KYC/AML/CFT Policy SBM India Policy - SBM Bank · 2) "Officially valid document” (OVD) means 1)...

KYC/AML/CFT Policy – SBM India Policy

Confidential Document

Page | 1

KYC/AML/CFT Policy – SBM India

Document Version: 1.0

Policy ID: _IND

Prepared by: Risk Management

2018


Confidential Document Page | 2

Document Review & Approval History: (All revisions made to this document are listed in chronological order)

Version

Date

Changes

Reviewed by

Approved by

No.

New Policy

1.0 November

2018

Risk Management Committee

Board



Synopsis of KYC AML CFT Policy – SBM India

Document Version: 1.0

Policy ID: _IND



Objective:

The primary objective of the policy is to prevent SBM India from being used, intentionally or

unintentionally, by criminal elements for money laundering or terrorist financing activities.

Scope:

The KYC/AML/CFT Policy covers the following aspects:

1. Know Your Customer (KYC): To ensure that the information collected from the customer for the

opening of account is confidential and not to be used for cross selling or any other purposes without their consent and any remittance of funds by way of demand draft, mail/ telegraphic transfer or any other mode and issue of travelers’ cheques for value of Rupees fifty thousand and above is effected by debit to the customer’s account or against cheques and not against cash payment.

2. Customer Acceptance Policy: Not accept as its customer any person who is barred by the law of the land to avail banking facilities. It shall be ensured that a) No account is opened in anonymous or fictitious/ benami name b) No account is opened for persons with criminal background and/or having connections with terrorist organisation/s. c) No account is opened for persons who are identified as ‘money mules’ and for MLM companies. d) No transaction or account-based relationship is undertaken without following the CDD procedure etc.

3. Risk Classification: Customers classified into three Money Laundering risk levels, i.e. Low, Medium and High

4. Customer Identification Procedures - CDD: Customer identification requires identifying customer and verifying his/ her identity by using reliable, independent source documents, data or information as per regulatory prescriptions.

5. Monitoring and Reporting of Transactions: The transactions to be monitored depending on sensitivity of the accounts. The threshold limits prescribed for each category of accounts. Breaches of threshold and suspicious nature of transactions to be monitored for filing Suspicious Transaction Reports with the FIU-India.

6. Risk Management: Establish suitable framework covering appropriate procedures and ensuring their effective implementation covering proper management oversight, systems and controls segregation of duties, training and other related matters.

7. Correspondent Banking: Relationships with correspondent banks to be established only with the approval of the Board or a committee approved by the Board.

8. Employee Screening, Awareness and Training: SBM India to put in place adequate screening mechanism as part of their hiring/recruitment process. Employees shall have an on-going employee training program to ensure that staff are adequately trained in KYC procedures.



Periodic review shall be conducted with regards to systems and procedures for employees’ training

9. Record keeping and retention of records: As per the provisions of Section 12 of PML Act 2002.

GUIDING PRINCIPLES under PMLA: • Risk-based approach: Identify, assess and take effective action to mitigate money laundering and

terrorist financing risks etc.

• Proactive Monitoring: Proactive ongoing monitoring of transactions for effective AML System.

• Non-restrictive Procedures: Implementation of KYC/ AML/ CFT policies and procedures shall be non-restrictive and shall not result in denial of banking services to general public, especially those who are financially or socially disadvantaged

Reporting Requirements - Principal Officer - Head Compliance to act as Principal Officer (PO) as provided for in the PML Act and he shall be responsible for ensuring compliance, monitoring transactions, and sharing and reporting information as required under the law/regulations to FIU, RBI, Income Tax Department etc.

Policy Review: KYC/AML/CFT Policy will be reviewed on a regular basis and at least once a year by the

AML Unit and any amendment shall require approval of the Board. Further, inputs from the India Chief Executive will also be sought at the time of each review.

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POLICY DOCUMENT



1 INTRODUCTION 1.1 Definitions

Definition of the Term Money Laundering Money Laundering is the introduction of assets derived from unlawful and criminal activities (Predicate offences) into the legitimate funds/assets. Offences are for example forgery of money, extortionate robbery, drug crime as well as fraud, corruption, organized crime, or terrorism etc. Predicate offences for money laundering are defined by local law. Generally speaking, the money laundering process consists of three “stages”:

Placement: The introduction of illegally obtained monies or other valuables into financial or non-financial institutions. Layering: Separating the proceeds of criminal activity from their source through the use of layers of complex financial transactions. These layers are designed to hamper the audit trail, disguise the origin of funds and provide anonymity. Integration: Placing the laundered proceeds back into the economy in such a way that they re-enter the financial system as apparently legitimate funds. These “stages” are not static and overlap broadly. Financial institutions may be misused at any point in the money laundering process.

In this Policy, unless the context otherwise requires, the terms used shall bear the meanings assigned to them in the RBI Master Direction – Know Your Customer Direction, 2016 (Master Direction DBR.AML.BC. No. 81/14.01.001/2015-16 dated February 25, 2016 (Refer Appendix -1) For the purpose of KYC policy, a ‘Designated Director’ is defined as:

a person designated by the reporting entity (bank, financial institution, etc.) to ensure overall compliance with the obligations imposed under chapter IV of the PML Act and the Rules and includes

(i) the Managing Director or a whole-time Director duly authorized by the Board of Directors if the reporting entity is a company, (ii) the Managing Partner if the reporting entity is a partnership firm, (iii) the Proprietor if the reporting entity is a proprietorship concern, (iv) the Managing Trustee if the reporting entity is a trust, (v) a person or individual, as the case may be, who controls and manages the affairs of the reporting entity, if the reporting entity is an unincorporated association or a body of individuals, and (vi) such other person or class of persons as may be notified by the Government if the reporting entity does not fall in any of the categories above. Explanation. - For the purpose of this clause, the terms "Managing Director" and "Whole-time Director" shall have the meaning assigned to them in the Companies Act 2) "Officially valid document” (OVD) means 1) the passport, the driving Licence, the Permanent Account Number (PAN) Card, 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, letter issued by the Unique Identification Authority of India containing details of name, address and Aadhaar number, or any other document as notified by the Central Government in

consultation with the Regulator. 2) Where ‘simplified measures’ are applied for verifying the identity of the clients the following documents shall be deemed to be OVD: a) Identity card with applicant’s Photograph issued by Central/ State Government Departments, Statutory/ Regulatory Authorities, Public Sector Undertakings, Scheduled Commercial Banks, and Public Financial Institutions; b) Letter issued by a gazetted officer, with a duly attested photograph of the person. where ‘simplified measures’ are applied for verifying for the limited purpose of proof of address the following additional documents are deemed to be OVDs :. a) Utility bill which is not more than two months old of any service provider (electricity, telephone, post-paid mobile phone, piped gas, water bill); b) Property or Municipal Tax receipt; c) Bank account or Post Office savings bank account statement; d) Pension or family pension payment orders (PPOs) issued to retired employees by Government Departments or Public Sector Undertakings, if they contain the address; e) Letter of allotment of accommodation from employer issued by State or Central Government departments, statutory or regulatory bodies, public sector undertakings, scheduled commercial banks, financial institutions and listed companies. Similarly, leave and license agreements with such employers allotting official accommodation; and f) Documents issued by Government departments of foreign jurisdictions and letter issued by Foreign Embassy or Mission in India.

3) ‘transaction’ means a purchase, sale, loan, pledge, gift, transfer, delivery or the arrangement thereof and includes – (i) Opening of an account (ii) 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 (iii) The use of a safety deposit box or any other form of safe deposit (iv) Entering into any fiduciary relationship (v) Any payment made or received in whole or in part of any contractual or other legal obligation; or (vi) Establishing or creating a legal person or legal arrangement. 4) A ‘person’ includes: (i) an individual (ii) a Hindu Undivided Family (HUF) (iii) a company (iv) a firm (v) an association of persons or a body of individuals whether incorporated or not (vi) every artificial or juridical person not falling within any one of the above persons (I to v) and (vii) any agency, office or branch owned or controlled by any of the above persons (I to vi)

(viii) Non-Profit Organization"(NPO) means any entity or organization that is registered as a trust or a

society under the Societies Registration Act, 1860 or any similar State Legislation or a company

registered under Section 8 Of the Companies Act. 2013



5.Principal Officer means a senior officer appointed by the bank to act as Principal Officer (PO) as provided for in the PML Act and he shall be responsible for ensuring compliance, monitoring transactions, and sharing and reporting information as required under the law/regulations.

1.2 Purpose and Scope

1.2.1 Purpose The primary purpose of the policy is to prevent SBM India (herewith referred to as “Bank” also) from being used, intentionally or unintentionally, by criminal elements for money laundering or terrorist financing activities.

Refer Appendix-1 for the relevant RBI sources that are referred in this policy supplement. Any updates in the relevant RBI Directions/Circulars with regards to Know Your Customer/Anti Money Laundering/Combating Financing of Terrorism (KYC/AML/CFT) would supersede the policy supplement statements given here and would accordingly need to be incorporated in the next revision in the supplement. 1.2.2 Scope The KYC/AML/CFT Policy covers the following aspects:

10. Know Your Customer (KYC) 11. Customer Acceptance Policy 12. Risk Classification 13. Customer Identification Procedures 14. Monitoring and Reporting of Transactions 15. Risk Management 16. Correspondent Banking 17. Employee Screening, Awareness and Training 18. Record keeping and retention of records

1.3 Context 1.3.1 Context Banks in India been advised by the RBI to follow certain customer identification procedure for opening of accounts and monitoring transactions of a suspicious nature for the purpose of reporting it to the Financial Intelligence Unit (FIU-IND) of the Government of India. The guidelines issued by the Reserve Bank of India take in to account the recommendations made by the Financial Action Task Force [FATF] on AML Standards and on combating financing of terrorism (CFT). The guidelines also incorporate aspects covered in the Basel Committee document on Customer Due Diligence [CDD] measures, which is a reflection of the international financial community’s resolve to assist law enforcement authorities in combating financial crime. This policy incorporates SBM India’s approach to customer identification procedures, customer profiling based on the risk perception and monitoring of transactions on an ongoing basis and has been prepared in line with the regulatory guidelines.



1.3.2 Obligations of Banks under Prevention of Money Laundering (PML) Act, 2002 Section 12 of PML Act 2002 places certain obligations on every banking company, financial institution and intermediary, which include:

1. Maintaining a record of prescribed transactions 2. Furnishing information of prescribed transactions to the specified authority 3. Verifying and maintaining records of the identity of its clients 4. Preserving records in respect of points 1, 2, 3 above for a period of at least 5 years from the date

of cessation of transactions with the clients 2 GUIDING PRINCIPLES

The below principles for compliance risk management would guide and underpin the development of all processes, systems and procedures in this regard.

• Risk-based approach: Identify, assess and take effective action to mitigate money laundering and terrorist financing risks, such that measures are commensurate with the risks identified.

• Proactive Monitoring: Proactive ongoing monitoring is an essential element of effective AML

System – this has to be a combination of manual and system supported monitoring of transactions.

• Non-restrictive Procedures: Implementation of KYC/ AML/ CFT policies and procedures shall be

non-restrictive and shall not result in denial of banking services to general public, especially those who are financially or socially disadvantaged

3 OPERATING GUIDELINES 3.1 Know Your Customer (KYC) – General Guidance

• SBM India shall ensure that the information collected from the customer for the purpose of opening of account is confidential and details thereof are not to be used for cross selling or any other purposes without their consent.

• SBM India shall ensure that any remittance of funds by way of demand draft, mail/ telegraphic

transfer or any other mode and issue of travelers’ cheques for value of Rupees fifty thousand and above is effected by debit to the customer’s account or against cheques and not against cash payment.

• SBM India shall not make payment for an instrument if they are presented beyond the period of

three months from the date of such instrument.

• SBM India shall ensure that all provisions of the Foreign Contribution (Regulation) Act, 2010 wherever applicable to are strictly adhered to.

• SBM India’s KYC policy will consist of the following: o Customer Acceptance Policy o Customer Identification Procedures o Monitoring of Transactions o Risk Management

In case of non-compliance of KYC requirements by the customers despite repeated reminders, SBM India would impose ‘partial freezing’ on such KYC non-compliant accounts in a phased manner, after giving due notice 3.1.1 Customer Acceptance Policy Bank’s Customer Acceptance policy (CAP) lays down the criteria for acceptance of customers.



1. SBM India will not accept as its customer any person who is barred by the law of the land to avail banking facilities. In particular, it shall be ensured that: a. No account is opened in anonymous or fictitious/ benami name. b. No account is opened for persons with criminal background and/or having connections with

terrorist organisation/s. Information relating to persons with criminal background and/or having contacts with terrorist organisations will be shared with the branches from time to time. Branches will also have to be guided by the information available in public domain (including RBI communications in this regard) for the purpose.

c. No account is opened for persons who are identified as ‘money mules’ and for Multi-Level Marketing Companies.

d. No transaction or account-based relationship is undertaken without following the CDD procedure. e. The mandatory information to be sought for KYC purpose as specified are obtained while opening

an account and during the periodic up-dation. f. ‘Optional’/additional information is obtained with the explicit consent of the customer after the

account is opened. g. CDD Procedure is followed for all the joint account holders, while opening a joint account.

h. Suitable system is put in place to ensure that the identity of the customer does not match with any person or entity, whose name appears in the sanctions lists circulated by Reserve Bank of India.

2. Special care is to be taken to ensure that implementation of these guidelines do not result in denial of banking services to general public, especially to those who are financially or socially disadvantaged.

3. Branches shall not open an account or close an existing account, where the branch is unable to apply appropriate customer due diligence measures i.e. branch is unable to verify the identity and/or obtain documents required as per the risk categorization due to non-cooperation of the customer or non-reliability of the data/information furnished to the bank. However, the decision to continue or close an existing account shall be taken by the branch manager only after he is satisfied with the process/documentation and in case of closure, after giving due notice to the customer explaining the reasons for such a decision.

4. SBM India shall also clearly define the circumstances in which a customer is permitted to act on behalf of another person/ entity, which shall be in conformity with the established law and practice of banking. For operational details for collection of documentation and risk categorization, SBM India shall refer to the Master Circular on Know Your Customer (KYC) norms / Anti-Money Laundering (AML) standards/Combating of Financing of Terrorism (CFT)/Obligation of banks under PMLA, 2002 and comply with all requirements of the PML Act, 2002.

3.1.2 Customer Identification Procedures

Customer identification requires identifying the customer and verifying his/ her identity by using reliable, independent source documents, data or information. In addition, the following additional requirements identified as the regulatory guidelines shall also be adhered to by SBM India:

• SBM India staff shall identify the beneficial owner, taking reasonable measures to verify the identity of the beneficial owner. For determination of Beneficial Ownership, SBM India shall follow the specified procedure as advised by the Government of India and RBI as amended from time to time.

• SBM India will allot Unique Customer Identification Code (UCIC) to all customers while entering

new relationships

• KYC done by one branch of the bank shall be valid for transfer of the account within the bank as



long as full KYC has been done for the concerned account.

• For e-KYC process, the information containing demographic details and photographs made available from UIDAI (e-Aadhaar) may be treated as an officially valid document.

• SBM India will follow the detailed guidelines prescribed by the RBI on KYC/AML/CFT for customer

identification requirements for different categories of customers identified in the circular.

3.1.2.1 SBM-India shall undertake identification of customers in the following cases:

a. Commencement of an account-based relationship with the customer. b. Carrying out any international money transfer operations for a person who is not an account

holder of the bank. c. When there is a doubt about the authenticity or adequacy of the customer identification data it

has obtained. d. Selling third party products as agents, selling their own products, payment of dues of credit

cards/ sale and reloading of prepaid/travel cards and any other product for more than rupees fifty thousand.

e. Carrying out transactions for a non-account-based customer, that is a walk-in customer, where the amount involved is equal to or exceeds rupees fifty thousand, whether conducted as a single transaction or several transactions that appear to be connected.

f. When there is reason to believe that a customer (account- based or walk-in) is intentionally structuring a transaction into a series of transactions below the threshold of rupees fifty thousand.

3.1.2.2 While undertaking customer identification, SBM-India shall ensure that:

a. Decision-making functions of determining compliance with KYC norms are not be outsourced. b. Introduction is not sought while opening accounts. c. The customers is not required to furnish an additional Officially Valid Documents (OVD), if the

OVD submitted by the customer for KYC contains both proof of identity and proof of address. d. The customer is not required to furnish separate proof of address for permanent and current

addresses, if these are different. In case the proof of address furnished by the customer is the address where the customer is currently residing, a declaration shall be taken from the customer about her/his local address on which all correspondence will be made.

e. The local address for correspondence, for which proof of address of the customer is not available, shall be verified through ‘positive confirmation’ such as acknowledgment of receipt of letter, cheque books, ATM cards, telephonic conversation, visits to the place, or the like.

f. In case it is observed that the address mentioned as per ‘proof of address’ has undergone a change, it shall be ensured that fresh proof of address is obtained within as soon as possible.

3.1.2.3 Risk Classification

1. The level of Money Laundering (ML) risks that SBM India is exposed to by a Customer relationship depends on:

a. Type of the customer and nature of business b. Type of product / service availed by the customer c. Country where the Customer is domiciled

2. Based on the above criteria the customers will be classified into three Money Laundering risk levels, i.e. Low, Medium and High. Refer to the Annexure 2 for details on the risk



categorization. 3. The Bank has fixed certain minimum standards of account documentation for all new

customer relationships, to enable the Bank to understand the nature of the customer’s business, carry evidence of key data regarding the customer and its principal owners/ signatories and understand the type and level of activity that is to be considered as normal in the customer’s account.

4. Categorization of customers shall be carried out at a periodicity of not less than once in six months.

5. Screening of name of all existing customers to be carried out against World Check and other Watch Lists on an ongoing screening mode on World Check One for regular monitoring. In case the account holders are either not responding within three months from the request for submission of updated KYC documents or are not found at the given addresses, the bank would as an initial measure place such accounts under close watch, depriving the non-compliant customers certain additional facilities (i.e. facilities other than Basic Banking facilities), till the customer complies with such requirements.

3.1.2.4 KYC for Debit Cards/Credit Cards/Smart Cards/Gift Cards

SBM India shall ensure full compliance with all KYC/AML/CFT guidelines issued from time to time, in respect of add-on/ supplementary cardholder’s also. SBM India shall ensure that appropriate KYC procedures are duly applied before the cards are issued.

3.1.2.5 Where the Bank No Longer Knows the True Identity SBM India shall file a Suspicion Transaction Report to the Financial Intelligence Unit - India in circumstances when SBM India believes that it would no longer be satisfied that it knows the true identity of the account holder. 3.1.3 Customer Due Diligence

3.1.3.1 Documentation

a) Individuals

(i) SBM-India shall obtain the following documents from an individual while establishing an account-

based relationship: a. one certified copy of an OVD as mentioned containing details of identity and address; b. one recent photograph; and c. such other documents pertaining to the nature of business or financial status specified by the RE

in their KYC policy. provided that the information collected from customers for the purpose of opening of account shall be treated as confidential and details thereof shall not be divulged for the purpose of cross selling, or for any other purpose without the express permission of the customer.

(ii) The e-KYC service of Unique Identification Authority of India (UIDAI) shall be accepted as a valid

process for KYC verification under the PML Rules, provided SBM-India obtains authorisation from the individual user authorising UIDAI by way of explicit consent to release his/her identity/address through biometric authentication.

(iii) A copy of the marriage certificate issued by the State Government or Gazette notification indicating



change in name together with a certified copy of the ‘officially valid document’ in the existing name of the person shall be obtained for proof of address and identity, while establishing an account-based relationship or while undertaking periodic updation exercise in cases of persons who change their names on account of marriage or otherwise.

(iv) In case the person who proposes to open an account does not have an OVD as ‘proof of address’, such person shall provide OVD of the relative with whom the person is staying, as the ‘proof of address’. A declaration from the relative that the said person is a relative and is staying with him/her shall also be obtained. A customer shall not be required to furnish separate proof of current address, if it is different from the address recorded in the OVD. In such cases, merely a declaration from the customer may be obtained indicating the address to which all correspondence will be made by the bank.

(v) In cases where a customer categorised as ‘low risk’, expresses inability to complete the

documentation requirements on account of any reason that is considered to be genuine, and where it is essential not to interrupt the normal conduct of business, SBM-India may at its discretion, complete the verification of identity of the customer within a period of six months from the date of establishment of the relationship.

(vi) In respect of customers who are categorised as ‘low risk’ and are not able to produce any of the

OVDs and where ‘simplified procedure’ is applied, any one document from each of the two additional sets of documents listed in the Note below may be accepted as OVD.

Note: where simplified measures are applied for verifying the identity of the clients the following documents shall be deemed to be 'officially valid documents’: Proof of identity: (a) identity card with applicant's Photograph issued by Central / State Government Departments, Statutory / Regulatory Authorities, Public Sector Undertakings, Scheduled Commercial Banks, and Public Financial Institutions (b) letter issued by a gazetted officer, with a duly attested photograph of the person; Proof of Address: a) utility bill which is not more than two months old of any service provider (electricity, telephone, post-paid mobile phone, piped gas, Water bill); b) property or Municipal tax receipt; c) bank account or Post Office savings bank account statement; d) pension or family pension payment orders (PPOs) issued to retired employees by Government Departments or Public Sector Undertakings, if they contain the address; e) letter of allotment of accommodation from employer issued by State or Central Government departments, statutory or regulatory bodies, public sector undertakings, scheduled commercial banks, financial institutions and listed companies. Similarly, leave and licence agreements with such employers allotting official accommodation; f) documents issued by Government departments of foreign jurisdiction and letter issued by Foreign Embassy or Mission in India.

(vii) Small Account: In case an individual customer who does not possess either any of the OVDs or

the documents applicable in respect of simplified procedure and desires to open a bank account, banks shall open a ‘Small Account’, subject to the following:



a. The bank shall obtain a self-attested photograph from the customer. b. The designated officer of the bank certifies under his signature that the person opening the

account has affixed his signature or thumb impression in his presence. c. Such accounts are opened only at Core Banking Solution (CBS) linked branches or in a branch

where it is possible to manually monitor and ensure that foreign remittances are not credited to the account.

d. It would be ensured that the stipulated monthly and annual limits on aggregate of transactions and balance requirements prescribed by RBI in such accounts are breached. If any customer desires to have operations beyond the stipulated limits, the same shall be allowed only after complying with requirements for opening a normal account including completion of CDD/KYC procedures which include quoting of PAN/Form 60 while opening an account with the bank. If any account is rendered ineligible for being classified as a 'Small Account' due to credits/balance in the account exceeding the permissible limits, withdrawals may be allowed within the limit prescribed for small accounts where the limits thereof have not been breached.

e. The account shall be monitored and when there is suspicion of money laundering or financing of terrorism activities or other high-risk scenarios, the identity of the customer shall be established through the production of “officially valid documents”.

f. Foreign remittance shall not be allowed to be credited into the account unless the identity of the customer is fully established through the production of “officially valid documents”.

g. The account remains operational initially for a period of twelve months which can be extended for a further period of twelve months, provided the account holder applies and furnishes evidence of having applied for any of the OVDs during the first twelve months of the opening of the said account.

h. The entire relaxation provisions shall be reviewed after twenty-four months. i. BSBD Accounts (PMJDY accounts are akin to BSBDAs), which are not KYC compliant accounts are

to be treated as ‘Small Accounts’ and are subjected to the limitations applicable to such accounts. Hence, for allowing normal operations in such accounts, the procedures explained at (ii) above are to be complied with. If any account is rendered ineligible for being classified as a small account due to credits/balance in the account exceeding the permissible limits, withdrawals will be allowed within the limit prescribed for small accounts where the limits thereof have not been breached.

j. In respect of KYC compliant accounts where the required CDD procedure has been complied with, the compliance regarding quoting of PAN/obtaining of Form 60 for all transactions in terms of I.T. Rule 114 B is to be strictly ensured. No debit transaction, transfer or otherwise shall be allowed in accounts which do not comply with the above-mentioned requirements. To begin with, this rule shall be strictly applied in accounts where both the thresholds as stipulated in RBI Master Direction.

(viii) If an existing KYC compliant customer desires to open another account with the bank, there shall be no need for a fresh CDD exercise.

(ix) KYC verification once done by one branch/office of the RE shall be valid for transfer of the account

to any other branch/office of the same RE, provided full KYC verification has already been done for the concerned account and the same is not due for periodic up-dation and a self-declaration from the account holder about his/her current address is obtained in such cases.

b) Sole Proprietary Concerns:



For opening an account in the name of a sole proprietary firm, a certified copy of an OVD containing details of identity and address of the individual (proprietor) shall be obtained. In addition to the above, any two of the following documents as a proof of business/ activity in the name of the proprietary firm shall also be obtained:

a. Registration certificate b. Certificate/licence issued by the municipal authorities under Shop and Establishment Act. c. Sales and income tax returns. d. CST/VAT certificate. e. Certificate/registration document issued by Sales Tax/Service Tax/Professional Tax authorities. f. IEC (Importer Exporter code) issued to the proprietary concern by the office of

DGFT/Licence/certificate of practice issued in the name of the proprietary concern by any professional body incorporated under a statute. The compliance with updated instructions/ rules/ guidance notes/ Press releases/ issued on the subject by Central Board of Direct Taxes (CBDT) from time to time and available on the web site is to be strictly ensured.

g. Complete Income Tax Return (not just the acknowledgement) in the name of the sole proprietor where the firm's income is reflected, duly authenticated/acknowledged by the Income Tax authorities.

h. Utility bills such as electricity, water, and landline telephone bills.

In cases it is not possible to furnish two such documents, SBM-India may, at its discretion, accept only one of those documents as proof of business/activity.

c) Legal Entities

i. For opening an account of a company, one certified copy of each of the following documents shall be obtained:

a. Certificate of incorporation. b. Memorandum and Articles of Association. c. A resolution from the Board of Directors and power of attorney granted to its managers, officers

or employees to transact on its behalf. d. Officially valid documents in respect of managers, officers or employees holding an attorney to

transact on its behalf.

ii. For opening an account of a partnership firm, one certified copy of each of the following documents shall be obtained:

a. Registration certificate. b. Partnership deed. c. Officially valid documents in respect of the person holding an attorney to transact on its behalf.

iii. For opening an account of a trust, one certified copy of each of the following documents shall be

obtained:

a. Registration certificate. b. Trust deed.



c. Officially valid documents in respect of the person holding a power of attorney to transact on its behalf.

iv. For opening an account of an unincorporated association or a body of individuals, one certified copy of each of the following documents shall be obtained:

a. resolution of the managing body of such association or body of individuals; b. power of attorney granted to transact on its behalf; c. Officially valid documents in respect of the person holding an attorney to transact on its behalf

and d. such information as may be required by the RE to collectively establish the legal existence of

such an association or body of individuals.

Explanation: Unregistered trusts/partnership firms shall be included under the term ‘unincorporated association’.

Further, the term 'body of individuals' includes societies. v. For opening accounts of juridical persons not specifically covered in the earlier part, such as Government or its Departments, societies, universities and local bodies like village panchayats, a certified copy of the following documents shall be obtained:

a. Document showing name of the person authorised to act on behalf of the entity; b. Officially valid documents for proof of identity and address in respect of the person holding a power of attorney to transact on its behalf and c. Such documents as may be required by the bank to establish the legal existence of such an entity/juridical person.

3.1.3.2 Identification of Beneficial Owner

For opening an account of a Legal Person who is not a natural person, the beneficial owner(s) shall be identified and to verify his/ her identity shall be undertaken keeping in view the following:

a. Where the customer or the owner of the controlling interest is a company listed on a an

approved/ recognized/ acceptable stock exchange, or is a subsidiary of such a company, it is not necessary to identify and verify the identity of any shareholder or beneficial owner of such companies.

b. In cases of trust/nominee or fiduciary accounts whether the customer is acting on behalf of another person as trustee/nominee or any other intermediary is determined. In such cases, satisfactory evidence of the identity of the intermediaries and of the persons on whose behalf they are acting, as also details of the nature of the trust or other arrangements in place shall be obtained.

3.1.3.3 On Going Due Diligence

a) SBM-India shall undertake on-going due diligence of customers to ensure that their transactions

are consistent with their knowledge about the customers, customers’ business and risk profile; and the source of funds.



b) A system of periodic review of risk categorisation of accounts, with such periodicity being at least once in six months, and the need for applying enhanced due diligence measures shall be put in place. Risk categorisation shall be undertaken based on parameters such as customer’s identity, social/financial status, nature of business activity, information about the clients’ business and their location etc. While considering customer’s identity, the ability to confirm identity documents through online or other services offered by issuing authorities will also be factored in.

c) The transactions in accounts of marketing firms, especially accounts of Multi-level Marketing (MLM) Companies shall be closely monitored.

3.1.3.4 Periodic Updating

Periodic updation shall be carried subject to the following conditions:

a. Fresh proofs of identity and address shall not be sought at the time of periodic updation, from

customers who are categorised as ‘low risk’, when there is no change in status with respect to their identities and addresses and a self-certification to that effect is obtained.

b. A certified copy of the proof of address forwarded by ‘low risk’ customers through mail/post, etc., in case of change of address shall be acceptable.

c. Physical presence of low risk customer at the time of periodic updation shall not be insisted upon. d. The time limits prescribed above would apply from the date of opening of the account/ last

verification of KYC. e. Fresh photographs shall be obtained from customer for whom account was opened when they

were minors, on their becoming a major. f. e-KYC process using OTP based authentication, for the purpose of periodic updation is allowed,

provided, while onboarding, the customer was subjected to the stipulated KYC process.

A review KYC up-dation of High-Risk customer may be undertaken once a year.

3.1.3.5 Partial freezing and closure of accounts

(a) Where it is not possible to comply with the CDD requirements mentioned as above, SBM-India shall not open accounts, commence business relations or perform transactions. In case of existing business relationship which is not KYC compliant, banks shall ordinarily take step to terminate the existing business relationship after giving due notice.

(b) As an exception to the Rule, SBM-India may choose not to terminate business relationship straight away and instead opt for a phased closure of operations in this account as explained below:

i. The option of ‘partial freezing’ shall be exercised after giving due notice of three months to the

customers to comply with KYC requirements. ii. A reminder giving a further period of three months shall also be given.

iii. Thereafter, ‘partial freezing’ shall be imposed by allowing all credits and disallowing all debits with the freedom to close the accounts in case of the account being KYC non-compliant after six months of issuing first notice.

iv. All debits and credits from/ to the accounts shall be disallowed, in case of the account being KYC non-compliant after six months of imposing ‘partial freezing’,

v. The account holders shall have the option, to revive their accounts by submitting the KYC



documents.

(c) When an account is closed whether without ‘partial freezing’ or after ‘partial freezing’, the reason for that shall be communicated to account holder.

3.1.3.6 Enhanced and Simplified Due Diligence

A. Enhanced Due Diligence

1. Accounts of non-face-to-face customers: SBM- India shall include additional procedures i.e., certification of all the documents presented, calling for additional documents and the first payment to be effected through the customer's KYC-complied account with another reporting entity(RE), for enhanced due diligence of non-face to face customers.

2. Accounts of Politically Exposed Persons (PEPs): SBM- India may establish a relationship with a PEP provided that:

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 REs’

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 provisions shall also be applicable to accounts where a PEP is the beneficial owner

3. Client accounts opened by professional intermediaries:

SBM-India shall ensure 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. b. REs 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. REs shall not open accounts of such professional intermediaries who are bound by any client

confidentiality that prohibits disclosure of the client details to the RE. d. All the beneficial owners shall be identified where funds held by the intermediaries are not

co-mingled at the level of RE, and there are 'sub-accounts', each of them attributable to a beneficial owner, or where such funds are co-mingled at the level of RE, the RE shall look for the beneficial owners.

e. REs 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 RE.



B. Simplified Due Diligence

1. Self Help Groups (SHGs)

a. KYC verification of all the members of SHG shall not be required while opening the savings bank

account of the SHG b. KYC verification of all the office bearers shall suffice. c. No separate KYC verification of the members or office bearers shall be necessary at the time of

credit linking of SHGs. 2. Accounts of foreign students

(a) SBM-India may open a Non-Resident Ordinary (NRO) bank account of a foreign student on the basis of his/her passport (with visa & immigration endorsement) bearing the proof of identity and address in the home country together with a photograph and a letter offering admission from the educational institution in India.

i. Provided that a declaration about the local address shall be obtained within a period of 30 days

of opening the account and the said local address is verified. ii. Provided further that pending the verification of address, the account shall be operated with a

condition of allowing foreign remittances not exceeding USD 1,000 or equivalent into the account and a cap of rupees fifty thousand on aggregate in the same, during the 30-day period.

(b) The account shall be treated as a normal NRO account and shall be operated in terms of Reserve Bank of India’s instructions on Non-Resident Ordinary Rupee (NRO) Account, and the provisions of FEMA. 1999.

(c) Students with Pakistani nationality shall require prior approval of the Reserve Bank for opening the account. 3. Foreign Portfolio Investors (FPIs)

Accounts of FPIs which are eligible/ registered as per SEBI guidelines, for the purpose of investment under Portfolio Investment Scheme (PIS), shall be opened by accepting KYC documents as detailed in Annex II of the RBI Master Directions on Know Your Customer -2016, subject to Income Tax (FATCA/CRS) Rules, provided that an undertaking from FPIs or the Global Custodian acting on behalf of the FPI that as and when required, the exempted documents as detailed in Annex II of RBI master Directions (referred to above) will be submitted. 3.1.3.7 Activation of Dormant Account: The instructions/guidelines relating to customer due diligence procedure and the various documents prescribed for establishing an account-based relationship and record management shall be strictly applicable while activating the dormant accounts. 3.1.4 Monitoring and Reporting of Transactions

1. SBM India shall monitor transactions depending on the sensitivity of the accounts involved. It shall prescribe threshold limits for a particular category of accounts and pay particular attention

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to the transactions which exceed these limits, filing Suspicious Transaction Reports with the FIU-India when suspicious transactions are identified.

2. These shall also be monitored: a. High-risk and PEP accounts b. Wire Transfers c. Case Management

3. SBM India shall consider closing the account or terminating the banking relationship in cases where it is unable to apply appropriate KYC measures due to non-furnishing of information and / or non-cooperation by the customer. However, such decisions need to be taken at a senior level.

4. Monitoring of transactions will be conducted taking into consideration the risk profile of the account. High Risk Accounts will be strictly monitored for all transactions.

5. Special attention shall be paid to all complex, unusually large transactions and all unusual patterns, which have no apparent logical or visible lawful purpose.

6. Transactions that involve large amount of cash inconsistent with the normal and expected activity of the customer will be subjected to detailed scrutiny.

7. Accounts with very high turnover inconsistent with the size of the balance to be closely monitored for "washing out" of funds.

8. After due diligence at the appropriate level in SBM India, transactions of suspicious nature and/or any other type of transaction notified under PML Act, 2002 will be reported to the appropriate authority and a record of such transactions will be preserved and maintained for a period as prescribed in the Act.

9. Transactions of suspicious nature: a. A transaction or a series of transactions would be considered "suspicious" if the

transaction/s appear to be inconsistent with the customer's legitimate business or personal activities or known transaction profile or if it does not make economic sense. In the circumstances when a bank believes the transaction is suspicious or that the bank is no longer satisfied that it knows the true identity of the account holder, SBM India shall also file an STR with FIU-IND within 7 days of arriving at a conclusion that any transaction is of suspicious nature.

b. SBM India branches are required to record and report all transactions of suspicious nature in deposit, loan and remittances accounts etc., with full details to Head-Operations and Compliance Officer. Branches to exercise four eyes principle in reporting such suspicious transactions

c. Officers are required to be courteous to the customers in the process to take care that the customers are not driven away from the Bank. Officers are also required to ensure that customers are not tipped off that their account/s are under transaction monitoring.

3.1.5 Risk Management and Internal Audit

• SBM India shall establish appropriate framework covering appropriate procedures and ensuring their effective implementation covering proper management oversight, systems and controls, segregation of duties, training and other related matters.

• Internal Audit of KYC/AML/CFT norms shall provide an independent evaluation of the same including legal and regulatory requirements. Internal Auditors shall specifically check and verify the application of KYC/AML procedures at the branches and comment on the lapses observed in this regard. The compliance in this regard will be placed before the Audit Committee of the Board at quarterly intervals.

• The concurrent auditors who undertake audit of all transactions at their respective branches on



a concurrent basis check and verify the ongoing compliance with the KYC/AML processes by branches and their monthly reports are submitted to Internal Audit Department which brings to the attention of the Audit Committee of the Board, major irregularities, if any, reported in the Concurrent Audit Reports

The compliance in this regard will be placed before the Internal Audit Committee at quarterly intervals.

3.2 Combating Financing of Terrorism

3.2.1 SBM India shall ensure that it always maintain the most updated list of suspected terrorists/terrorist organizations supplied to it by RBI. This list (created/approved by Security Council Committee - established pursuant to various United Nations' Security Council Resolutions) is a compilation of all individuals and entities suspected of being terrorists / terrorist’s organizations and is received from Government of India and circulated by RBI. Before opening any new account it shall be ensured that the name/s of the proposed customer does not appear in the list. Further, branches shall scan all existing accounts to ensure that no account is held by or linked to any of the entities or individuals included in the list. Full details of accounts bearing resemblance with any of the individuals/entities in the list shall immediately be intimated to the Head Office

3.2.2 Freezing of Assets under Section 51A of Unlawful Activities (Prevention) Act (UAPA), 1967

• SBM India shall strictly follow the procedure laid down in the UAPA Guidelines and ensure meticulous compliance to the Order issued by the Government. In terms of Section 51A of Unlawful Activities (Prevention) Amendment Act, 2008, the Central Government is empowered to freeze, seize or attach funds and other financial assets or economic resources held by, on behalf of or at the direction of the individuals or entities.

• SBM- India shall ensure that in terms of Section 51A of the Unlawful Activities (Prevention) (UAPA) Act, 1967, no account in the name of individuals/entities appearing in the lists of individuals and entities, suspected of having terrorist links, which are approved by and periodically circulated by the United Nations Security Council (UNSC) is opened and maintained. The details of the two lists are as under:

(a) The “ISIL (Da’esh) & Al-Qaida Sanctions List”, which includes names of individuals and entities associated with the Al-Qaida. The ISIL & Al-Qaida Sanctions List and the 1988 sanction lists have been updated are available at https://www.un.org/sc/suborg/sites/www.un.org.sc.suborg/files/1267.pdf

(b) The “1988 Sanctions List”, consisting of individuals (Section A of the consolidated list) and entities (Section B) associated with the Taliban which is available at http://www.un.org/sc/committees/1988/list.shtml.

• Details of accounts resembling any of the individuals/entities in the lists shall be reported to FIU-

IND apart from advising Ministry of Home Affairs as required under UAPA notification dated August 27, 2009.

http://www.un.org/sc/committees/1988/list.shtml

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• In addition to the above, other UNSCRs circulated by the Reserve Bank in respect of any other jurisdictions/ entities from time to time shall also be taken note of. The procedure laid down in the UAPA Order dated August 27, 2009 shall be strictly followed and meticulous compliance with the Order issued by the Government shall be ensured.

• On receipt of the list of individuals and entities subject to UN sanctions (referred to as designated lists) from RBI, SBM India shall ensure expeditious and effective implementation of the procedure prescribed under Section 51A of UAPA in regard to freezing/unfreezing of financial assets of the designated individuals/entities enlisted in the UNSCRs and especially, in regard to funds, financial assets or economic resources or related services held in the form of bank accounts.

• For detailed procedures regarding the Freezing of Assets under the UAP Act, SBM India shall

follow the guidelines mandated by the Master Directions on KYC, 2016 and PMLA, 2002

3.2.3 Jurisdictions that do not or insufficiently apply the FATF Recommendations • SBM India shall also consider publicly available information for identifying countries, which do not

or insufficiently apply the FATF Recommendations. SBM India shall also give special attention to business relationships and transactions with persons (including legal persons and other financial institutions) from or in countries that do not or insufficiently apply the FATF Recommendations and jurisdictions included in FATF Statements.

• SBM India shall examine the background and purpose of transactions with persons (including legal

persons and other financial institutions) from jurisdictions included in FATF Statements and countries that do not or insufficiently apply the FATF Recommendations. Further, if the transactions have no apparent economic or visible lawful purpose, the background and purpose of such transactions shall, as far as possible be examined, and written findings together with all documents shall be retained and made available to Reserve Bank/other relevant authorities, on request.

3.2.4 Screening against OFAC list SBM India shall subject all customers including cardholders, merchants and/or affiliates to screening against the OFFICE OF FOREIGN ASSETS CONTROL(OFAC) - Specially Designated Nationals and Blocked Persons List and in the event of positive match being found, all activity with the individual/entity including those related to Credit/Debit/prepaid cards will be terminated.

3.3 Correspondent Banking 1. Relationships with correspondent banks shall be established only with the approval of the Board

or a committee approved by the Board. 2. SBM India shall gather sufficient information to understand fully the nature of the business of the

correspondent/respondent bank. Information on the other bank’s management, major business activities, level of AML/CFT compliance, purpose of opening the account, identity of any third-party entities that will use the correspondent banking services, and regulatory/supervisory framework in the correspondent's/respondent’s country may be of special relevance.

3. SBM India shall refuse to enter into a correspondent relationship with a "shell bank" (i.e. a bank which is incorporated in a country where it has no physical presence and is unaffiliated to any regulated financial group).

4. SBM India staff dealing with customers shall also guard against establishing relationships with respondent foreign financial institutions that permit their accounts to be used by shell banks.



3.4 Introduced Business 1. To avoid duplication, SBM India may rely on other eligible or group introducers to verify the

identity of applicants for business. 2. Eligible introducers are persons who introduce other persons or bodies to Indian banks or banks in

other countries and have a legislation in their country at least equivalent to that in India 3. A group introducer is an introducer, which forms part of the same group as SBM India and is

subject to the consolidated supervision of a regulator or to the anti-money laundering regulation of a regulator in a jurisdiction equivalent to that of Head Office.

4. Introducers will be carefully assessed whether the introducers are "fit and proper" in accordance with the guidelines on "fit and proper" of the Bank.

5. SBM India will use the following criteria to determine whether an introducer can be relied upon: a. It must comply with the customer due diligence practices recommended by Financial

Action Task Force (FATF) and Anti Money Laundering (ALM) and Combating Financing of Terrorism (CFT)

b. The customer due diligence procedures of the introducer shall be as rigorous as those which the bank would itself have conducted for the customer.

c. The systems put in place by the introducer to verify the identity of the customer shall be very reliable

6. SBM India will request group or eligible introducers to provide with a duly completed Group Introducers Certificate or Eligible Introducers Certificate as the case may be. The bank must reach an agreement with the introducer that it will be permitted at any stage to verify the due diligence undertaken by the introducer.

7. SBM India will also ensure that all relevant identification data and other documentation duly certified pertaining to the customer's identity shall be immediately submitted by the introducer to the bank who will carefully review the documentation provided.

3.5 Wire Transfers Wire transfer is an instantaneous and most preferred route for transfer of funds across the globe and hence, there is a need for preventing terrorists and other criminals from having unfettered access to wire transfers for moving their funds and for detecting any misuse when it occurs. SBM India shall maintain the record of all Cross-Border Wire Transfers of more than INR 0.5mm or its equivalent in foreign currency, where either the origin or destination of the fund is in India and furnish the information of all such transactions to Director, FIU-IND by 15th of the succeeding month. The information shall be furnished electronically in the FIN-Net module developed by FIU-IND. Information accompanying wire transfers must contain the name and address of the originator and where an account exists, the number of that account. In the absence of an account, a unique reference number, as prevalent in the country concerned, must be included. SBM India shall follow the detailed procedures outlined in the Master Circular on KYC norms/AML standards/CFT/Obligation of banks under PMLA,2002 relating to wire transfers.

3.6 Principal Officer SBM India shall appoint a senior management officer to be designated as Principal Officer. The Principal Officer shall be located at SBM India’s head office in Mumbai and report directly to the senior management or to the Board of Director. He shall have timely access to customer identification data and other CDD information transaction records and other relevant information.



3.7 Record Management

3.7.1 SBM India shall follow all requirements stated in Section 12 of the PMLA Act 2002, relating to the preservation and reporting of customer account information.

Monitoring of Transactions will be carried out on an on-going basis. It will be conducted taking into consideration the risk profile of the account. High Risk Accounts will be strictly monitored for all transactions. Special attention shall be paid to all complex, unusually large transactions and all unusual patterns, which have no apparent logical or visible lawful purpose.

3.7.2 Maintenance of records of transactions SBM India shall introduce a system of maintaining proper record of transactions prescribed under Rule 3 of PML Rules, 2005, as mentioned below:

• All cash transactions of the value of more than INR 1mm or its equivalent in foreign currency;

• All series of cash transactions integrally connected to each other which have been valued below INR 1mm or its equivalent in foreign currency where such series of transactions have taken place within a month and the aggregate value of such transactions exceeds INR 1mm. Refer to the Master Circular on KYC on KYC norms/AML standards/CFT/Obligation of banks under PMLA, 2002 for detailed explanation of integrally connected cash transactions.

• All transactions involving receipts by non-profit organizations of value more than INR 1mm or its

equivalent in foreign currency [Ref: Government of India Notification dated November 12, 2009-Rule 3, sub-rule (1) clause (BA) of PML Rules]

• All cash transactions where forged or counterfeit currency notes or bank notes have been used

as genuine and where any forgery of a valuable security or a document has taken place facilitating the transaction and

• All cross-border wire transfers of the value of more than INR 0.5mm or its equivalent in foreign

currency where either the origin or destination of fund is in India.

• All suspicious transactions whether or not made in cash and by way of as mentioned in the Rules.

3.7.3 Information to be preserved SBM India is required to maintain all necessary information in respect of transactions referred to in Rule 3 to permit reconstruction of individual transaction, including the following information:

• The nature of the transactions; • The amount of the transaction and the currency in which it was denominated; • The date on which the transaction was conducted; and

• The parties to the transaction

3.7.4 Maintenance and Preservation of Records • SBM India is required to maintain the records containing information of all transactions including

the records of transactions. SBM India shall take appropriate steps to evolve a system for proper maintenance and preservation of account information in a manner that allows data to be retrieved easily and quickly whenever required or when requested by the competent authorities. Further, in terms of PML Amendment Act 2012 notified on February 15, 2013, SBM India shall maintain for at least five years from the date of transaction between the bank and the client, all necessary records of transactions, both domestic or international, which will permit reconstruction of individual transactions (including the amounts and types of currency involved



if any) so as to provide, if necessary, evidence for prosecution of persons involved in criminal activity.

• SBM India shall ensure that records pertaining to the identification of the customer and his

address (e.g. copies of documents like passports, identity cards, driving licenses, PAN card, utility bills etc.) obtained while opening the account and during the course of business relationship, are properly preserved for at least five years after the business relationship is ended as required under Rule 10 of the Rules ibid. The identification records and transaction data shall be made available to the competent authorities upon request.

• SBM India shall pay special attention to all complex, unusual large transactions and all unusual

patterns of transactions, which have no apparent economic or visible lawful purpose. The background including all documents/office records/memorandums pertaining to such transactions and purpose shall be examined and the findings at branch as well as Principal Officer level shall be properly recorded. Such records and related documents shall be made available to help auditors in their day-to-day work relating to scrutiny of transactions and also to Reserve Bank/other relevant authorities. These records are required to be preserved for five years under PMLA, 2002.

3.7.5 Reporting to Financial Intelligence Unit – India • SBM India shall report information relating to cash and suspicious transactions and all

transactions involving receipts by non-profit organizations of value more than INR 1mm or its equivalent in foreign currency to the Director, Financial Intelligence Unit-India (FIU-IND) in respect of transactions referred to in Rule 3 at the following address:

Director, FIU-IND, Financial Intelligence Unit-India, 6th Floor, Hotel Samrat, Chanakyapuri, New Delhi -110021 Website - http://fiuindia.gov.in/

• SBM India shall use the eight reporting formats (as applicable) detailed in the Master Circular on

KYC norms/AML standards/CFT/Obligation of banks under PMLA, 2002. The reporting formats contain detailed guidelines on the compilation and manner/procedure of submission of the reports to FIU-IND. SBM India shall also ensure electronic filing of all types of reports to FIU-IND

• SBM-India shall ensure that reports are submitted in time as per the schedule 3.8 Cash and Suspicious Transaction Reports 3.8.1 Cash Transaction Reports SBM India shall submit the Cash Transaction Report (CTR) for each month to FIU-IND by 15th of the

succeeding month. Cash transaction reporting by branches to the controlling offices shall, therefore, invariably be submitted on monthly basis (not on fortnightly basis).

The Principal Officer of SBM India shall report to FIU-IND all cash transactions, where forged or

counterfeit Indian currency notes have been used as genuine not later than seven working days from the date of occurrence of such transactions (Counterfeit Currency Report – CCR). These cash transactions shall also include transactions where forgery of valuable security or documents has taken place and may be reported to FIU-IND in plain text form.

CTR shall contain only the transactions carried out by SBM India on behalf of their clients/customers

excluding transactions between the internal accounts of the bank.

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A summary of cash transaction report for SBM India as a whole shall be compiled by the Principal

Officer every month in physical form as per the format specified by the Master Circular. The summary shall be signed by the Principal Officer and submitted to FIU-India.

For detailed procedures regarding the cash transaction reporting, SBM India shall follow the

guidelines mandated by the Master Circular on KYC norms/AML standards/CFT/Obligation of banks under PMLA, 2002.

3.8.2 Suspicious Transaction Reports (STR)

• SBM India shall make STRs if they have reasonable ground to believe that the transaction involve proceeds of crime generally irrespective of the amount of transaction and/or the threshold limit envisaged for predicate offences in part B of Schedule of PMLA, 2002.

• The Suspicious Transaction Report (STR) shall be furnished within 7 days of arriving at a conclusion

that any transaction, whether cash or non-cash, or a series of transactions integrally connected are of suspicious nature. The Principal Officer shall record his reasons for treating any transaction or a series of transactions as suspicious.

• SBM India shall refer to Annex-E of the 'IBA's Guidance Note for Banks, January 2012’ for creating

KYC/AML awareness among the staff and for generating alerts for suspicious transactions.

• SBM India shall not put any restrictions on operations in the accounts where an STR has been made and shall keep the fact of furnishing of STR strictly confidential, as required under PML Rules. It shall be ensured that there is no tipping off to the customer at any level.

• For detailed procedures regarding the suspicious transaction reporting, SBM India shall follow the

guidelines mandated by the Master Circular on KYC norms/AML standards/CFT/Obligation of banks under PMLA, 2002.

3.8.3 Non-Profit Organizations SBM India shall submit a monthly report of all transactions involving receipts by non- profit organizations of value more than INR 1mm or its equivalent in foreign currency. The report must be submitted to the Director of FIU-IND by the 15th of the succeeding month.

3.9 Miscellaneous 1. Issue and Payment of Demand Drafts, etc.,

Any remittance of funds by way of demand draft, mail/telegraphic transfer/NEFT/IMPS or any other mode and issue of travelers’ cheques for value of rupees fifty thousand and above shall be effected by debit to the customer’s account or against cheques and not against cash payment. 2. Quoting of PAN

Permanent account number (PAN) of customers shall be obtained and verified while undertaking transactions as per the provisions of Income Tax Rule 114B applicable to banks, as amended from time to time. Form 60 shall be obtained from persons who do not have PAN.

3. Selling Third party products

SBM-India shall while acting as agents for selling third party products as per regulations in force from time to time shall comply with the following aspects:

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(a) the identity and address of the walk-in customer shall be verified for transactions above rupees fifty thousand.

(b) transaction details of sale of third-party products and related records shall be maintained as prescribed.

(c) AML software capable of capturing, generating and analysing alerts for the purpose of filing CTR/STR in respect of transactions relating to third party products with customers including walk-in customers shall be available.

(d) transactions involving rupees fifty thousand and above shall be undertaken only by:

• debit to customers’ account or against cheques; and • obtaining and verifying the PAN given by the account based as well as walk-in customers.

(e) Condition ‘d’ above shall also apply to sale of SBM-India’s own products, payment of dues of credit cards/sale and reloading of prepaid/travel cards and any other product for rupees fifty thousand and above.

4. Issuance of Prepaid Payment Instruments (PPIs):

SBM-India while issuing PPIs shall ensure that the instructions issued by Department of Payment and Settlement Systems of RBI are followed. 5. CDD Procedure and sharing KYC information with Central KYC Records Registry (CKYCR)

SBM-India shall capture the KYC information for sharing with the CKYCR in the manner mentioned in the PML Rules, as required by the KYC templates prepared for ‘individuals’ and ‘Legal Entities’ as the case may be by the CKYCR.

6. Reporting requirement under Foreign Account Tax Compliance Act (FATCA) and Common Reporting

Standards (CRS)

Under FATCA and CRS, SBM-India shall take the following steps for complying with the reporting requirements:

(a) Register on the related e-filling portal of Income Tax Department as Reporting Financial Institutions at the link https://incometaxindiaefiling.gov.in/ post login --> My Account --> Register as Reporting Financial Institution,

(b) Submit online reports by using the digital signature of the ‘Designated Director’ by either uploading the Form 61B or ‘NIL’ report, for which, the schema prepared by Central Board of Direct Taxes (CBDT) shall be referred to.

(c) Develop Information Technology (IT) framework for carrying out due diligence procedure and for

https://rbidocs.rbi.org.in/rdocs/content/pdfs/KYCIND261115_A1.pdf

https://rbidocs.rbi.org.in/rdocs/content/pdfs/KYCLEN26115_A2.pdf

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recording and maintaining the same, as provided in Rule 114H.

(d) Develop a system of audit for the IT framework and compliance with Rules 114F, 114G and 114H of Income Tax Rules.

(e) Constitute a “High Level Monitoring Committee” under the Designated Director or any other equivalent functionary to ensure compliance.

7. Period for presenting payment instruments

Payment of cheques/drafts/pay orders/banker’s cheques, if they are presented beyond the period of three months from the date of such instruments, shall not be made.

8. Operation of Bank Accounts & Money Mules

The instructions on opening of accounts and monitoring of transactions shall be strictly adhered to, in order to minimise the operations of “Money Mules” which are used to launder the proceeds of fraud schemes (e.g., phishing and identity theft) by criminals who gain illegal access to deposit accounts by recruiting third parties which act as “money mules.” If it is established that an account opened and operated is that of a Money Mule, it shall be deemed that the bank has not complied with these directions.

9. Collection of Account Payee Cheques

Account payee cheques for any person other than the payee constituent shall not be collected.

10. Quoting of PAN

Permanent account number (PAN) of customers shall be obtained and verified while undertaking transactions as per the provisions of Income Tax Rule 114B applicable to banks, as amended from time to time. Form 60 shall be obtained from persons who do not have PAN.

4.9 Education, Training and New Technologies & Products

3.9.1 Customer Education SBM India shall prepare specific literature/pamphlets so as to educate the customer of the objective of the KYC program. The front desk staff needs to be specially trained to handle such situations while dealing with customers.

3.9.2 Introduction of New technologies and Products SBM India will pay special attention to the money laundering threats arising from new or developing technologies and take necessary steps to prevent misuse of technology innovations or products for money laundering activities. Bank will ensure that appropriate KYC procedures are duly applied to customers using new technology driven products. All the new products, systems and applications will be approved by the Head of Compliance to comply with KYC/AML regulations.

3.9.3 Employees’ Training

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SBM India shall have an ongoing employee training program so that the members of the staff are adequately trained in KYC procedures. Periodic review shall be conducted with regards to systems and procedures for employees’ training. Training requirements shall have different focuses for frontline staff, compliance staff and staff dealing with new customers.

3.9.4 Hiring of Employees SBM India shall have adequate screening mechanism in place as part of their hiring/recruitment process to ensure that criminals are not allowed to misuse the banking channels.

3.9.5 Miscellaneous CDD Procedure and sharing KYC information with Central KYC Records Registry (CKYCR) a. SBM-India shall capture the KYC information for sharing with the CKYCR in the manner mentioned in the PML Rules, as required by the KYC templates prepared for ‘individuals’ and ‘Legal Entities’ as the case may be by the CKYCR. The bank shall invariably upload the KYC data pertaining to all mew individual accounts opened on or after January 01, 2017 with CERSAI in terms of the provisions of the PML (Maintenance of Records) Rules, 2005. b. SBM- India shall provide an option for One Time Pin (OTP) based e-KYC process for on-boarding of customers. The accounts opened using OTP must be with specific consent from the customer for authentication through OTP and are subject to the conditions stipulated in the RBI Master Directions and instructions issued by RBI from time to time. The account opened using OTP based e-KYC shall not be allowed for more than one year within which the prescribed customer Due Diligence (CDD) procedure is to be completed. If the CDD procedure is not completed within a year, the deposit account shall be closed immediately. While uploading KYC information to CKYCR, it would be clearly indicated that such accounts are opened using OTP based e-KYC and other banks shall not open accounts based on the OTP based e-KYC. SBM-India strictly monitor procedures including systems to generate alerts to ensure compliance of the above stipulations. c. The prospective customer's e-Adhar letter may be downloaded/printed from UIDAI portal such a customer knows only his/her Aadhaar number or if the customer has only a copy of Aadhaar downloaded from a place/source elsewhere, provided the prospective customer is physically present in the branch/ office of SBM India.

3.9.6 Reporting requirement under Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standards (CRS) Under FATCA and CRS, SBM-India shall adhere to the provisions of Income Tax Rules 114F, 114G and 114H and determine whether they are a Reporting Financial Institution as defined in Income Tax Rule 114F and if so, shall take the following steps for complying with the reporting requirements: (a) Register on the related e-filling portal of Income Tax Department as Reporting Financial Institutions at the link https://incometaxindiaefiling.gov.in/ post login --> My Account --> Register as Reporting Financial Institution, (b) Submit online reports by using the digital signature of the ‘Designated Director’ by either uploading the Form 61B or ‘NIL’ report, for which, the schema prepared by Central Board of Direct Taxes (CBDT) shall be referred to. (c) Develop Information Technology (IT) framework for carrying out due diligence procedure and for recording and maintaining the same, as provided in Rule 114H.



(d) Develop a system of audit for the IT framework and compliance with Rules 114F, 114G and 114H of Income Tax Rules. (e) Constitute a “High Level Monitoring Committee” under the Designated Director or any other equivalent functionary to ensure compliance. (f) Ensure compliance with updated instructions/ rules/ guidance notes/ Press releases/ issued on the subject by Central Board of Direct Taxes (CBDT) from time to time and available on the web site http://www.incometaxindia.gov.in/Pages/default.aspx. REs may take note of the following: updated Guidance Note on FATCA and CRS a press release on ‘Closure of Financial Accounts’ under Rule 114H.

4 POLICY REVIEWS This KYC/AML/CFT Policy will be reviewed on a regular basis and at least once a year by the AML Unit and any amendment shall require approval of the Board. Further, inputs from the Chief Executive Officer will also be sought at the time of each review. 5 POLICY AMENDMENT AUTHORITY SBM Risk Management Committee must recommend to the Board any changes or amendments to the policy for their approval 6 POLICY AUTHORIZATION By their signatures below, on behalf of the Board of SBM India, the Chief Executive Officer and CRO/Head of Risk hereby certify that this KYC/AML/CFT Policy has been drafted to comply with, and is in accordance with, practices at SBM India and will be fully adopted and adhered to. 8 LIST OF ACRONYMS



ANNEXURE -1: RBI SOURCES

The below document has been referred to while working on the policy for SBM India:

Circular RBI/DBR/2015-16/18 Master Direction DBR. AML. BC. No. 81/ 14.01.001/ 2015-16 dated February 25, 2016 - Know Your Customer (KYC) Direction, 2016 updated as on July 12, 2018. Any change in regulatory guidelines will supersede the provisions of the existing policy. ANNEXURE -2: THREE TYPES OF CUSTOMER RISK CATEGORISATION

Three types of Customer Risk Categorisation are as under:

1. High Risk a) Customers who are engaged in certain professions where money-laundering

possibilities are high e.g., Antique Dealers (individuals and entities), Money Services Bureau (entities - not employees of these entities) and dealers in arms

b) Customers who live in “high risk countries” (nationality is irrelevant), as per list given in Master Circular

RBI Reserve Bank of India

PEP Politically Exposed Person

KYC Know Your Customer

AML Anti-Money Laundering

FIU-IND Financial Intelligence Unit of Government of India

CFT Combating financing of terrorism

CDD Customer Due Diligence

CE Country Executive

STR Suspicious Transaction Reporting

MLRO Money Laundering Reporting officer

FATCA Foreign Account Tax Compliance Act

UIDAI The Unique Identification Authority of India

IEC Import Export Code

BSBD Accounts Basic Saving Bank Deposit Account

PMJDY Prime Minister Jan Dhan Yojana

IT Rules Income Tax Rules

DGFT Director General of Foreign Trade



c) Any Trust, Charities, NGOs and organizations receiving donations (except NPOs/NGOs promoted by United Nations or its agencies)

d) Firms with 'sleeping partners'; e) Travel agencies and travel related services f) Those with dubious reputation as per public information available g) Politically Exposed Persons (PEPs) of foreign origin, customers who are close relatives of

PEPs and accounts in which PEP is the ultimate beneficial owner. h) Customers from countries that do not or insufficiently apply the FATF standards. i) Customers from countries that do not or insufficiently apply the FATF standards. j) High Networth Individuals (HNI) (where half yearly average balance of all accounts and

TDs of individual customers is equal to or above INR 5mm.) k) Companies having close family shareholding or beneficial ownership l) Consulate accounts m) The accounts having the cash transactions of INR 1mm i.e. integrally connected cash

transactions per month and reported under CTR. n) Locker holders (other than staff) o) Accounts of Bullion dealers (including sub-dealers) and jewelers p) Accounts for which STR has been reported. q) Customers involved in betting and/or gambling business.

SBM India shall obtain additional information disclosing the source of funds that would be deposited in such accounts. Opening of the above-mentioned accounts would need specific approval of Heads of branches and Head-Operations, India or CEO, SBM India. 2. Medium Risk

Customers are classified as Medium Risk if they qualify under the following parameters: a) Any account holder living in a Medium risk country as per the list in the Master Circular b) Client's Accounts opened by professional intermediaries c) Non-profit organizations d) Non-face to face customers e) Dormant account (i.e. Prime accounts under low risk) which continue to remain under

that stage for than six months. 3. Low Risk

Individuals (other than High Net Worth) and entities whose identities and sources of wealth can be easily identified and transactions in whose accounts by and large conform to the known profile may be categorized as low risk. Illustrative examples are –

a) Salaried employees whose salary structures are well defined b) People belonging to lower economic strata of the society whose accounts show small

balances and low turnover. c) Government Departments and Government owned companies d) Regulators and statutory bodies e) Loan accounts of Non-operative nature having pre-determined cash flows (Consumer

loans and Term loans) f) All customers that are not High/ Medium Risk are Low Risk customers. g) NPOs/NGOs promoted by United Nations or its agencies may be classified as low risk

customer



Any lowering in customer classification as defined above (i.e. High to Medium or Medium to Low), at the

time of account opening or during half yearly review, would require compliance approval by submitting

the detailed justification as per format in the Master Circular.

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