IV of the AOF) 7. Certificate of commencement of business (in case of Public Limited Company) 8. CIN No. ………………………………………………………. 9. Proof of Current Address 10. Certificate of Registrar of Joint Stock Companies dated ……………………………………………. That the Company is entitled to commence business (for inspection, entry in the Power of Attorney Register and return). A copy of the same is retained. (This certificated is not required when, a. The company is a private company b. The company was registered before 1913 and does not invite the public to subscribe for shares. c. The company is Limited by guarantee and does not have a share capital). 11. Format of resolution ……………………………………………….., regulating the conduct of the account, obtained, somewhat on the following items :- We hereby certify that the following resolution of the Board of direction of the ……………………………………………………………………… Company Limited was passed of a meeting of the Board held on the ……………………………………………………. And has been duly recorded in the Minute Book of the said Company :- “resolved :- that a bank account for the company be opened with the State Bank of India, and that the said Bank be and is hereby authorised to honour cheques, bills of exchange and promissory noted drawn, accepted or made on behalf of the Page 13 of 133  company by ……...................................................................................................................................……………………. and to act on any instructions so given relating to the account, whether the same be overdrawn or not, or relating to the transactions of the company.” हस्ता॰ / sd/-हस्ता॰ / sd/- हस्ता॰ / sd/- अध्यक्ष/ Chairman निदे शक/ Directors सचिव / Secretary 12. OVD and PAN of the Chairman / Managing Director / Chief Promoter etc of all Related persons or beneficial owners, Separate Annexure II for each beneficial owner to be obtained. Partnership 1. Registration Certificate (in case of registered firms). Firm 2. Partnership deed dated………………………………………………………. 3. PAN of the Partnership Firm (Note: PAN is mandatory for Partnership firms. Form 60 is not acceptable.) 4. (a) OVD; and (b) Permanent Account Number or Form 60 issued to the person holding POA on its behalf Other Documents: 5. A declaration containing the names of all the beneficial owners together with their shareholding / controlling interest / stake duly signed by the authorized signatory. (Annexure IV of AOF) 6. Mode of operation in case of Partnership to be indicated clearly in AOF (Viz. All Partners jointly/severally (singly), Partner 1 & 2 jointly/severally (singly) etc.) 7. Partnership letter dated………………………… and No. …………………………… obtained on Cos 37. Signed by all partners. (To be compulsorily obtained in case of partnership firms) 8. Addresses of the Power of Attorney holders 9. POA granted to a partner or employee of the firm to transact business on its behalf 10. OVD and PAN of all partners & beneficial owners Separate Annexure II for each beneficial owner to be obtained. Trust KYC Documents 1. Registration Certificate. 2. Trust Deed; and 3. PAN of the Trust; and 4. (a) OVD; and (b) Permanent Account Number of Form 60 issued to the person holding POA on its behalf Other Documents Page 14 of 133  5. A declaration containing the names of all the beneficial owners together with their shareholding / controlling interest / stake duly signed by the authorized signatory. (Annexure IV of AOF) 6. Copy of relevant extracts of trust deed dated ………………………………………………………………obtained and perused, with special emphasis on the power of the trustees to sign cheques, delegation of authority, borrow money etc. The relevant portions are entered in the power of attorney register. 7. A copy of the Resolution 8. Power of Attorney granted to transact business on its behalf (wherever applicable), 9. OVD and PAN of trustees, executors, administrators, etc. of all Related persons or Beneficial owners, Separate Annexure II of AOF for each beneficial owner to be obtained. 10. Proof of current address 11. All Trust Accounts to be invariably assigned “High Risk” 12. OPENING OF ACCOUNTS IN THE NAME OF TRUST: CLARIFICATIONS As per Para 9.6.5 of the KYC Policy (Explanation 1), and also explanation provided under Para 33 A of Master Direction on KYC issued by the Reserve Bank of India (updated as on 20.04.2020), unregistered Trusts/Partnership firms shall be included under the term ‘unincorporated association’. Documents required for opening an account of such unincorporated association or a body of individuals have also been specified in the Master Direction. (Cir.Ref. R&DB/OPS-KYC/KYC/9/2020 – 21 dated 5 Dec 2020) Unincorporate 1. Resolution of the managing body of such association or body d association of individuals. 2. Power of attorney granted to transact on its behalf, of or body of individuals individuals 3. (a) OVD; and (b) Permanent Account Number of Form 60 issued to the person holding POA on its behalf 4. Such information as may be required by the bank to collectively establish the legal existence of such an association or body of individuals. 5. OVD and PAN of all Related persons or Beneficial owners, Separate Annexure II for each beneficial owner to be obtained 6. A declaration containing the names of all the beneficial owners together with their shareholding / controlling interest / stake Page 15 of 133  duly signed by the authorized signatory. (Annexure IV of AOF) In Case of Political Parties, along with above mentioned document these 4 other documents will also be attached: a. Certificate from the Election Commission confirming that “the political party is registered under section 29A of Representation of people Act, 1951 (43 of 1951) and secured not less than one percent of the votes polled in the last general election to the House of the People or the Legislative Assembly , as the case may be”. b. Memorandum or Rules and regulations of the political party. c. Photograph of the person who has been authorised to transact the account, i.e., to whom Power of Attorney is granted. d. Documents in respect of proof of address of the political party. Juridical  Document showing name of the person authorised to act on persons (not behalf of the entity.  Such documents as may be required to establish the legal covered above existence of such an entity/juridical person such as  KYC documents for individuals, mentioned above, from Government or managers, officers or employees holding an attorney to transact on its behalf. its Departments, societies, universities and local bodies like village panchayats) Association/ KYC Documents as applicable to Accounts of unincorporated Clubs/ Associations or Body of Individuals Other Documents Societies 1. Copy of the Memorandum of Association registered on ……………….....................…………………. and Articles of Association dated …………….………………. Obtained. 2. Resolution of managing body for opening the account 3. Copy of the By Laws dated …………………..................…………………… and resolution dated ……………………………………………...........……. Of the Society, regarding the conduct of the account, obtained. 4. Government / Military Order dated Page 16 of 133  ………………………………………………………. obtained (whichever applicable). 5. OVD and PAN of Chairman/ MD/ Chief Promoter/Secretary etc. of all Related persons or Beneficial owners, Separate Annexure II of AOF for each beneficial owner to be obtained. HUF 1. Joint Hindu Family Letter (The existing Joint Hindu Family Letter (Part-A) shall continue to be used for HUFs whose funds relate to business and modified Joint Hindu Family Letter (Part -B) should be used for HUFs whose funds do not relate to business.) dated ………and No. …… Obtained on Cos 38, signed by all the adult coparceners Family (HUF) 2. Declaration from the Karta 3. OVD and PAN of Karta 4. OVD and PAN of adult coparceners 5. PAN Card or Form 60 of Joint Hindu Family 6. On death of a coparcener, birth of a coparcener and a minor coparcener attaining majority (18 years), a fresh JHF letter (COS 38) has to be executed Declaration that a) the depositor is the Karta of the Joint Family, b) the deposit belongs to JHF Executors, Proof of Identity for Executors, Administrators and Liquidators Administrat 1. Probate or letter of administration or authority under the ors and Companies Act dated ……………………………………… obtained (for inspection. Entry in miscellaneous documents Liquidators register and return). A copy of the same is retained I. In case more than one executors / administrators / liquidator are appointed, letter of authority signed by all of them regulating the conduct of the account, must be obtained. II. Executors / administrators / liquidators cannot normally delegate their powers to third parties. III. OVD and PAN of all Related persons or Beneficial owners, Separate Annexure II of AOF for each beneficial owner to be obtained Proof of Residence for Tax purpose IV. With respect to an entity, any official document issued by an authorised Government body, including a Government agency or a municipality, which includes the name of the entity and either the address of its principal office in the country or territory in which it claims to be a resident or the country or territory in which the entity was incorporated or organised. V. TIN letter issued by the respective Government body/agency in case of entity resident in any country or territory outside Page 17 of 133  India. Accounts of Bank can open accounts of PEP subject to following Politically 1. sufficient information including information about the sources of funds accounts of family members and close relatives is gathered on Exposed the PEP Persons 2. The identity of the person shall have been verified before (PEP) accepting the PEP as a customer 3. Branches should open such accounts with the approval of controllers in respect of branches / BPR outfits headed by officials of Junior Management/Middle Management 4. Branches / BPR outfits headed by officers of Senior Management and above, such approval should be accorded by the branch/operating unit head in person 5. all such accounts are subjected to enhanced monitoring on an on- going basis 6. In the event of an existing customer or the beneficial owner of an existing account subsequently becoming PEP, Branches should obtain approval as mentioned herein above to continue the business relationship. the CDD measures as applicable to PEPs including enhanced monitoring on an on-going basis are applicable 7. These instructions shall also be applicable to accounts where a PEP is the beneficial owner “Politically Exposed Persons” (PEPs) are individuals who are or have been entrusted with prominent public functions by a foreign country, including the Heads of States/Governments, senior politicians, senior government or judicial or military officers, senior executives of stateowned corporations and important political party official Accounts of Non- In case of non-face-to-face customers, apart from applying Face to Face usual customer identification procedures, there must be specific and adequate procedures to mitigate the higher risk customers (Non involved. face to face Branches/ offices shall ensure that the first payment is to be customers is those affected through the customer's KYC-complied account with with whom the another Bank, for enhanced due diligence of non-face-to-face Branch has not had customers direct interaction at the time of opening the account e.g., NRI customers who opened the account Page 18 of 133 without visiting the branch.) Client accounts Branches to ensure that opened by 1. Clients shall be identified when client account is opened by a professional intermediary on behalf of a single client professional 2. Bank Branches shall have option to hold 'pooled' accounts intermediaries managed by professional intermediaries on behalf of entities (Branches may like mutual funds, pension funds or other types of funds 3. Bank branches shall not open accounts of such exercise enhanced professional intermediaries who are bound by any client due diligence at the confidentiality that prohibits disclosure of the client details to time of opening the Bank 4. All the beneficial owners shall be identified where funds accounts held by the intermediaries are not co-mingled at the level of by intermediaries Bank, and there are 'sub-accounts', each of them attributable such as guardians to a beneficial owner, or where such funds are co-mingled at of estates, the level of Bank, the Bank shall look for the beneficial owners executors, 5. Banks shall, at their discretion, rely on the 'customer due administrators, diligence' (CDD) done by an intermediary, provided that the assignees, intermediary is a regulated and supervised entity and has adequate systems in place to comply with the KYC receivers etc. e.g. : requirements of the customers while opening of the 6. The ultimate responsibility for knowing the customer lies account of an with the Bank administrator of the estate, it would be necessary to examine the Letter of Administration (Authority) as it would give a clear picture of the assets of the estate) Self Help Groups a. CDD of all the members of SHG shall not be required while opening the savings (SHGs) bank account of the SHG. Page 19 of 133  b. CDD of all the office bearers shall suffice. c. Customer Due Diligence (CDD) of all the members of SHG may be undertaken at the time of credit linking of SHGs. Indicative Guidelines for customer identification TRUST/NOMINEE OR FIDUCUARY ACCOUNTS 1. Determine if the customer is working on behalf of another person as trustee / nominee or any other intermediary (Purpose to be determined) 2. In case of intermediaries obtain satisfactory evidence of the identity of the intermediary 3. Verify the identity of the trustees and the settlers of the trust grantors, protectors, beneficiaries and signatories. 4. In the case of ‘foundation’, steps should be taken to verify the founder managers/ directors and the beneficiaries, if defined. 5. In case of serious doubt, one may refer to the Trust Commissioners office. ACCOUNTS OF COMPANIES AND FIRMS 1. Details of registration of companies should be verified through company master data from Ministry of Corporate Affairs, Govt. of India, website – www.mca.gov.in (MCA-21) wherever available, in addition to verification of copies of KYC documents from the originals thereof. 2. Please do refer to list of companies de-registered by the MCA. 3. Please do refer to the defaulter list of CICs. 4. Please do refer to the list of Banned entities circulated by the RBI. 5. Examine the control structure of the entity 6. Determine the source of funds 7. Identify the natural person persons who have a controlling interest and who comprise the management (may be moderated in case of Listed Companies as it will not be necessary in this case to identify all the beneficial owners / shareholders. 8. Ascertain the Risk perception. CLIENT ACCOUNTS OPENED BY PROFESSIONAL INTERMEDIARIES When the bank 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. (b) Banks may hold ‘pooled’ accounts managed by professional intermediaries on behalf of entities like mutual funds, pension funds or other types of funds. (c) Banks also maintain ‘pooled’ accounts managed by lawyers/chartered accountants or stockbrokers for funds held ‘on deposit’ or ‘in escrow’ for a range of clients. (d) Accounts of such professional intermediaries who are bound by any client Page 20 of 133 confidentiality that prohibits disclosure of the client details to the Bank should not be opened. (e) All the beneficial owners shall be identified where funds held by the intermediaries are not co-mingled at the bank level and there are ‘subaccounts’, each of them attributable to a beneficial owner. Where such funds are co-mingled at the bank, the bank should still identify the beneficial owners. (f) Where the Branches / BUs 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. (g) Ultimate responsibility for knowing the customer lies with the bank Current Account “Current Account” means a form of non-interest-bearing demand deposit where from withdrawals are allowed any number of times depending upon the balance in the account or up to a particular agreed amount and shall also be deemed to include other deposit accounts which are neither Savings Deposit nor Term Deposit Ref.: RBI/DBR/2015-16/19 Master Direction DBR. Dir. No.84/13.03.00/2015-16 March 03, 2016 (Updated as on July 02, 2021) Not every individual / Entity can open a Current account because it falls under the purview of Indian Contract Act 1872, therefore only those who meet the criteria can open a Current Account. The criteria are further subject to other laws and guidelines for anti-money laundering etc. (Please refer to chapter on KYC, FATCA etc. for details) A current account cannot be opened without the authority of the Branch Manager / Deputy Branch Manager / Divisional Manager / Service Manager / Authorized Official. A Current Account can be opened with a caveat – the Branch has to obtain an undertaking from the applicant - that they are not enjoying any credit facility with any other Bank. If the customer is availing credit facilities from other Banks, then the Branch has to obtain a ‘No Objection Certificate’ from the creditor Bank. (Circular no. NBG/TBU-LTP/6/2016-17 dated 29-08-2016). The undertaking format has been circulated vide letter no. TBU/L&TP/9 dated 06-05-2017. This undertaking has to be collected in existing accounts as well. The following can open a Current Account – as stated above if the purpose is other than savings than almost anyone can open a Current Account. The list could be as under: 1. Individuals 2. Proprietorship Firms 3. Partnership Firms (Unlimited / Limited Liability) Page 21 of 133  4. Joint Hindu Family (engaged in business activity then mandatory current account only) 5. Private & Public Limited Company 6. Clubs/ Associations/ Societies of other fiduciary nature 7. Trusts 8. Liquidators 9. Executors and Administrators 10. Banks 11. Government Departments or Bodies, who for performance of their functions depend on Budgetary Allocations, usually cannot open Savings Bank Accounts but can open a Current Account.  Examples are Municipal Corporations or Committees, Panchayat Samiti, State Housing Boards, Water & Sewerage Boards, State Textbook Publishing Corporations or Societies, Metropolitan Development Authorities, State/District level Cooperative Housing Societies, etc., any political party or any trading/business or professional concern, whether such concern is a proprietary or a partnership firm or a company or an association.  Any institution, irrespective of the fact that it is a Government Department, Semi- Government or Quasi-Government Body, which receives grants, loans or subsidies from the Government is said to depend on budgetary allocation. Government grants to institutions are also in the nature of the budgetary allocation.  Government’s subscription to the share capital of these institutions also forms part of the budgetary allocation.  A political party herein above will mean an association or body of individual citizens of India, which is, or is deemed to be registered with the Election Commission of India as a political party under the Election Symbols (Reservation and Allotment) Order, 1968 as in force for the time being.  Local bodies like Municipal Corporations, Zilla Parishads, Taluka Panchayats and Gram Panchayats are given grants in the nature of ‘compensation and assignments’, which also form part of budgetary allocation, although taxes collected by these bodies are not covered under the definition and scope of budgetary allocation of Central and State Governments. RISK CATEGORISATION All customers are to be categorized as High risk, medium risk and Low risk for proper risk assessment of business relationship with customers and evolving suitable monitoring mechanism. This categorisation does not reflect in any way on the account holders it is meant only for monitoring purposes. Since this categorisation is extremely important for implementation of KYC/AML/Combating of Financing of Terrorism (CFT) measures, therefore please comply with the regulatory guidelines in letter and spirit. Risk categorisation done by the branch should not be disclosed to the customers Page 22 of 133 E-KYC “E-KYC authentication facility”, as defined in Aadhaar (Authentication) Regulations, 2016, means a type of authentication facility in which the biometric information and/or OTP and Aadhaar number securely submitted with the consent of the Aadhaar number holder through a requesting entity, is matched against the data available in the CIDR, and the Authority returns a digitally signed response containing e-KYC data along with other technical details related to the authentication transaction While using e-KYC service of UIDAI, the individual user needs to authorize the UIDAI, by explicit consent, to release her or his identity/address through biometric authentication to the bank branches/business correspondents (BCs). The UIDAI then used to transfers the data of the individual comprising name, age, gender, and photograph of the individual, electronically to the bank/BCs. Customers’ authorization to UIDAI for sharing e-KYC data with the bank is to be obtained either in physical form/electronic form. E-KYC for BC Channel Our bank has restarted e-KYC authentication process for the customers receiving DBT benefit vide e-Circular No- R&DB/OPS-KYC/KYC/6/2019-20 dated 06.06.2019, in line with RBI Master Direction-Know Your Customer(KYC) Direction, 2016 updated as on 29.05.2019 in the Branch channel. This allows Banks to carry out e- KYC authentication for individuals desirous of receiving any benefit or subsidy under any scheme notified under section 7 of the Aadhaar (Targeted Delivery of Financial and other Subsidies, Benefits and Services) Act,2016. Now, competent authority has permitted for the restart of the e-KYC authentication process at BC Channel for the customers to be onboarded through CSP outlets. The IT functionality in this regard has been developed and rolled out for enrolment of customers at BC Channel w.e.f. 07.02.2020. Aadhaar based e-KYC authentication for opening Regular Savings Bank account. With a view to giving a thrust to digital account opening using Aadhaar e-KYC, account opening through YONO platform was reintroduced from 11.10.2019 in few CUG branches and now being rolled out to all the branches. CIFs opened in this process will not be subjected to LCPC second level of scrutiny. (Circular No.: R&DB/S&DB-YONO/32/2019 – 20 Date: Tue 29 Oct 2019) Acceptance of e-Aadhaar Page 23 of 133 Branches may also accept e-Aadhaar downloaded from UIDAI website as an officially valid document, as permitted by RBI guidelines and if the customer approves, subject to the following: a) If the prospective customer knows only his/her Aadhaar number, the bank may print the prospective customer’s e-Aadhaar letter in the bank directly from the UIDAI portal. b) If the prospective customer carries a copy of the e-Aadhaar downloaded elsewhere, the bank may print the prospective customer’s e-Aadhaar letter in the bank directly from the UIDAI portal. Branches/Business Units on receipt of the Aadhaar number from the customer (opting for DBT / Subsidy) may carry out authentication of the customer’s Aadhaar number using E-KYC authentication facility, after receipt of the customer’s consent/ declaration that he is desirous of receiving any benefit or subsidy. The proforma for the consent form is circulated vide e-Circular No. R&DB/OPSKYCUIDAI/ 1/201819 dated 04.04.2018 (enclosed for ready reference). Where offline verification of Aadhaar (using Aadhaar XML or Aadhaar Secure QR Code) is carried out, there is no need for obtaining any OVD. However, a recent photograph shall be obtained as the quality of the photograph received through offline verification may not be of acceptable quality. Biometric based e-KYC authentication can be done by Branch official/Business Correspondents/Business Facilitators. There may be cases where the customer does not consent for authentication of his/her Aadhaar Number with UIDAI but submits his Aadhaar voluntarily for identification purpose through offline verification. In such cases, Branches/Business Units shall ensure that the customer redacts or blacks out his Aadhaar number through appropriate means. KYC Updation High/Medium Risk Customers and Low Risk Customers when there is a change in Identity/ Address: In case of a change only in the address details of the customer, a self-declaration of the new address/ self-declaration along with copy of an OVD shall be obtained from the customer through customer’s email-id registered with the Bank, customer’s mobile number registered with the Bank, ATMs, digital channels (such as online banking / internet banking, mobile application of Bank), letter etc as under: a) Customers who have undergone Aadhaar based e-KYC authentication and wants to provide a current address which is different from the address as per the identity information available in the Central Identities Data Repository of UIDAI, a self-declaration by the customer to that effect shall be obtained. b) For all other customers, Self-declaration along with copy of an OVD (with current address) shall be obtained from the customer. Low Risk Customers when there is no change in status Page 24 of 133 In case of no change in the KYC information, a self-declaration from the customer in this regard shall be obtained through customer’s email-id registered with the Bank, customer’s mobile number registered with the Bank, ATMs, digital channels (such as online banking / internet banking, mobile application of Bank), letter etc KYC Updation Page 25 of 133 Some Common irregularities (As per value statement in RFIA) SB accounts opened for Government / Quasi Govt. Depts without obtaining proper authority letter from the competent authority of the concerned Govt. Dept. SB accounts opened for Government/ Quasi Govt. Depts without authorisation by the branch head. Photo Identity Proof has not been obtained (EC) EC- External Compliance Copy of ID Proof have not been verified with originals Proof of Address has not been obtained (EC) Copy of Address proof have not been verified with originals Recent photograph for opening of account has not been obtained. A copy of PAN card/Aadhar Card/ Form No. 60/61 has not been obtained (EC) Documents (AOF) not produced for verification. Multiple CIF of same branch or at different branches have not been deduped/merged into a single CIF Specimen signatures are not scanned in the system. Specimen signatures scanned are not uploaded at the branch, laid down systems and procedures are not adhered to. In cases for request for addition of name, the signature of the new account holder is not attested by the existing account holders as per the mandate of the account such as either-or survivor, jointly operated Requests for addition/deletion of names, change of signature and change of Page 26 of 133 operational instructions in deposit accounts are not done after obtaining all necessary documents and after approval of the appropriate authority New signature on fresh part II of AOF is not obtained In case of addition of account holder, new CIF is not linked to the existing bank account Proper records of the modifications made are not kept and letters are not sent to the existing account holder as a fraud detection measure. "Certified copy of the following documents have not been obtained for customer identification: Registration certificate Trust deed, an officially valid document of Proof of Identity, Proof of Address in respect of the person holding power of attorney to transact on behalf of the Trust/Foundation " Certified copies of the following documents have not been obtained: Declaration from the Karta, Proof of Identification of Karta, Prescribed Joint Hindu Family Letter (COS 38) signed by all the adult co-parceners. Passport and Residence Visa Copies, duly attested by any of the following have not been obtained: Banker (our branches/ offices), Notary Public, Indian Embassy, Officers of correspondent banks whose signatures are verifiable through an authorized (A/B category Forex handling branch) branch of the Bank. KYC verification of all the office bearers of the SHG has not been carried out Nomination facility has not been extended. (EC) Where Account Holder does not desire Nomination and the relative field is marked N in CBS, his/her specific intent thereto has not been recorded Nomination Details are not captured in CBS. DA1/DA2/DA3 form(s) are not filled up and are not signed by the depositor. Acknowledgement of receipt of nomination is not being handed over to the depositors / clients. Customer(s) requisitions for a creation or change of nomination are not forwarded to LCPC Copy of Certificate of Incorporation duly certified has not been obtained Certified copy of Memorandum and Articles of Association has not been obtained Copy of PAN of the Company has not been obtained A resolution from the Board of Directors authorising its managers, officers or employees to transact on behalf of the company has not been obtained An officially valid document in respect of managers, officers or employees authorised under Board Resolution to transact on behalf of the company has not been obtained Proof of current address of the Company has not been obtained Deviations in External Compliance related value statements in terms of RFIA:  NOC of existing bankers or declaration having no credit facilities in other bank is not obtained (from Current Account Opening Customers).  The beneficial owners have not been identified (In case of legal entities) Page 27 of 133   Customer has not been categorized as High risk, medium risk or Low risk while opening the account  The customer has been assigned a High Risk, Medium Risk and Low Risk. KYC updating exercise has not been carried out every 2 years, 8 years and 10 years respectively.  Accounts of jewellers/bullion dealers, NRIs, HNIs, trusts, charities, NGOs, PEPS, non-face to face persons to be categorized as high risk requiring enhanced due diligence  Before opening new account, banks to ensure that no account is held or linked to any of the entities / individuals included in the negative list. Banks also should scan all existing accounts when a new list is received. Verification of Documents: Documents accepted shall be verified through internet using website of Government / concerned authority wherever such information is available online and shall be compared with the original and recording the same on the copy by the authorized officer of the Bank. Various sites as furnished hereunder through which the documents can be verified online. SN Menu and address of the sites What to be verified 1. https://incometaxindiaefiling.gov.in >> Select know PAN of Customer / your jurisdictional A.O PAN of employer as per form 16 2. https://www.mahaonline.gov.in/NSDG/PANDetails/ -do- MahaonlinePAN.aspx 3. https://incometaxindiaefi TAN of customer ling.gov.in >> Select know your TAN 4. https://www.tinxsys.com/TinxsysInternetWeb/index.jsp TIN of customer >> Dealer/Form Search >> I agree >> Search By TIN 5. https://cbec-easiest.gov.in/EST >> Assessee Code STRN of customer Based Search 6. https://contents.tdscpc.gov.in/ >> Taxpayer >> View Form 16 TDS/TCS Credit >> verification code >> verify TDS Certificate 7. https://incometaxindiaefiling.gov.in >> ITR-V Receipt Status of Status Acknowledgement receipt (ITR-V) 8. https://tin.tin.nsdl.com/oltas/servlet/QueryTaxpaye Tax Paid Challan rAjax 9. (a) CA Membership No: www.icai.org >> members >> Chartered Accountant members Directory search >> As on Date >> Search membership number members database by Membership No. as on date and their Firm’s Regn. (b) CA’s Firm Regd. No: www.icai.org >> members >> No. verification List of Firms as on……. 10. Aadhaar Number e-KYC Proof of possession of Aadhaar Offline Verification / Digital KYC (where e- Page 28 of 133  KYC is not done) 11. http://eci.nic.in/eci/eci.html Voter ID (i) Name in voter ID >> State >> electoral photo ID card number OR (ii) National Electoral Search >> Search by Details or Search by EPIC >> feed details or EPIC 12. Sites of respective service provider / vendors, if Telephone bill / facility available electricity bill etc Common issues related to Account Opening: Following common irregularities are pointed out by the Inspecting officials during Audit:  Documents obtained viz. Proof of ID, Proof of Address and Photograph are not held on record.  Proof of ID, Proof of Address and Photograph are not updated, as prescribed / Full particulars of the documents are not entered in the CBS correctly.  Multiple CIF of same branch or at different branches have not been deduped/merged into a single CIF.  Passbooks including duplicate Passbooks and Welcome Kits are not handed over to the Account Holders under acknowledgement.  Welcome Kits are not kept in Joint Custody.  Welcome kits are not handed over to the Account Holders under acknowledgement.  Welcome Kits are not reconciled at the prescribed periodicity.  Cheque books including Emergency Cheque Books are not issued against requisition slips/ written request after verifying the identity and signature of the customer.  Undelivered cheque books are not deactivated immediately in CBS and kept under joint custody and not destroyed as per guidelines.  In all inoperative a/cs with balances over Rs 25,000, all extant guidelines for such cases are not meticulously followed  Inoperative Accounts are not revived, and operations permitted without authorization, verification of addresses, signatures & identity of the customer.  Communications is not sent to all customers (who’s a/cs have a balance of Rs. 5,000 & above and where no customer-induced transactions have taken place for more than a year) for ascertaining reasons for non-operation. (For details, please go through report folder of end of June and December)  In all inoperative a/c's with balances over Rs 25,000/-, where communication forwarded to account holders is returned undelivered extant guidelines viz Page 29 of 133  enquiry through telephone, e-mail, contact through employers or any other known person, legal heirs etc. are not followed.  Welcome Letter returned undelivered are not recorded in system and appropriate action not taken.  Specimen signatures are not scanned and uploaded in the system.  Account opening forms (AOFs) are not sent to e-DAC on prescribed interval using the Workflow module and discrepant AOF are not rectified and submitted.  SB accounts opened for Government / Quasi Govt. Depts without obtaining proper authority letter from the competent authority of the concerned Govt. Dept. and proper record not maintained.  Mismatch in information on PAN card & officially valid document (OVD)/mandatory document submitted as Customer Due Diligence (CDD) (Instructions on obtaining PAN/Form 60 in various cases have been issued from time to time. A comprehensive SOP on handling instances where there is mismatch in information on PAN card & officially valid document (OVD)/mandatory document submitted as Customer Due Diligence (CDD) along with Frequently Asked Questions (FAQs) is issued now Ref.: e-Circular No.: NBG/OPS-FATC-CTDS/3/2020 – 21 dated 19 Jan 2021) What are the conditions for opening of Accounts using OTP based e-KYC? i. There must be a specific consent from the customer for authentication through OTP. ii. the aggregate balance of all the deposit accounts of the customer shall not exceed rupees one lakh. In case, the balance exceeds the threshold, the account shall cease to be operational, till CDD as mentioned at (v) below is complete. iii. the aggregate of all credits in a financial year, in all the deposit accounts taken together, shall not exceed rupees two lakh. iv. As regards borrowal accounts, only term loans shall be sanctioned. The aggregate amount of term loans sanctioned shall not exceed rupees sixty thousand in a year. v. Reserve Bank of India has allowed Video based Customer Identification Process (V-CIP) facility to be used for Accounts opened using OTP based e- KYC, in non-face-to-face mode. Accordingly, Para 8.5.3 (e) of the Policy is amended as under: “Accounts, both deposit and borrowal, opened using OTP based e-KYC shall not be allowed for more than one year unless identification as per para 8.5.1 of the Policy or as per para 8.5.4 (V-CIP) of the Policy is carried out. If Aadhaar details are used under para 8.5.4 of the Policy, the process shall be followed in its entirety including fresh Aadhaar OTP authentication”. Page 30 of 133  vi. If the CDD procedure as mentioned above (Section 16) is not completed within a year, in respect of deposit accounts, the same shall be closed immediately. In respect of borrowal accounts no further debits shall be allowed. vi. 21A declaration shall be obtained from the customer to the effect that no other account has been opened nor will be opened using OTP based KYC in non- face-to-face mode with any other RE. Further, while uploading KYC information to CKYCR, REs shall clearly indicate that such accounts are opened using OTP based e-KYC and other REs shall not open accounts based on the KYC information of accounts opened with OTP based e-KYC procedure in non-face-to-face mode. VII. Video based Customer Identification Process (V-CIP) The process of V-CIP is defined as “An alternate method of customer identification with facial recognition and customer due diligence by an authorised official of the Bank by undertaking seamless, secure, live, informed, consent based audio-visual interaction with the customer to obtain identification information required for CDD purpose, and to ascertain the veracity of the information furnished by the customer through independent verification and maintaining audit trail of the process. Such processes complying with prescribed standards and procedures shall be treated on par with face-to-face CIP process.” Certain instructions pertaining to V-CIP procedure, V-CIP infrastructure, V- CIP records and data management and disruption in the V-CIP have been amended. Further, the requirement of ‘three days’ for – (i) the validity of Aadhaar XML file / Aadhaar Secure QR Code and (ii) to undertake the video process has been amended to ‘three working days.” Digital KYC & Process “Digital KYC” means the capturing live photo of the customer and officially valid document or the proof of possession of Aadhaar, where offline verification cannot be carried out, along with the latitude and longitude of the location where such live photo is being taken by an authorised officer of the RE as per the provisions contained in the Act. A. The process shall be undertaken only through the authenticated application. B. The Application shall be accessed only through login-id and password, or Live OTP or Time OTP controlled mechanism given to its authorized officials. C. The customer, for the purpose of KYC, shall visit the location of the authorized official or vice-versa. The original OVD shall be in possession of the customer. Page 31 of 133 D. It must be ensured that the Live photograph of the customer is taken by the authorized officer and the same photograph is embedded in the Customer Application Form (CAF). Further, the system Application shall put a watermark in readable form having CAF number, GPS coordinates, authorized official’s name, unique employee Code (assigned by REs) and Date (DD:MM:YYYY) and time stamp (HH:MM:SS) on the captured live photograph of the customer. E. It must be ensured that only live photograph of the customer is captured, and no printed or video-graphed photograph of the customer is captured. The background behind the customer while capturing live photograph should be of white colour and no other person shall come into the frame while capturing the live photograph of the customer. F. Similarly, the live photograph of the original OVD or proof of possession of Aadhaar where offline verification cannot be carried out (placed horizontally), shall be captured vertically from above and watermarking in readable form as mentioned above shall be done. No skew or tilt in the mobile device shall be there while capturing the live photograph of the original documents. G. The live photograph of the customer and his original documents shall be captured in proper light so that they are clearly readable and identifiable. H. Thereafter, all the entries in the CAF shall be filled as per the documents and information furnished by the customer. In those documents where Quick Response (QR) code is available, such details can be auto populated by scanning the QR code instead of manual filing the details. For example, in case of physical Aadhaar/e- Aadhaar downloaded from UIDAI where QR code is available, the details like name, gender, date of birth and address can be auto-populated by scanning the QR available on Aadhaar/e-Aadhaar. I. Once the above-mentioned process is completed, a One Time Password (OTP) message containing the text that ‘Please verify the details filled in form before sharing OTP’ shall be sent to customer’s own mobile number. Upon successful validation of the OTP, it will be treated as customer signature on CAF. However, if the customer does not have his/her own mobile number, then mobile number of his/her family/relatives/known persons may be used for this purpose and be clearly mentioned in CAF. In any case, the mobile number of authorized officers registered with the RE shall not be used for customer signature. The RE must check that the mobile number used in customer signature shall not be the mobile number of the authorized officer. J. The authorized officer shall provide a declaration about the capturing of the live photograph of customer and the original document. For this purpose, the authorized official shall be verified with One Time Password (OTP) which will be sent to his mobile number registered with the RE. Upon successful OTP validation, it shall be treated as authorized officer’s signature on the declaration. The live photograph of the authorized official shall also be captured in this authorized officer’s declaration. K. Subsequent to all these activities, the Application shall give information about the completion of the process and submission of activation request to activation officer, and also generate the transaction-id/reference-id number of the process. The Page 32 of 133 authorized officer shall intimate the details regarding transaction-id/reference-id number to customer for future reference. L. The authorized officer shall check and verify that:- (i) information available in the picture of document is matching with the information entered by authorized officer in CAF. (ii) live photograph of the customer matches with the photo available in the document.; and (iii) all of the necessary details in CAF including mandatory field are filled properly. M. On Successful verification, the CAF shall be digitally signed by authorized officer who will take a print of CAF, get signatures/thumb-impression of customer at appropriate place, then scan and upload the same in system. Original hard copy may be returned to the customer. Banks may use the services of Business Correspondent (BC) for this process. How Enhanced Due Diligence for Accounts of non-face-to-face customers (other than Aadhaar OTP based on-boarding) is ensured? It shall be ensured that the first payment is to be affected through the customer's KYC-complied account with another RE, for enhanced due diligence of non-face- to-face customers What Enhanced Due Diligence procedure is followed before establishing Account based relationship with Accounts of Politically Exposed Persons (PEPs)? (a) sufficient information including information about the sources of funds accounts of family members and close relatives is gathered on the PEP. (b) the identity of the person shall have been verified before accepting the PEP as a customer. (c) the decision to open an account for a PEP is taken at a senior level in accordance with the Bank’s Customer Acceptance Policy. (d) all such accounts are subjected to enhanced monitoring on an on-going basis. (e) in the event of an existing customer or the beneficial owner of an existing account subsequently becoming a PEP, senior management’s approval is obtained to continue the business relationship. (f) the CDD measures as applicable to PEPs including enhanced monitoring on an on-going basis are applicable. These instructions shall also be applicable to accounts where a PEP is the beneficial owner  Section 3(b)(xii) of Reserve Bank of India vide its Master Direction - Know Your Customer Direction -2016 updated as on 10.05.2021 has mentioned the definition of a politically exposed person as under: Page 33 of 133  “Politically Exposed Persons” (PEPs) are individuals who are or have been entrusted with prominent public functions in a foreign country, e.g., Heads of States/Governments, senior politicians, senior government/judicial/military officers, senior executives of state-owned corporations, important political party officials, etc”.  As the accounts of the PEPs are prone to high risk, FATF and Reserve Bank of India has envisaged that proper care should be taken while opening the accounts of PEPs.  For reiterating the guidelines and for the better understanding for operating functionaries on precautions to be taken while opening the accounts of PEPs, it is produced here under “Dos” and “Don’ts” for opening the accounts of PEPs. S.No Do’s Don’t s 1 Declaration of PEPs/relatives The field/column of PEP/relative of of PEPs or otherwise to be PEPs/None should not be kept obtained invariably in the blank. Either of these three are to Account Opening Form from be filled in by the customer. all customers. 2 Branches should gather While gathering the information sufficient information on any from customers of this category, person/customer of this customer should not be put to category intending to establish inconvenience or denied of banking a relationship and check all the services. Branches should not information available on the depend only on the declared person in the public domain. information of this category customers and gather information from public domain to confirm or for more information. 3 Branches should verify the Branches should not seek the identity of the person and seek information about sources of funds sufficient information about the and sources of wealth in a casual sources of funds, sources of way or in an investigative manner wealth, accounts of family causing inconvenience to members and close relatives, customers. They should seek the before accepting the PEP as a information politely and explaining customer. the need of such information in view of the Regulatory requirements. 4 Branches should open such Accounts for such category of accounts with the approval of customer should not be opened controllers in respect of without approval of Controllers by branches / BPR outfits headed branches / BPR outfits headed by by officials of Junior officials of Junior Management/ Management/Middle Middle Management. Page 34 of 133  Management. In respect of Accounts for such category of branches / BPR outfits headed customer should not be opened by without approval of branch/ officers of Senior Management operating unit head in person in and above, such approval respect of branches/BPR outfits should be accorded by the headed by Senior Management Branch/operating unit head in and above. person. 5 Such accounts should be Branches should not restrict subjected to enhanced themselves for EDD only to the monitoring on an ongoing AML alerts/system generated alerts basis. by AML CFT department but also should monitor the transactions on their own and file subjective STRs in case required. 6 In the event of an existing Branch should not continue the customer or the beneficial business relationship for those owner of an existing account, existing customer who become subsequently becoming a PEP subsequently, without PEP, Branches should obtain approval. necessary approval to continue the business relationship and subject the account to the Enhanced Customer Due Diligence (EDD) measures as applicable to the customers of PEP category including enhanced monitoring on an ongoing basis. 7 These instructions are also Branches should not accept details applicable to accounts where a of Beneficial Owner who is a PEP PEP is the Beneficial Owner. without above mentioned procedure. Cir. No. R&DB/OPS-KYC/KYC/10/2022 – 23 of 03.02.2023 What Enhanced Due Diligence procedure is followed before establishing Account based relationship in case of Client accounts opened by professional intermediaries? It shall be ensured while opening client accounts through professional intermediaries that: (a) Clients shall be identified when client account is opened by a professional intermediary on behalf of a single client. Page 35 of 133  (b) Bank shall have option to hold 'pooled' accounts managed by professional intermediaries on behalf of entities like mutual funds, pension funds or other types of funds. (c) Bank shall not open accounts of such professional intermediaries who are bound by any client confidentiality that prohibits disclosure of the client details to the Bank. (d) All the beneficial owners shall be identified where funds held by the intermediaries are not co-mingled at the level of Bank, and there are 'sub- accounts', each of them attributable to a beneficial owner, or where such funds are co-mingled at the level of Bank, the Bank shall look for the beneficial owners. (e) Bank shall, at their discretion, rely on the 'customer due diligence' (CDD) done by an intermediary, provided that the intermediary is a regulated and supervised entity and has adequate systems in place to comply with the KYC requirements of the customers. (f) The ultimate responsibility for knowing the customer lies with the Bank. What steps should be taken by REs regarding maintenance, preservation and reporting of customer account information, with reference to provisions of PML Act and Rules? The following steps shall be taken regarding maintenance, preservation and reporting of customer account information, with reference to provisions of PML Act and Rules. (a) maintain all necessary records of transactions between the RE and the customer, both domestic and international, for at least five years from the date of transaction; (10 years from the date of transaction as per FATCA guidelines: Cir Ref. NBG/S&P-RECORDS MGT/2/2020 -21 dated 22 May 2020 ) (b) preserve the records pertaining to the identification of the customers and their addresses obtained while opening the account and during the course of business relationship, for at least five years after the business relationship is ended; (8 years from the date of cessation of the transaction relationship between bank and the client as per FATCA guideline: Cir Ref.: NBG/S&P- RECORDS MGT/2/2020 -21 dated 22 May 2020 ) (c) make available the identification records and transaction data to the competent authorities upon request. (d) introduce a system of maintaining proper record of transactions prescribed under Rule 3 of Prevention of Money Laundering (Maintenance of Records) Rules, 2005 (PML Rules, 2005). (e) maintain all necessary information in respect of transactions prescribed under PML Rule 3 to permit reconstruction of individual transaction, including the following: (i) the nature of the transactions. Page 36 of 133  (ii) the amount of the transaction and the currency in which it was denominated. (iii) the date on which the transaction was conducted; and (iv) the parties to the transaction. (f) 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. (g) maintain records of the identity and address of their customer, and records in respect of transactions referred to in Rule 3 in hard or soft format. For how long should the record of transactions be retained? The records referred to in clause (a) of sub-section (1) of Section 12 shall be maintained for a period of five years from the date of transaction between a client and the reporting entity. The records referred to in clause (e) of sub-section (1) of Section 12 shall be maintained for a period of five years after the business relationship between a client and the reporting entity has ended or the account has been closed, whichever is later. Can a reporting entity be penalized for not complying with the obligations of maintenance of records under PMLA, 2002? Yes, under section 13 of the Prevention of Money Laundering Act, 2002. If the Director, FIU-IND, in the course of any inquiry, finds that a reporting entity or its designated director on the Board or any of its employees has failed to comply with the obligations under Chapter IV of the Prevention of Money Laundering Act, 2002 , then, without prejudice to any other action that may be taken under any other provisions of this Act, he may- (a) issue a warning in writing; or (b) direct such reporting entity or its designated director on the Board or any of its employees, to comply with specific instructions; or (c) direct such reporting entity or its designated director on the Board or any of its employees, to send reports at such interval as may be prescribed on the measures it is taking; or (d) by an order, impose a monetary penalty on such reporting entity or its designated director on the Board or any of its employees, which shall not be less than ten thousand rupees but may extend to one lakh rupees for each failure. AOF  New AOF, Pre-LCPC AOFs, AOFs under CKYC and KYC documents are to be segregated and sent in separate envelop to LCPC marking the type of documents sent in the envelop, otherwise whole bunch will be returned without acceptance from LCPC as there is no sorting section of AOFs at LCPC. Page 37 of 133  LCPC shall not be responsible for loss of AOF or KYC Documents if sent with mixed lot.  AOF will be followed up with controllers and regions branch wise and category wise as AOF not received AOF+KYC not received and LHO/Corporate Centre will monitor on the basis of mismatch observed/ rectified, documents with KYC /without KYC and number and percentage of documents moved to storage which will be later removed from pendency Despatch of AOF/documents to LCPC by the branch The Assistant at the Despatch Section will arrange for sending the cover along with enclosures by a pre-designated courier/post for delivery at LCPC. Page 38 of 133 Page 39 of 133 Page 40 of 133 KNOW YOUR CUSTOMER (KYC) GUIDELINES KYC UPDATION AND UPLOAD TO CKYCR (INDIVIDUAL CUSTOMER) ROLLOUT OF END-TO-END PROCESS FOR KYC UPDATE Ver2.0 (Re-KYC) Reserve Bank of India vide its Master Direction on Know Your Customer updated as on 04.01.2024 has envisaged that: “CDD Procedure and sharing KYC information with Central KYC Records Registry (CKYCR)” 56 (h) In order to ensure that all KYC records are incrementally uploaded on to CKYCR, REs shall upload/ update the KYC data pertaining to accounts of individual customers and LEs opened prior to January 1, 2017 and April 1, 2021 respectively at the time of periodic updation as specified in Section 38 of this Master Direction, or earlier, when the updated KYC information is obtained/ received from the customer. (i) REs shall ensure that during periodic updation, the customers are migrated to the current CDD standard , To comply with the regulatory guidelines, a functionality for updation of KYC with facility to scan the documents and upload to CKYCR portal was developed and rolled out on 26.12.2022. To enhance the application, KYC update ver2.0 for individual customers has been developed and rolled out w.e.f. 18.03.2024. (j) In CBS apps “KYC Portal” tile in LCPC workflow has been created exclusively for the purpose of Re-KYC and front-end KYC update option in CBS will be disabled shortly. The path to the App is as under: CBS>> Other Apps>> LCPC Workflow>> KYC Portal>> KYC Upload At the time of re-KYC, branches should obtain the prescribed forms for different scenarios as under: Annexure Description A Individuals having CKYCR number: No change in KYC information/ OVDs (Self Declaration Form) B Individuals with or without CKYCR number: change in KYC information/ Address / OVDs C Other than Individuals with CKYCR Number: No Change in KYC Information/ OVDs (Self Declaration Form) D Other than Individuals with or without CKYCR Number: Change in KYC Information/ Address/ OVDs Re-KYC process is as important as customer onboarding process. Branches have to obtain information related to all the fields in request form irrespective of whether mandatory or not in CBS and the same should be incorporated in Page 41 of 133 the system. This will help the bank for proper risk categorisation and better profiling of the customer. Once maker completes details of customer details in the prescribed form in the KYC Update menu, the relative KYC documents and photo should be scanned and uploaded. On submission for verification by maker at branch, checker at the branch should login in the workflow and ensure the correctness of information fed as per the KYC Update form and should authorise the same. On approval by checker at the branch, the same will go to LCPC for scrutiny similar to that of new account opening process. On approval by LCPC checker, KYC data and KYC date will be updated in CBS and the same will be uploaded to CKYCR portal in the similar way like new accounts. Once the process is completed, customer will get a SMS as under: “Dear Customer, we have to advise that your KYC details have been updated for account no ……….. xxxx on …………. Thank you. Team SBI” 8. All the requests related to updation of KYC are to be mandatorily done through KYC update portal only and amendment of KYC date in CBS front-end screen is prohibited wherever KYC information is changed by the Branches/ CPC etc. Other changes in CIF Strictly For Internal Circula