Account Opening kyc and operation (1).pptx

ACCOUNT OPENING ,ON-BOARDING PROCESS KYC MECHANISM AND OPERATIONS By: Krishan Gopal Sing Former Financial Literacy Counselo & Retired Senior Manage  ACCOUNT OPENING ,ON-BOARDING PROCESS,KYC MECHANISM AND OPERATI JECTIVE his s...

ACCOUNT OPENING ,ON-BOARDING PROCESS KYC MECHANISM AND OPERATIONS By: Krishan Gopal Sing Former Financial Literacy Counselo & Retired Senior Manage  ACCOUNT OPENING ,ON-BOARDING PROCESS,KYC MECHANISM AND OPERATI JECTIVE his session participants will be able to understand the procedures relati pening of customers’ accounts peration in the accounts YC ( Know Your Customer ) norms as provided for in the guidelines issue RBI and measures to be taken for prevention of money laundering losure of accounts RODUCTION ny person , who want to open an account with a bank, will have to subm ain documents , to prove his identity and residential/office address. general terms , this procedure in banking terms is called “ Know Your C C) BI has stipulated “ Officially valid documents”, for various type of custo plying with the said procedure. These guidelines have been issued by th was observed that in several geographical location , the economic offe e indulging in undesirable economic activities, wherein the origin of fun erated by illegal means was concealed ; they were indulging in routing eys so generated , through the banking system of various countries and sfer of funds, to various entities, such that the money earned in illegal e invested in legitimate activities.  PENING ,ON-BOARDING PROCESS,KYC MECHANISM AND OPERATIONS ; KEY WOR key words in this session are : r Customer [ KYC ] : A process to verify the identity and other credentia services user. Valid Documents [ OVDs ]: Those documents that can be accepted, for ng the legal name and current address of individuals. Owner : is the natural person(s) who, whether acting alone or together ne or more juridical persons, has/have a controlling ownership interest cise control through other means. Due Diligence [ CDD ] means identifying and verifying the customer an y owner using reliable and independent sources of identification. ustomers : individuals and entities whose identities and sources of wea sily identified and transactions in whose accounts by and large conform profile. isk Customers : Customers who are likely to pose a higher-than-average Bank Customers : Customers on whose behalf, the banks are required to emp due diligence measures. OUNT OPENING ,ON-BOARDING PROCESS,KYC MECHANISM AND OPERATIONS:KEY orandum of Association : is a document which represents the charter of the com a legal document prepared during a company ‘s formation and registration proce e of Association : Is a document of a company which set out the rules and regul the objectives of the company’s operations and its purpose. nership Deed: is agreement between the partners of the firm, which outlines the itions of partnership between the partners. Deed: is a legal document that sets out the conditions, terms and rules for cre aging a Trust. r of Attorney : is a document that gives a legal authorization to a designated right to act as the representative of some ones else. educted at Source [TDS] : is the procedure implemented by the Indian Governm ct taxes at the source of Income. ue Truncation System [CTS]: is a cheque clearance system that involves the dig Physical paper cheque in to a substitute electronics form, for transmission to th. mated Teller machine [ ATM ] : is an electronic ( computerized device) banking allows customer basic transactions, without the help oh a branch representative nation : is the service that enables the account holder or any other financial inst tor to name someone to claim the deposit or the investment after the original o e assets or account, passes away. NT OPENING ,ON-BOARDING PROCESS,KYC MECHANISM AND OPERATIONS : KEY Any person who is not of the age of majority ( 18 years is the age of m a ) is a minor. asin : A woman who practices purdah can be referred to as pardanashin or Survivor : this is the most common form of joint account. Only two in erate the account. Both can access the account and transfer the funds. r or Survivor : It means tat in bank account the First named person will count in all circumstances, except in case of his/her death. Only in case person the joint holder would be eligible to operate the account. Laundering ( ML ): A process wherein the origin of funds generated by , such as drug trafficking , terrorism, illegal arms trade, corruption, ext ealed. rpose of money laundering: is to route the money so generated through g systems of various countries and transferred to various entities ( laye e money trail can be camouflaged and the money become “clean mone g the same through the banking system. CEDUR FOR OPENING AN ACCOUNT money laundering should be checked : is can be used to fund illegal activities is money does not participate in the economic development of the coun tax is paid on such funds f Money laundering : Direct/indirect indulgence, knowingly or unknowi ding assistance to a party involved in any process or activity connecte eeds of crime and projecting it as untainted property. objectives of Prevention of Money laundering Act : Enable banks to know/ monitor customer’s transaction better. Put in place appropriate control and reporting of suspicious activities. Comply with applicable laws and regulatory activities. ey laundering – Stages and Types acement: It means physical disposal of proceeds of criminal activity yering: It means separation of illicit proceeds from their source by crea omplex layers of financial transactions thereby avoiding audit trail and nonymity to the source of funds. tegration: This is the final phase in which such money are invested in le omic activity as normal funds. r Pillars of KYC policy: tomer acceptance policy 2. Customer identification policy onitoring of transactions 4. Risk Management “Know Your Customer”(KYC) ? – KYC is a tool to check Money Laundering can check Money Laundering ? : Banks/ Financial Institutions. bank can check Money Laundering ? : By being vigilant at the time of o ccount of different entities and monitoring the transactions in the Accou Guidelines : ify & confirm the bonfides of the customer. ain identity proof and the address proof in the form of prescribed docu gular updating of KYC records nitoring & reporting the suspicious Transactions h transactions of over Rupees 10 lacs should be reported to the RBI on rtnightly basis picious transactions are to be reported to FIU-IND w Your Customer”(KYC) guidelines of RBI CTIVES: establishes the identity and residential address of the customers, by sp ocumentary evidences. prevent possible misuse of the banking system , for money laundering a nancing of terrorist activities. mpulsory and Strict adherence to “KYC’ guidelines by bank and monitor ash transitions, based on the norms prescribed for the purpose. w Your Customer”(KYC) guidelines of RBI ally Valid Documents ( OVD ): Means- e Passport / The Driving License of of possession of Aadhar number e Voter’s Identity Card issued by Election Commission of India card issue by the NREGA duly signed by an officer of the State Governm ter issued by the National Population Register containing details of nam ddress se where the OVD furnished by the customer does not have updated add ollowing documents shall be deemed to be OVD for the limited purpose dress. However , the customer shall submit the ODV with current addre iod of three months: ity bill which is not more than two months old of any service provider s ectricity , telephone, post-paid mobile phone, piped gas, water bill perty or Municipal tax receipt nsion or family pension payment order (PPOs) issued to retired employe overnment Departments or Public Sector Undertakings, if these contain ter of allotment of accommodation from the employer issued by the rnment Departments or statutory or regulatory bodies, public sector un cial Institutions and listed companies and lease and license agreement oyers allotting official accommodation.  Account Opening count of Individuals: account can be opened for a single individual or for Two or more individ ntly. ndividual should be major by age ( 18 years of age in India ), of sound m d should not be un-discharged insolvent or disqualified from contacting ny law which he is subjected to. ated Entities ( REs ) means Bank / Financial Institution, shall obtain the an individual while establishing an account –based relationship or while n individual who is a beneficial owner, authorized signatory or the pow ney holder related to any legal entity: ttested - sport size Photographs of individuals of the official valid document ( ODV ) required for proof of identity of the official valid document ( OVD ) required for proof of address Card or Form No. 60 as defined in Income Tax Rules,1962 h other documents including in respect of the nature of business and fin of the customer, as may be required by the RE ( bank/FI)  Account Opening unt of Individuals: Illiterate persons; addition to obtaining documents required for opening the account of in e rule relating to the account have to be clearly explained to an illiterat language understood by him/her. /she should be advised that for withdrawing money from the account , to personally come to the bank with passbook, every time. ft thumb impression of the account holder is obtained on the account o m in the presence of an authorized bank officer and a person well know nk who will attest his/her thumb impression on the account opening for unt of Individuals: Minors: nk allow literate minors above the age of 10 years to open and operate ount, subject to certain conditions. ening of minor’s accounts need compliance of KYC formalities of both t his/her guardian. e father is the natural guardian for opening the account, but RBI has pe ks to open minor’s account with the mother as a guardian. e term natural guardian does not include step mother or step father. o minors cannot open a joint account. I has allowed banks to offer facilities like internet banking, ATM, and De a literate minor  Account Opening unt of Individuals: Small Accounts; ose person who do not possess any documents, notified as OVD for the open small accounts with the bank. UIREMENTS: mall account can be opened on the basis of a self- attested photograph ng his /her signature or thumb impression in the presence of an official ank, with certain limitations. ATIONS: gregate credits not more than Rs.1,00,000 in a year. gregate withdrawals not more than Rs. 10,000 in a month. ance in the account not more than 50,000 at any point of time. count normally valid / allowed for a period of 12 months. ch account can be allowed to continue for further 12 months ,if proof of pplied for any the OVD is submitted  Account Opening count of Individuals: NRO Accounts of forign students ( studing in Indi QUIREMENTS: Passport ( with appropriate visa and immigration endorsement ) contai Proof of identity and address in the home country. A photograph and a letter from the educational institution offering adm in India. thin 30 days: To submit Rent agreement / letter from the educational institution ( pro address of hostel etc. Branch to ensure local address verification. ring 30 days period : Inward remittance not more than US $ 1,000 ( or equivalent). Withdrawals not more than Rs. 50,000, due to pending verification of ad her Condition: Students of Pakistani nationality will need the RBI’s prior approval for o an account  Account Opening ation regarding OVDs for Low Risk ( salaried accounts , small business customers: IREMENTS: Identity card with applicant’s photograph issued by central/State Gover rtments, Statutory/regulatory authorities, public sector undertakings, uled commercial banks, and public Financial institution Letter issued by a gazetteted offer, with a duly attested photograph of or SB of SHGs, KYC verification of all the office bearers is enough. ONTINUED NON-COMPLIANCE OF “KYC “REQUIREMENTS nk should impose partial freezing after giving 3 months notice followed reminder. ount cab ne revived by submitting the KYC documents. er 6 months of imposing initial “ partial freezing” account will become operative. h KYC non-compliant account may be closed also by the bank.  Account Opening OMPANY ACCOUNT: opening an account of the company , certified copies of each of the foll ments or the equivalent e-documents to be obtained. tificate of incorporation; morandum and Article of Association; manent Account Number of the company; py of Board resolution to open an account and authorized officials to op e account. ower of Attorney to its manager, officers or employee to transact busine s behalf. he registered office and the principal place of business , if it is different. STN of the company  Account Opening PARTNERSHIP FIRM’S ACCOUNT: or opening an account of the Partnership Firm , certified copies of each wing documents or the equivalent e-documents to be obtained. egistration certificate artnership deed ermanent Account Number of the partnership firm ower of Attorney granted to a partner or an employee of the firm to tr business on its behalf YC of all the partners ddress of registered office and the principal place of its business , if it is ocuments , as specified for Customer Due Diligence ( CDD ), relating to Owner, Managers, Officers or Employees as the case may be.  Account Opening COUNT OF TRUST & FOUNDATIONS pening an account of Trust or Foundation , certified copies of each of t ng documents or the equivalent e-documents to be obtained. ficate of Registration Deed manent Account Number or Form No. 60 of the trust ments , as specified for Customer Due Diligence ( CDD ), relating to Ben ner, Managers, Officers or Employees as the case may be, holding an att nsact on its behalf. lution of the managing body of the Trust/ Foundation/association. e of the beneficiaries, Trustees, Settlor, protector, if any, and authors of ess of the registered office of the Trust of trustees and documents, as specified in section 16 , for those dischar role as trustee and authorized to transact on behalf of the trust.  Account Opening OUNT OF PROPRIETORSHIP FIRMS pening an account of a sole Proprietorship Firms, besides Customer Due ce, any Two of the following documents or the equivalent e-documents d. tration Certificate including Udhyam Registration Certificate ( URC ) iss ernment. ficate/ license under Shop & Establishment Act and income tax return; GST registration details. ssional Tax authorities License issued by the registering authorities. urn copy ( Sole Proprietor ) duly authenticated / acknowledged by the Tax Authorities. y Bills such as electricity , water bills etc. rt Export Code ( IEC ) issued to the firm by the office of DGFT.  Account Opening CCOUNT OF JURIDICAL PERSON r opening account of a customer who is a juridical person [not specifical where ] such as societies, universities and local bodies like Village Panch ho purports to act on behalf of such juridical person or individual or trus fied copies of the following documents or the equivalent e-documents to ned. cument showing name of the person authorized to act on behalf of the cuments, as specified for Customer Due Diligence ( CDD ), of the person olding an attorney to transact on its behalf. ch documents as may be required by the RE to establish the legal existe of such entity/ juridical person.  Account Opening RIODIC UPDATION OF KYC } Ongoing due diligence: hrough email / letter / telephonic conversation / forms / interviews / visi or Medium Risk : at least every Two years or Low Risk : at least every Three Years } Full KYC Exercise should be done: or High Risk Customers ; at least once in every Two Years or Medium Risk Customers ; at least once in every Eight Years or Law Risk Customers ; at least once in every Ten Years m the date of opening of the account / last KYC up dation.  Account Opening graph of account holder/Depositor k should obtain and keep on record, photograph of all depositors/accou rs, in respect of accounts opened by them y Banks and Government departments will be exempted from requireme hing photographs. ase of deposit in the name of minor, photograph of Guardian should be MEN SIGNATURE: cimen signature of the customers obtained on the account opening form esence of bank staff and the same is attested by an authorized bank offi ase of illiterate customer, bank take the thumb impression for the iden se. NATION: ilable in all types of deposit accounts (a) Single depositor (b) Joint De omination can be made in favor of individuals only and not associations, rganization or its office-bearers. ase of Joint account , all the depositors together will nominate a single inor nominee can be represented by a guardian. omination may be changed / cancelled by the depositor(s).  RBI GUIDELINES IN REGARD TO OPERATIONS nimum balance requirement and charges:- ould be transparently made known at least one month in advance. noperative account: No penal charges to be levied. suance of Pass-book to SB account Holders (Individuals) ariably offer Pass-book facility to all its SB account holders ( Individuals cost be levied for provision of pass book nch address / telephone number and IFSC code should be mentioned on ss-book oviding monthly statement of Accounts ariably Monthly statement of account to be issued to current account h scribed periodicity is to be maintained by bank. nch address / telephone number and IFSC code should be mentioned on atement of account. sue of Cheque Books yable at par”/ “Multi-city” CTS 2010 standard cheques to be issued to a ng Bank customers without extra charges, when they are issued for the  RBI GUIDELINES IN REGARD TO OPERATIONS operative Accounts o transaction in Saving/current for over a period of two years , accoun eated as inoperative / Dormant. the this classification purpose , both the type of transaction i.e. Debit edit transaction be induced. eration in inoperative account may be allowed after due diligence as pe ategory of the customer rm deposit Account : Issue of term deposit receipt: ariably issue Term Deposit receipt l details , such as date of issue, period of deposit, due date, applicable terest, etc. be mentioned on the receipt turity renewal notice should be sent well in advance to their depositors vance instruction from depositor for disposal of deposit on maturity ma btained in the application form itself. uto” renewal facility of TDR for the same periodicity, at the current inte ay also be provided, in absence of renewal.  RBI GUIDELINES IN REGARD TO OPERATIONS ment of Term/Fixed Deposit : ame: ity – as per mandate. aturity- Signature of both the depositor required, in case of joint depos ore Maturity or Survivor” Mandate : In case one of the depositor expires ity - the surviving joint account holder will be paid the maturity procee aturity - no pre-payment of Fixed/Term deposit may be allowed without nce of the legal heirs of the deceased joint holder. er or Survivor” Mandate: h the depositor are alive al on maturity : by Former alone red Payment : Signature of both depositor required e of former died- On maturity : Survivor can withdraw on maturity. e of death of one of the depositors re Payment : Surviving depositor and the legal heirs of the deceased ca  RBI GUIDELINES IN REGARD TO OPERATIONS ddition or deletion of the name/s of its account holder: dividual Account Holder: On request , allow to add the name of another s a joint account holder, subject to obtain KYC documents. nt Account Holder: on request of all joint account holders , allow the ad tion of name/s of joint account holders. wever , in no case the amount, deposit or duration of the original Term deposit is allowed. RO accounts may be held by Non-residents jointly with residents. RE joint deposits: can be opened by two or more NREs and /or PIOs or by NRI/PIO with a resident relative(s) on “Former or Survivor” basis. During s a power of attorney holder. cknowledgement by bank at the time of submission of Form 15G/15H: nk should give an acknowledge after obtaining form 15G/15H. nk not required to deduct TDS , from depositors who submit declaration 5G/15H under income tax rules. 1962.  RBI GUIDELINES IN REGARD TO OPERATIONS peration of account of Old & Incapacitate Persons: pe of Old & Incapacitate Persons: ) An account holder who is too ill to sign a cheque and/or cannot visit t branch to Withdraw money but can put his/her thumb impression on the withdrawal Form. ) An account holder who is not only unable to visit the branch but is als even to put his/her thumb impression on the cheque/ withdrawal form d certain physical incapacity peration Procedure: bank may follow the procedure as under: humb or toe impression of such account holder should be identified by independent witness known to the bank, one of whom should be a resp bank official. Where the such customer cannot even put his/her thumb impression and not able to present in the bank, a mark can be obtained on visit the che which should by identified by two independent witness known to the b of whom should be a responsible bank official. he customer may also be asked to indicate o the bank as to who would w the amount from the bank on the basis of Cheque/WF as obtained above person should be identified by two independent witness.  RBI GUIDELINES IN REGARD TO OPERATIONS ally impaired persons: lowing banking facilities may be offered to the visually challenged per hey are legally competent to contract : such as- eque book facility eration of ATM cker facility etc. step banking: provide doorstep facility , which include basic facility such as pick up o nd instruments against receipt, delivery of cash against withdrawal fro ubmission of KYC documents, Life Certificate etc. at the premises/reside enior citizen of more than 70 years of age and differently abled or infirm UES heque has Three parties: awer awee yee le Cheque : Three months after the date written on the cheque, can no nless revalidated. ssing of Cheques: neral Crossing: can not be paid otherwise than to a banker. Drawer /is older can cross the cheque by drawing on its face two parallel Transver with or without the word “not negotiable” or “account payee”. pecial crossing: the effect of such crossing is that the drawee bank shal e cheque otherwise than to the banker to whom it is crossed or his age ollection arer Cheque: payable to a or to the order of the payee. der Cheque: has to be paid to the specified payee or his/her endorsee af entifying the payee and validity of endorsement. QUES – ENDORSEMENT arer Cheque: payable to a or to the order of the payee. der Cheque: has to be paid to the specified payee or his/her endorsee a dentifying the payee and validity of endorsement. dorsement: as made on the back of the instrument or by attaching a sli paper ( called “allonge” ) signature of the endorser without adding any words is adequate to con endorsement ) Endorsement has to be made by the payee or by the all payees jointly, a stranger can not endorse, unless he is a holder in due course. ) An endorsement can not be partial ( part of the amount ). LOSING AN ACCOUNT Bank can close the account on the request of customer. All the account holder(s) request is necessary , if the account is in the n of Joint depositors/holders On receipt of notice of death of the customer. A joint account may also be closed on the death of any one of the accou holders and fresh account opened in the name of the surviving accoun to avoid the legal problems. If any suspicious activity is observed in the transaction in the account, account may be frozen/ closed after giving sufficient notice to the cus TOPPING OF OPERATION IN THE ACCOUNT BY BANK : On the death of a customer. On receiving the garnishee order of court/ Income tax authorities. On the death of a partner in the Partnership account. On observation of any Money Laundering activity in the account. HARTER OF CUSTOMER RIGHTS The RBI has laid down a Charter of Customer Rights for protection of b customers. These are:- Right to Fair treatment Right to Transparency, Fair, and Honest Dealing Right to Suitability Right to Privacy Right to Grievance Redress and Compensation LET US SUM UP Bank account can be opened by individuals, Partnership /Proprietorship Firm, Private/Public limited companies, Trust , Societies etc. Banks undertake due verification of all records and satisfy themselves with regard to status of the customer(s) KYC is an important aspect of account opening and monitoring the same. Any person who want to open an account with bank has to submit OVDs Aim of obtaining the OVD is the procedure to check Money laundering. RBI has stipulated certain guidelines in regard to operation in accounts. By opening an account of customers, the bank enter into relationship with customer.  CK YOUR PROGRESS Money Laundering refers to………………….. Conversion of assets into cash Conversion of Money which is illegally obtained through legal channels Conversion of cash into gold ) Conversion of legal money for utilization of illegal purposes, ne of the important steps in Money laundering is …………………… Placement & Layering Organization & Controlling Depositing & Withdrawing Backward & Forward integration Which of the following is an Officially valid Document available to the ba for customer identification? Election ID card Rashion card Photograph Bank Statement of Account. K YOUR PROGRESS at is the objective of KYC norms? To ensure appropriate customer identification To monitor transactions of suspicious nature. If loan is given, it would not be a NPA To create a data base of customers ntify the statement from among the following options The customer has a right to close the deposit account because of chang residence or dissatisfaction with the service of the bank. Bank normally do not choose to stop operation in the joint deposit acco even upon receipt of notice of death of one of the customers, to avoid a nconvenience to the surviving customer losure of account can be done only on Voluntary basis and the Banks ge do not close of customers on their own, even if the customer is convicte operation in the account are found to be undesirable Banks have he prerogative to close the inoperative account of custome without giving any notice to them. Thank you