KYC, AML & CFT Programme For State Cooperative Banks

KYC, AML & CFT
Programme for
State Cooperative
Banks
January 31, 2012
KYC & AML Programme

for State Cooperative
Banks
This KYC, AML and CFT programme has been developed to prevent the Bank from being
2
unintentionally or intentionally used for money laundering and terrorist financing activities and
shall enable the Bank better understand its customers and their financial activities, which in turn
will help manage customer risk prudently.
Original Issue Date:

Approver:
Author:
Contact Person:
Classification:
Applicability:
Last Revision Date:
Review Date:
Version:
4th October 2011

Mr. Bhima Subrahmanyam, Managing Director, NAFSCOB
Jocata Financial Advisory and Technology
Prashant Muddu, Managing Director, Jocata
KYC, AML & CFT Regulatory Compliance
All Branches Including Head Office of the Bank
23rd January 2012
27th January 2012
Final
GLOSSARY OF TERMS
AML
BM
BDD
CAP
CBI
CBS
CCR
CRCM
CDD
CIP
CRO
CTR
DCCB
EDD
FATF
FIU-IND
HNI
HUF
IBA
KYC
ML
NRI
PACS
PEP
PIO
PMLA
PMLR
PO
RBI
RRB
NABARD
NAFSCOB
NRI
NSDL
NTR
SA
SCB
SDD
STR
UAPA
UN
UNSCR
Anti-Money Laundering
Branch Manager
Basic Due Diligence
Customer Acceptance Program
Central Bureau of Investigation
Core Banking Solution
Counterfeit Currency Report
Customer Risk Categorisation Model
Customer Due Diligence
Customer Identification Program
Customer Relationship Officer
Cash Transaction Report
District Central Cooperative Bank
Enhanced Due Diligence
Financial Action Task Force
Financial Intelligence Unit - India
High Net Worth Individual
Hindu Undivided Family
Indian Banks Association
Know Your Customer
Money Laundering
Non-Resident Indian
Primary Agricultural Cooperative Societies
Politically Exposed Person
Person of Indian Origin
Prevention of Money Laundering Act 2002
Prevention of Money Laundering Rules 2005
Principal Officer
Reserve Bank of India
Regional Rural Banks
National Bank for Agriculture and Rural Development
National Federation of State Cooperative Banks
Non Resident Indian
National Securities Depository Limited
Non-Profit Organisation Transaction Reports
Staff Assistant
State Cooperative Banks
Simplified Due Diligence
Suspicious Transaction Report
Unlawful Activities Prevention Act
United Nations
United Nation Security Council Resolution
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TABLE OF CONTENTS
1
Preface .......................................................................................................................... 10
1.1
Definitions ...................................................................................................................... 11
2.1
Customer ................................................................................................................ 11
2.2
High Net-Worth Individual....................................................................................... 11
2.3
Beneficial Owners................................................................................................... 11
2.4
Controlling Parties .................................................................................................. 11
2.5
Money Laundering.................................................................................................. 11
2.6
Terrorist Financing.................................................................................................. 12
2.7
Small Account......................................................................................................... 12
2.8
Financial Intermediary ............................................................................................ 12
2.9
Ordering Bank ........................................................................................................ 12
2.10
Intermediary Bank .................................................................................................. 13
2.11
Beneficiary Bank..................................................................................................... 13
Legislative and Regulatory Framework ......................................................................... 14

3.1
Defined legal frameworks ....................................................................................... 14
3.1.1
Prevention of Money Laundering Act 2002 ..................................................... 14
3.1.2
Rules under PMLA .......................................................................................... 14
3.1.3
Unlawful Activities (Prevention) Act, 1967....................................................... 14
3.2
Applicable Regulatory Authorities........................................................................... 14
3.2.1
Reserve Bank of India ..................................................................................... 14
3.2.2
National Bank for Agriculture and Rural Development .................................... 15
3.2.3
Financial Intelligence Unit India.................................................................... 15
3.3
Statement of commitment....................................................................................... 10
Consequences of Non-Compliance ........................................................................ 15
3.3.1
Penalties for Non-Compliance......................................................................... 15
3.3.2
Reputational Risk ............................................................................................ 15
Governing Structure and Roles and Responsibilities at State Cooperative Banks........ 17

4.1
Overview................................................................................................................. 17
4.2
Governing Policies and Procedures ....................................................................... 17
4.3
Roles and Responsibilities ..................................................................................... 18
4.3.1
Board of Directors ........................................................................................... 18
4.3.2
Senior Management ........................................................................................ 18
4.3.3
Principal Officer ............................................................................................... 18
4.3.4
AML Compliance Group .................................................................................. 19
4.3.5
Audit and Compliance Department ................................................................. 19
4.3.6
Customer Relationship Officer ........................................................................ 19
4.3.7
Branch Manager.............................................................................................. 19
4.3.8
Staff ................................................................................................................. 20
Customer Classification ................................................................................................. 21

5.1
Constitution............................................................................................................. 21
5.2
Categories .............................................................................................................. 22
5.2.1
Individuals ....................................................................................................... 22
5.2.2
Entities............................................................................................................. 22
Customer Acceptance Policy......................................................................................... 24

6.1
Fictitious or Benami names .................................................................................... 24
6.2
Customer Risk Categorisation ................................................................................ 24
6.2.1
Business Imperative ........................................................................................ 24
6.2.2
Overview of Methodology................................................................................ 25
6.2.3
Application of Rating Methodology.................................................................. 25
6.2.4
Risk categorisation review............................................................................... 27
Appendix I to Chapter 6: Customer Risk Categorisation Variables and Scores ................... 29

Appendix II to Chapter 6: High Risk Industry Sectors........................................................... 36
7
Customer Identification and Verification Program ......................................................... 37

7.1
Overview................................................................................................................. 37
7.2
Applicability............................................................................................................. 37
7.3
Basis for Customer Identification ............................................................................ 37
7.3.1
Walk-in Customers .......................................................................................... 37
7.3.2
Account Holders .............................................................................................. 38
7.4
Customer Due Diligence......................................................................................... 38
7.4.1
Basic Due Diligence ........................................................................................ 39
7.4.2
Simplified Due Diligence ................................................................................. 39
7.4.3
Enhanced Due Diligence ................................................................................. 40
7.4.4
Steps to perform EDD ..................................................................................... 40
7.4.5
Special Cases for Documentary Verification ................................................... 40
7.4.6
Name Screening.............................................................................................. 41
7.4.7
External Requests for Freezing of Accounts ................................................... 43
7.4.8
Adverse Information Checks ........................................................................... 43
7.4.9
Politically Exposed Person .............................................................................. 44
Appendix I to Chapter 7: Due Diligence Checklist ................................................................ 46

Appendix II to Chapter 7: List of Officially Valid Documents ................................................. 91
Address Proof Documents ................................................................................................ 92
8
Relaxations to KYC Information Collection Requirements ............................................ 94

8.1
Small Accounts....................................................................................................... 94
8.2
Customers through Introducer ................................................................................ 94
Account Opening Process ............................................................................................. 96

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9.1
Determine Type of the Customer and Obtain Basic Customer Information............ 96
9.2
Obtain or Calculate the Customer Risk Categorisation Score................................ 96
9.3
Determine If Customer qualifies for Simplified Due Diligence ................................ 96
9.4
Verify the Identity of the Customer Using Documentary Methods .......................... 96
9.5
Perform Background Checks.................................................................................. 97
9.6
Collect Introducer Information ................................................................................ 97
9.7
Identify Details for Entity Customers ...................................................................... 98
9.8
Identify Controlling Parties and Beneficial Owners................................................. 98
9.9
Obtain Approvals .................................................................................................... 98
Appendix I to Chapter 9: Account Opening Flowchart ............................................................ 1

10
Customer Information Update .................................................................................. 100
10.1
Schedule of Reviews ............................................................................................ 100
10.2
Procedures for Periodic Reviews ......................................................................... 100
10.3
Change in Category or Constitution ..................................................................... 101
11
Account Cancellation and Closure ........................................................................... 102
11.1
Initiation of Customer Relationship Closures........................................................ 102
11.1.1
Internal Notification........................................................................................ 102
11.1.2
Scheduling Closure ....................................................................................... 102
11.1.3
Transaction cancellation................................................................................ 103
12
Internal controls........................................................................................................ 104
12.1
Products and Services Offered by the Bank......................................................... 104
12.2
Customer Acceptance and Identification Procedures........................................... 104
12.3
Country Risk Assessment Procedures ................................................................. 104
12.4
Customer Risk Assessment Procedures .............................................................. 104
12.5
KYC, AML and CFT Policy and Procedure Reviews ............................................ 105
12.6
Actions of the AML Compliance Group ................................................................ 105
12.6.1
Self-assessment Procedures ........................................................................ 105
12.6.2
Updates on Policy and Procedures ............................................................... 105
12.6.3
Perform Audits............................................................................................... 105
12.6.4
Perform Quality Assurance Tests.................................................................. 105
13
Transaction Monitoring and Reporting ..................................................................... 106
13.1
Introduction........................................................................................................... 106
13.2
Reporting Formats................................................................................................ 106
13.3
Submission of Reports to FIU-IND ....................................................................... 106
13.4
CTRs .................................................................................................................... 107
13.4.1
CTR Filing Procedures .................................................................................. 107
13.4.2
Time Frames for Filing a CTR ....................................................................... 108
13.4.3
Exemptions.................................................................................................... 108
13.5
STRs..................................................................................................................... 108
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13.5.1
Introduction.................................................................................................... 108
13.5.2
Potential Indicators of Suspicious Activity or Red Flags................................ 109
13.5.3
Transaction Types for Monitoring .................................................................. 111
13.5.4
Automated Transaction Monitoring ............................................................... 112
13.5.5
Manual Alerts ................................................................................................ 115
13.5.6
STR Filing Obligations................................................................................... 115
13.5.7
Communication with Authorities and Voluntary STRs ................................... 115
13.5.8
Prohibition of Disclosure................................................................................ 116
13.5.9
Protection from Civil Liability for Reporting Information in a STR.................. 116
13.5.10
Prohibition on Retaliation ........................................................................... 116
13.5.11
Failure to Comply with the Banks Policy ................................................... 117
13.5.12
Escalation and Referral of Potentially Suspicious Activity ......................... 117
13.5.13
STR Filing Procedures............................................................................... 117
13.5.14
On-going Duty to Report............................................................................ 118
13.5.15
Time Frames for Filing a STR.................................................................... 118
13.5.16
STR Dispute Resolution ............................................................................ 119
13.5.17
Supplemental STRs ................................................................................... 119
13.5.18
Closing Accounts Due to Continued Suspicious Activity ........................... 119
13.5.19
STR Record Retention............................................................................... 119
13.5.20
Regulatory and Law Enforcement Requests ............................................. 120
13.6
CCRs .................................................................................................................... 120
13.6.1
CCR Filing Procedures.................................................................................. 120
13.6.2
Time Frames for Filing a CCR....................................................................... 120
13.7
NTRs .................................................................................................................... 121
13.7.1
NTR Filing Procedures .................................................................................. 121
13.7.2
Time Frames for Filing a NTR ....................................................................... 121
13.8
Special Note on Wire Transfers............................................................................ 121
13.8.1
Requirements of Domestic Transfers ............................................................ 122
13.8.2
Requirements of Cross Transfers ................................................................. 122
13.8.3
Exemption from Wire Transfer Requirements ............................................... 122
Appendix I to Chapter 13: Other Authorities for Enforcement of the PMLA ........................ 123
14
Customer Record Retention and Sharing ................................................................ 124
14.1
Maintenance and Preservation of Records .......................................................... 124
14.2
Information Sharing, Legal Process and Other Matters ....................................... 124
14.2.1
Principal Officer ............................................................................................. 124
14.2.2
Sharing Process ............................................................................................ 124
15
Training and Education ............................................................................................ 126
15.1
Customer Education ............................................................................................. 126
15.2
Training................................................................................................................. 126
8
15.3
KYC for Existing and New Employees ................................................................. 127
15.4
Training formats.................................................................................................... 127
Annexure A: Guidelines on Performing Background Checks using Google ....................... 128

Annexure B: Letter to Individual Customers Regarding KYC Compliance ......................... 132
Annexure C: Schedule of Offences..................................................................................... 134
Annexure D: Manual Format for Filing Cash Transaction Report ....................................... 143
Annexure E: Manual Format for Filing Suspicious Transaction Report .............................. 147
Annexure F: Manual Format for Filing of Counterfeit Currency Transaction Report........... 152
1 Preface
This policy and procedure document is a comprehensive source of reference for all the
concerned and relevant activities of the Bank towards Know Your Customer (KYC), Anti
Money Laundering (AML) and Combating the Financing of Terrorism (CFT) compliance. The
policies and procedures developed are designed to ensure that the Bank is committed to the
prevention of the use of its facilities for laundering the proceeds of crime and financing
terrorist activities. It consists of the following sections:
Risk based acceptance model to facilitate the classification of current and

existing customers on the basis of money laundering and terrorist financing
risk;
Account opening procedures including customer classification, verification of
customer information using documentary and non-documentary methods and
escalation processes;
Policy for customer information updates based on the risk level of the
individual or entity;
Internal controls to measure the risk levels of products, services and
customers accepted and to measure the effectiveness of current policies and
procedures;
Policies and procedures for the monitoring and reporting of transactions;
Policies and procedures for customer record maintenance, retention and their
sharing with government agencies; and
Recommendation for a training programme for Bank officials geared towards
customer identification and acceptance, customer risk ranking and detection
of money laundering instances.
1.1 Statement of commitment

The goals and objectives of this KYC, AML & CFT programme are to (1) deter
individuals and entities from using the Bank to launder the proceeds of illegal activities;
(2) enable member branches of the Bank to comply with their obligations under the
Prevention of Money Laundering Act, Unlawful Activities Prevention Act (ULPA) and
regulations from Reserve Bank of India (RBI) and National Bank for Agriculture and
Rural Development (NABARD), regulatory bodies for the banks; (3) manage and
mitigate money laundering and terrorist financing related risks; (4) allow banks to cooperate with regulatory bodies and government agencies in detecting and deterring
money laundering and terrorist financing; and (5) provide employees with guidance for
actions to be taken to comply with the Banks obligations under the law and the Banks
policies.
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2 Definitions
2.1 Customer
RBI defines a customer1 as any one of the following:
A person or entity that maintains an account and/or has a business

relationship with the Bank.
One on whose behalf the account is maintained (i.e., the beneficial owner) or
beneficiary of transactions conducted by professional intermediaries, such as
stock brokers, chartered accountants, solicitors, etc. as permitted under the
law.
Any person or entity connected with a financial transaction or any other
product offered by the Bank including walk-in customers.
2.2 High Net-Worth Individual

An individual is designated as a High Net-Worth Individual (HNI) for the purposes of
the Bank if the sum of all the credits for the individual at the Bank across all products
exceeds Rupees 15 lakhs (Rs. 15,00,000)
2.3 Beneficial Owners

The Beneficial Owner for an entity constitution type is any individual or entity that owns
or controls over 20% of the entity. For an individual constitution type the beneficial
owner refers to the individual itself or all the operators of the account.
2.4 Controlling Parties

Controlling parties are individuals or entities with direct or indirect control over the
account created. For KYC purposes, the controlling parties are defined as authorized
signatories, power of attorney holders, executive management (e.g. CEO, CFO,
Directors) and Board of Directors. Different account types and transactions could
involve different controlling parties.
2.5 Money Laundering

Money Laundering is a process by which illegal sources of money are disguised to
make it appear as if they were the proceeds of legal activities. It usually occurs in three
steps:
1. The placement step involving the introduction of the money into the financial
system;
2. The second step known as layering involves performing complex financial
transactions to hide the illegal source; and
1
Section 1.2 of RBI Master Circular on KYC, AML and CFT norms - July 1, 2011
11
3. Finally, the integration step, during which the previously illegal proceeds enter
the economy and are converted into apparently legitimate earnings.
2.6 Terrorist Financing

Terrorist Financing relates to the use of financial institutions to launder money or
misdirect clean money for illegal and illegitimate terrorist activities. Terrorist financing,
unlike money laundering, cares little about the source of the funds and its purpose is
what defines the scope.
2.7 Small Account

A small account refers to a savings bank account where:
1. The aggregate of all credits in a financial year does not exceed Rupees one
lakh (Rs. 1,00,000);
2. The aggregate of all withdrawals and transfers in a month does not exceed
Rupees ten thousand (Rs. 10,000); and
3. The balance at any point of time does not exceed Rupees fifty thousand (Rs.
50,000)
2.8 Financial Intermediary

For the purposes of this document, a financial intermediary is a person or institution
that acts on behalf of its customers to conduct a transaction or open an account with
the Bank.
As per the RBI, the term Financial Intermediary includes following persons or entities
registered under Section 12 of the Securities and Exchange Board of India (SEBI) Act,
1992:
1. Stock brokers
2. Sub-brokers
3. Share transfer agents
4. Bankers to an issue
5. Trustees to trust deed
6. Registrars to issue
7. Merchant bankers
8. Underwriters
9. Portfolio Managers
10. Depositories and Participants
11. Custodian of securities
12. Credit rating agencies
13. Venture capital funds
14. Collective investment schemes including mutual funds
2.9 Ordering Bank

In relation with wire transfers, an Ordering Bank is a Bank that originates a wire
transfer as per the order placed by its customers.
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2.10 Intermediary Bank

In relation with wire transfers, an Intermediary Bank provides business services on
behalf of another financial institution (ordering and beneficiary bank). Intermediary
Banks are also known as Correspondent Banks and are used by domestic banks in
order to service transactions originating in different cities, states or foreign countries,
and act as a domestic bank's agent. This is done because the domestic bank may
have limited access to markets outside of its geography, and cannot service its client
accounts without opening up a branch in that particular city, state or country.
2.11 Beneficiary Bank

In relation with wire transfers, a Beneficiary Bank refers to the bank identified in a
payment order in which an account of the beneficiary is to be credited pursuant to the
order or which otherwise is to make payment to the beneficiary if the order does not
provide for payment to an account.
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3 Legislative and Regulatory Framework

3.1 Defined legal frameworks
3.1.1
Prevention of Money Laundering Act 2002

The Prevention of Money Laundering Act (PMLA) of 20022 is the legislation that forms
the core of the legal framework put in to place to combat money laundering. The PMLA
came into effect from 1st July 2005 with two amendments passed in May 2005 and
March 2009. The act criminalises money laundering and also provides for freezing and
confiscation of assets associated in money laundering. It requires financial institutions
and intermediaries to verify the identity of clients, maintain records and furnish
prescribed transactional information to the FIU-IND.
3.1.2
Rules under PMLA

In addition, the Government of India has strengthened the PMLA through the
notification of various rules, known as Prevention of Money Laundering Rules (PMLR),
to enforce the PMLA which includes defining an adjudicating authority and appellate
tribunal, conferring exclusive and concurrent powers, specifying rules for receipt and
management of confiscated properties, etc. A complete listing of the rules and their
purpose is available on the FIU-IND website3
3.1.3
Unlawful Activities (Prevention) Act, 1967

The Unlawful Activities Prevention Act of 1967, amended in 2008, relates to the
purposes of prevention, and for coping with terrorist activities. The Government of
India has issued an order dated August 27 2009 detailing the procedure for
implementing of section 51A of the Act and it empowers the Central Government 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 listed in the

Schedule to the Order, or
Any other person engaged in or suspected to be in engaged in terrorism ,or
Prohibit any individual or entity from making any funds ,financial assets or
economic resources or related services available for the benefit of the
individuals or entities listed in the Schedule or Order.
3.2 Applicable Regulatory Authorities

3.2.1
Reserve Bank of India
Prevention of Money Laundering Act 2002 is available at http://fiuindia.gov.in/pmla2002.htm
Notification section of the FIU-IND website is available at http://fiuindia.gov.in/notificationsoverview.htm

3
14
The RBI is the central banking institution in India and controls the monetary policy of
the
rupee and the currency reserves. Through its Master Circular on Know Your
Customer (KYC)
norms/Anti Money Laundering (AML) Standards/Combating of
Financing of Terrorism/Obligations of Banks under PMLA, 2002 the RBI introduced KYC
guidelines for all
banks which it has since updated yearly. The RBI also has the
authority to penalize banking institutions for violations in KYC, AML and CFT norms.
3.2.2
National Bank for Agriculture and Rural Development

NABARD is the apex development bank in India and is accredited with matters
regarding policy, planning and operations in the field of credit for agriculture and
other economic activities in rural regions in India. In discharging its role as a
facilitator for rural prosperity, NABARD is also entrusted with acting as a regulator for
Cooperative Banks and Regional Rural Banks (RRBs). NABARD created a model
KYC policy for its member banks with a stipulation that it be tailored to the individual
needs of the bank.
3.2.3
Financial Intelligence Unit India

FIU-IND is the central national agency responsible for receiving, processing,
analysing and disseminating information relating to suspicious financial transactions
and is responsible for domestic and global efforts against money laundering and
related crimes. Any reports regarding financial transactions such as Suspicious
Transaction Reports (STRs) and Cash Transaction Reports (CTRs) must be filed
with the agency. FIU-IND also has the authority to request additional information on
individuals or entities from banks and other financial institutions.
3.3 Consequences of Non-Compliance

3.3.1
Penalties for Non-Compliance

Any contravention or non-compliance with RBIs instructions relating to KYC, AML
and CFT guidelines shall attract penalties under the provisions of Section 47(A) (1)
(b) read with Section 46(4) of the Banking Regulation Act, 1949. The RBI has
imposed fines on various public and private sector banks for non-compliance with
KYC norms. In the first six months of 2011, over 48 cooperative banks had been
fined between Rupees one lakh (Rs. 1, 00,000) and Rupees five lakh (Rs. 5,
00,000) for various KYC, AML and CFT related offences4.
Additionally, the PMLA specifies punishments of up to ten years of rigorous
imprisonment on whosoever willingly commits the offence of money laundering.
3.3.2
Reputational Risk
If the Bank is penalised for non-compliance, it can create a negative perception of the
institution on customers, investors and regulators and can adversely affect the
Banks ability to raise capital and to maintain and create business relationships.
Press Report, 4 June 2011
15
RBI has stepped up its actions against non-compliant banks and in addition to fiscal
penalties, also issues notifications and press releases5 on the banks that have been
fined for violation of KYC, AML and CFT guidelines. These press releases are picked
up by national and international news media which can result in a severe reputational
damage to the banks.
5RBI
press releases documenting penalties are available in the Press Release section of
http://www.rbi.org.in
16
4 Governing Structure and Roles and Responsibilities at

4.1 Overview
The short-term cooperative banking structure under NABARD is a three-tiered
structure with the State Cooperative Banks (SCBs) at the apex level followed by the
District Central Cooperative Banks at the intermediate level and the Primary
Agricultural Credit Societies (PACS) at the village level. Certain states, however, have
two-tier structures with no District Central Cooperative Bank (DCCBs) present at the
intermediate level while other states have a combination of a two-tier and three-tier
structure.
The DCCBs and PACS provide banking services to individuals and entities primarily in
the rural and semi-urban areas. In urban areas, most SCBs provide all the regular
banking services to individuals and non-individuals alike.
Short Term Cooperative

Structure
Apex Level
Mostly Urban
Intermediate Level
Semi-Urban or
Rural
Base
Level
Rural
4.2 Governing Policies and Procedures

At the present time, PACS have not been brought under the KYC, AML and CFT regulations.
This KYC, AML and CFT programme explicitly addresses the requirements of the SCBs and
is intended for their use. Further customisation will be required before adoption of the
programme by the DCCBs.
17
4.3 Roles and Responsibilities

4.3.1
Board of Directors
As per the RBI guidelines6, the Board of Directors of the Bank is responsible for
ensuring that an effective KYC, AML and CFT programme is put in place by
establishing procedures and ensuring their effective implementation. The programme
set by the Board of Directors shall contain:
Application procedures for AML measures developed by senior management;
Roles and responsibilities;
Training for bank officials;
Systems and controls for implementation;
Approving methodology for customer risk categorization; and
Management oversight for the KYC, AML and CFT programme.
It is the responsibility of the Board of Directors to appoint the Principal Officer
(PO) of the Bank.
All pertinent KYC, AML and CFT topics must be discussed by the Board of Directors
in their quarterly meeting.
4.3.2
Senior Management
The Senior Management is tasked with the creation of policies and procedures and
their responsibilities include but are not limited to:
Creation of KYC, AML and CFT policies subject to approval of the Board;
Deployment of suitable personnel and providing them with sufficient authority
to ensure the effective implementation and administration of KYC, AML and
CFT programmes;
Obtain periodic reports regarding transaction monitoring, KYC, AML and CFT
initiatives, identified compliance deficiencies and corrective actions taken; and
Create updates or make changes to the existing policies and procedures
which will be required to be ratified by the Board of Directors.
4.3.3
Principal Officer
As per the guidelines7, the Principal Officer (PO) is the officer-in-charge vested with
the authority to ensure the overall implementation of the Banks KYC, AML and CFT
policy. The PO is also responsible for:
Ensuring the monitoring and reporting requirements of the Bank under the
PMLA are met;
Reviewing the adequacy of systems and controls with respect to KYC, AML &
CFT;
Coordinating with regulatory and law enforcement agencies; and
Assisting Senior Management and Compliance Groups in their function.
6
7
RBI Circular DBOD.AML.BC.18/14.01.001/2002-03 dated August 16, 2002

RBI Circular DBOD.AML.BC.No.108/14.01.001/2009-10 dated June 9, 2010
18
4.3.4
AML Compliance Group

The AML Compliance Group is responsible for all transaction monitoring related
activity at the bank level. It is comprised of the PO and Senior Managers from the
various departments of the Bank including Banking, Internal Audit and Compliance.
The group is responsible for:
Receiving Transaction Alerts escalated by the Branch Manager (BM) and
either further escalating or closing out the report;
Sampling of Transaction Alerts reports closed out by the BM to check for
correctness of BM decisions relating to transaction monitoring; and
Providing periodic reports to Senior Management regarding compliance and
transaction related activities.
4.3.5
Audit and Compliance Department

The Banks internal audit and compliance department is responsible for the following:
Providing an independent evaluation of the policies and procedures deployed
within the bank and their effectiveness; and
Periodically checking the KYC, AML and CFT compliance levels at the
branches of the Bank and providing reports of the same to the audit
committee of the Board.
4.3.6 Customer Relationship Officer
The Customer Relationship Officer (CRO) or Account Opening Officer owns the
relationship with the customer and is responsible for:
Information review and approval for all new customers. While certain portions
of the information collection process may be delegated to the Staff Assistant
(SA), the CRO remains ultimately responsible;
Obtaining, maintaining and updating customer KYC information and
documentation in the Banks management systems;
Interacting with the customer or customer contact in order to make sure that
the customer identification requirements are understood;
Forming a reasonable belief regarding the true identity of the customers; and
Performing periodic reviews and refresh of customers KYC information on
file.
4.3.7
Branch Manager
The BM at the bank is the branch level decision making authority for all KYC & AML
policy decisions. The responsibilities of the Officer include:
Responsible for Implementation of KYC, AML and CFT policy at the Branch
level;
Implements policy on closure or freezing of accounts for non-compliance;
Responsible for submitting monthly Cash Transaction Reports; and
Escalating transaction monitoring alerts from the branch level to the
Bank level.
19
4.3.8
Staff
Bank staff that are interacting with customers and or handling customer
transactions/instructions will be a Banks strongest defence against money
laundering. Hence the communication of a Banks KYC, AML and CFT Programme
and related training in how to apply the programme, is key to the success of antimoney laundering and counter funding of terrorism strategies. Therefore as much as
it is important for the Bank to communicate the KYC, AML & CFT Programme with
the staff, it is equally important for the staff to keep themselves updated with the
policies and procedures related to their role in the organisation
Bank staff is also obligated to report transactions that are suspicious of nature and
could be potentially money laundering or terrorist financing activity. An employee is
required to report transaction activity based on mere suspicion even if he or she is
not precisely sure about the underlying criminal activity or whether illegal activities
have occurred.
20
5 Customer Classification
In order to determine the appropriate information and documentation that must be collected,
all the customers at the bank are classified into distinct constitution types and categories
within them.
5.1 Constitution
The information required from the customer is based on the customer type of the
account holder and is referred to as the constitution. The following constitution types
are applicable to the Bank:
Individuals: All accounts opened by individuals or groups acting in an

individual capacity (e.g. Joint Accounts, Hindu Undivided Family) are present
in this category.
Business Entities: Accounts of specific corporate entities, separate and
distinct from the individuals who finance it.
Financial Institutions: Institutions that provide financial services to its
members or clients including private, public and co-operative sector banks as
well as non-banking institutions such as money-services businesses and chit
funds.
Government, Government Agency or Entity: Any permanent or nonpermanent organization in the machinery of the government including
departments, ministries and other types of public bodies.
Trust: Trusts are classified into two types - Public trusts that are generally
formed for charitable and religious purposes and are not intended for
commercial activities while private trusts generate income for specified
beneficiaries.
Non Profit Organizations: Non-profit organizations or charities can be
registered as trusts, societies or a private limited non-profit company under
Section 25 of the Companies Act. These exist independently of the
government, are self-governed, produce benefits for individuals or groups
outside the membership of the organization and are prohibited from
disbursing monetary residual to members. Religious organizations are set up
primarily for religious purposes and must be registered with the Income Tax
Department.
Societies and Associations: A society or an association is an institution
owned by its members in that the funds are raised from membership and are
then used to provide common services to all the members of the organization.
Based on these definitions, a particular customer could fit into one or more
constitutions listed above but will hold the same customer risk categorisation value
from a KYC, AML and CFT compliance standpoint.
21
5.2 Categories
All the categories for the constitutions can be broadly grouped under individual and
entity constitution types as listed below:
5.2.1
Individuals
The constitution type individual consists of the following sub-categories:
Non-Resident Indian: A Non-Resident Indian (NRI) is an Indian citizen who resides
out of India for employment, business or other reasons for an uncertain duration of
stay. NRI accounts may provide for special tax and repatriation benefits due to the
status of the account holder.
Foreign National: A foreign national is an individual not of Indian nationality but
currently residing in the country for various purposes.
Persons of Indian Origin: A person of Indian origin is an individual who is not a
citizen of India but has Indian ancestry and has obtained a valid PIO card.
Minor: A minor account is an account created and operated in the name of a minor
(under the age of 18) and represented by a guardian or custodian. Upon the minor
attaining majority, the right of the guardian to operate the account shall cease.
Staff: Account created and operated by current or past employees of the bank.
Hindu Undivided Family: The Hindu Undivided Family (HUF) is a joint family
consisting of members descending from a common ancestor. A senior member is
designated as the Karta responsible for managing the account for the HUF.
Single: Any Indian citizen above the age of 18 and not falling under any of the
categories listed above account is considered a single account holder.
Joint: A joint account type is created in the combined name of all the depositors,
each of whom acting in his or her own individual capacity. A joint account can be
created between any number of Individual, Minor, Staff and NRI constitution types.
5.2.2
Entities
Each constitution in the entity section consists of obvious categories as listed below:
Business Entities
Proprietorship
Private Limited Company
Partnership
Co-operative
Public Limited Company
Joint Hindu Family Business
Limited Liability Partnership
22
Financial Institutions
Private Banks
Public Sector Banks
State Co-operative Banks
District Co-operative Banks
Urban Co-operative Banks
Money Service Businesses
Non-Banking Financial Company
Government, Government Agency or Entity
State Government
Central Government
State Government Undertaking
Government of India Undertaking
Government Authorities, Autonomous & Regulatory Bodies
Liquidator
Local Bodies
Trusts
Public
Private
Non Profit Organizations
Trust
Society
Section 25 Company
Unregistered Entity
Societies and Associations
Registered
Unregistered
23
6 Customer Acceptance Policy

The customer acceptance policy of the Bank lays down the explicit criteria for the
acceptance of customers. The policy allows for flexibility in the acceptance of the customer
and its implementation must not result in the denial of banking services to the general public,
especially to those customers who are financially or socially disadvantaged. Kindly refer to
Section 8 of the policy for permissible relaxations with regards to customer acceptance.
6.1 Fictitious or Benami names

Rule 9 of the PMLR, sub-rule (1), clause (1C) prohibits the Bank from opening
accounts or keeping accounts in fictitious or benami names where the identity of the
person cannot be verified or has not been disclosed.
6.2 Customer Risk Categorisation

The Bank has adopted a risk based approach in developing and implementing its
customer acceptance and identification policies and procedures as per the regulations
and approved Indian Banks Association (IBA) August 2011 guidelines. The risk based
approach has been adopted so that those attributes that might suggest a greater
likelihood of money laundering are identified. The key categories chosen to classify the
prospective and existing customers are:
6.2.1
Customer Demographics: This category includes static customer

information that describes the general characteristics of a customer such as
customer type, industry sector, length of relationship and customer
identification.
Geography: This category typically includes countries associated with the
customer such as Nationality and Country of Residence.
Product: This Category includes the type of products a customer has with the
Bank.
Transaction: This Category takes into account the characteristics of the
transactions that each customer makes.
Business Imperative
The development of a customer KYC, AML and CFT risk categorisation model
referred to as the Customer Risk Categorisation (CRC) model can be used to
evaluate the inherent money laundering/ terrorist financing risks for each client
relationship and will assist the Bank in:
Identifying customers or client relationships that should be subject to both

Enhanced Due Diligence (EDD) measures and enhanced transaction
monitoring;
Allocating scarce compliance resources to higher risk areas;
Prioritising customer compliance and remediation efforts; and
Satisfying regulatory requirements.
24
6.2.2
Overview of Methodology
The CRC model takes into consideration a total of eight parameters outlined below.
The parameters chosen for Individuals and Entities are shown below.
#
1
2
3
4
5
6
7
8
Category
Customer
Demographics
Customer
Demographics
Customer
Demographics
Customer
Demographics
Geography
Product
Transaction
Transaction
Variables for Individuals
Variables for Entities
Customer Type
Customer Type
Length of Relationship
Customer Identification
Industry Sector
Nationality
Product Type
Suspicious Transaction
Report
Product Type
Report
Each variable has a possible risk-rating of 1, 2 or 3 with 1 being the lowest and 3 the
highest score. Each variable is also weighted based upon the relative importance of
the variable. A total score out of 100 is calculated based on the following formula:
Total Score = Sum (Individual Variable Score * Weight)
The total score is then divided into three categories that denote the categorisation
level of the customer as Level I, Level II or Level III.
Appendix 1 to Chapter 7 provides a complete breakdown of the variables and the
associated weights and an explanation for the choices made.
6.2.3
Application of Rating Methodology

6.2.3.1
New Customers
The risk score calculated based on the due diligence performed or captured at the
time of account opening for new customers is called the Initial Customer
Categorisation score. For the Initial Customer Categorisation, the variables in the
Transaction Category are suppressed to account for the possibility of low volume,
frequency and value of transactions. This enables the other variables to have a more
pronounced effect on the Initial Customer Categorisation in the absence of sufficient
transaction information. The sum of the weighted scores of variables determines the
Initial Customer Categorisation score.
25
The chosen parameters and their weights at the time of Initial Customer
Categorisation are shown in the tables below under the column New Customer
Weights:
#
1
2
3
4
5
6
7
Category
Customer
Demographics
Customer
Demographics
Customer
Demographics
Geography
Product
Transaction
Transaction

Customer Type
New
Existing
Customer Customer
Weights
Weights
1
1
Nationality
Product Type
Report
1
1
0
0
1
1
2
2
#
1
2
3
4
5
6
7
Category
Customer
Demographics
Customer
Demographics
Customer
Demographics
Customer
Demographics
Product
Transaction
Transaction
6.2.3.2

Customer Type
New
Existing
Customer Customer
Weights
Weights
1
1
Industry Sector
Product Type
Report
1
0
0
1
2
2
Existing Customers
For existing customers, the variables for the Transaction Activity category are also
used to calculate the Customers Risk Categorisation Score. The applicable weights
26
and variables are shown in the above tables under the column Existing Customer
Weights.
The change in weights from a new customer model to an existing customer model is
applicable when a customer has held the relationship with the Bank for over a year
or has a CTR/STR filed within the first year.
6.2.3.3
Final Customer Categorisation Score
Once the Initial Customer Categorisation or Customer Categorisation has been

completed for new and existing customers, respectively, a BM may consider other
factors such as country of residence, matches to any sanctions lists or Politically
Exposed Persons (PEP) lists, negative news regarding customer, improper
introduction of customer, additional regulatory actions or guidance and when
appropriate, override a customers calculated customer score with a score that he or
she deems more reflective of the risk associated with the customer in light of the
additional information (Branch Override). All such Branch Overrides must follow an
approval process and require a final approval from the PO of the Bank.
The Final Customer Categorisation equals either the Initial Customer Categorisation
or the Customer Categorisation and when applicable the Branch Override. The Final
Customer Categorisation is scaled to a total score out of 100 as follows:
Final
Customer
Categorisation
Level I
Level II
Level III
Score
< 56
>= 56 and <=
78
> 78
IMPORTANT NOTE
Classification of a customer of the Bank into a Level III Category does not
automatically mean that this customer is a money launderer or financer of terrorism.
Equally, a Level I categorisation does not mean that the customer is completely
devoid of any risk. The categorisation only provides a broad clue to the possibilities
calling for additional monitoring and attention. The Bank staff must use their
experience and exercise appropriate judgement while applying the policies and
procedures.
6.2.4
Risk categorisation review

The RBI guidelines recommend the review of the CRCM to be carried out at least
once every six months8. The AML Compliance Group and the PO are entrusted the
responsibility for the review and updation of the CRCM.
RBI Master Circular on KYC, AML and CFT norms - July 1, 2011
27
28
Appendix I to Chapter 6: Customer Risk Categorisation

Variables and Scores
Customer Type
The customer type variable evaluates the inherent risk the type of customer poses to the
bank in terms of KYC, AML and CFT. This information is captured by the Bank using a
combination of the Constitution and Category fields. The risk values to the customer type
variable have been assigned using regulatory guidelines, industry best practices and prior
experience.
An example of this evaluation is as follows, if a company is publicly traded, it is less likely to
pose a high risk for money laundering. This is attributed to the fact that information on
publicly traded companies is made readily available to all individuals, making their financial
status and overall well standing transparent to all.
The table below lists the values for Constitution and Category and the associated scores.
Constitution
Individual
Individual
Individual
Individual
Individual
Individual
Individual
Individual
Business Entities
Business Entities
Business Entities
Business Entities
Business Entities
Business Entities
Business Entities
Govt., Govt. Agency or Entity
Category
Single
Joint
Minor or Custodian
Staff
High Net Worth
Non-Residents
Foreign
Proprietorship
Partnership
Co-operative
Private Banks
Public Sector Banks
Urban Co-operative
State Co-operative
District Co-operative
Non-Banking Financial Companies (NBFCs)
State Government
Central Government
Government India Undertaking
Government Authorities, Autonomous &
Regulatory Bodies
29
Score
2
2
2
2
2
3
3
3
3
2
2
1
1
3
2
2
1
1
2
1
1
3
2
1
1
1
1
1
Constitution
Govt.
Trust
Trust
Category
Local Bodies
Public
Private
Trust
Society
Section 25 Company
Score
2
2
2
3
3
3
Any new customers of the Bank should be considered to be higher risk for money laundering
or terrorist financing because the Bank does not know enough about the clients business,
transaction activities and overall profile. The risk the customer poses, based on this
variable, diminishes over time provided he continuous to transact actively and is subject to
transaction monitoring. The table below lists the values and the associated scores.
Variable
Factor
less than one year
one to three years
greater than three years
Score
3
2
1
Using the above scores in case of in-operative or dormant accounts that have been opened
more than three years ago will result in a lower score. However, since the account has been
inoperative or dormant the Bank does not necessarily have sufficient updated information
regarding the customers transactions or nature of business and a resulting lower
categorisation purely based on account opening is incorrect. In order to adjust for this
anomaly, the last operation date or last transaction date must also be considered.
Hence for all accounts that have an account opening date greater than three years the
following conditions must be applied and the scores readjusted to accurately reflect the
Banks knowledge of their customer :
Length of Relationship is greater than three years:
Additional Variable
Factor
Last Operation Date
Less than one year
Last Operation Date
one to three years
Last Operation Date
greater than three years
30
Score
1
2
3
Customer identification means identifying the customer and verifying his/her identity by using
reliable, independent source documents, data or information9
The Customer Identification variable score is based on the Banks ability to collect from the
customer all the required verification documentation. Lack of sufficient documentation and
information that does not allow a Bank to establish, to a satisfactory level, the identity of the
customer poses a higher risk to the Bank.
The table below lists the values and the associated scores.
Variable
Factor
KYC Complete
KYC Incomplete
KYC Pending (within 10 days of account
opening)
KYC Expired
Score
1
3
3
2
Industry Sector
The industry sector variable evaluates the inherent risk a customer poses due to the nature
of business or the industry the customer operates in. Regulatory guidelines classify certain
industry sectors such as bullion dealers and sub-dealers, jewellers, etc. as potentially
vulnerable to money laundering and as such are considered higher risk sectors.
To maintain consistency of data and reporting standards, the Bank has adopted the National
Industrial Classification of 2008 (NIC), developed and maintained by the Government of
India10, that seeks to provide a basis for the standardised data collection, analysis and
dissemination of industry (economic activity) wise economic data for India.
Due to the exhaustive nature of the list, only the industries that are vulnerable to potential
money laundering and terrorist financing are listed in Annexure I. The list is also known as
the Sensitive Industry List (SIL).
Nationality
As a result of varying levels of corruption, organized criminal activity, and differing quality of
regulation / legislation different countries create different levels of risks of money laundering
and terrorist financing. The Nationality variable evaluates the risk posed by each country in
Reserve Bank of India, KYC Master Circular July 1 2011. RBI/2011- 12/72 DBOD. AML. BC. No. 2
/14 .01.001/2011-12
10
Central Statistical Organisation, Ministry of Statistics and Programme Implementation
31
order to consider the possibility of a customer relationship being vulnerable to money

laundering or terrorist financing.
The ISO 3166, codes for the representation of names of countries and their subdivisions is a
commonly accepted international standard. The country risk categorisation takes into
consideration the following factors:
1. Whether the country is a member of the Financial Action Task Force;
2. Whether the country is on the United Nations Sanctions List;
3. Whether the country is classified as Primary Money Laundering Concern on the
International Narcotics Control Strategy Report 2011 (INSCR) published by the
United States Government;
4. The countrys 2010 Corruption Perception Index (CPI) published by Transparency
International; and
5. Whether the country is classified as a Terrorist Safe Haven by the United States
Government.
A complete list of the countries broken down by their risk categorisation is given below.
Score 3 Countries
AFGHANISTAN
ALBANIA
ALGERIA
ANDORRA
ANGOLA
ANGUILLA
ARGENTINA
ARMENIA
ARUBA
AZERBAIJAN
BAHAMAS
BANGLADESH
BARBADOS
BELARUS
BELIZE
BENIN
BERMUDA
BOLIVIA
BOSNIA AND HERZEGOVINA
BURKINA FASO
BURUNDI
CAMBODIA
CAMEROON
CAYMAN ISLANDS
CENTRAL AFRICAN REPUBLIC
CHAD
COMOROS
CONGO
11
COUNTRY NAME
GAMBIA
GIBRALTAR
GUATEMALA
GUERNSEY
GUINEA
GUINEA-BISSAU
GUYANA
HAITI
HONDURAS
INDIA11
INDONESIA
IRAN
IRAQ
ISLE OF MAN
JAMAICA
JERSEY
KAZAKHSTAN
KENYA
KIRIBATI
KOREA, DEMOCRATIC
PEOPLE'S REPUBLIC
KYRGYZSTAN
LAO PEOPLE'S
DEMOCRATIC REPUBLIC
LEBANON
LIBERIA
LIBYA
LIECHTENSTEIN
MACAO
MADAGASCAR
MYANMAR
NEPAL
NICARAGUA
NIGER
NIGERIA
PAKISTAN
PALAU
PANAMA
PAPUA NEW GUINEA
PARAGUAY
PHILIPPINES
RUSSIAN FEDERATION
SAMOA
SAO TOME AND PRINCIPE
SENEGAL
SEYCHELLES
SIERRA LEONE
SOLOMON ISLANDS
SOMALIA
SRI LANKA
SUDAN
SYRIA
TAJIKISTAN
TANZANIA
TIMOR-LESTE
TOGO
TONGA
TURKMENISTAN
India is classified as a high risk jurisdiction. However, since a large majority of customers
(approximately 99%) in the co-operative sector are individuals with nationality Indian, the value of
the variable is considered to be low since it is common across the entire population.
32
COUNTRY NAME
CONGO, THE DEMOCRATIC
REPUBLIC
COOK ISLANDS
CTE D'IVOIRE
CYPRUS
DJIBOUTI
DOMINICAN REPUBLIC
ECUADOR
EGYPT
EQUATORIAL GUINEA
ERITREA
ETHIOPIA
GABON
MALAWI
MALAYSIA
MALDIVES
MALI
MAURITANIA
MEXICO
MOLDOVA
MONACO
MONGOLIA
MONTSERRAT
MOROCCO
MOZAMBIQUE
TURKS AND CAICOS ISLANDS

UGANDA
UKRAINE
UZBEKISTAN
VANUATU
VENEZUELA
VIET NAM
YEMEN
ZAMBIA
ZIMBABWE
Score 2 Countries
LAND ISLANDS
AMERICAN SAMOA
ANTARCTICA
ANTIGUA AND BARBUDA
BAHRAIN
BONAIRE, SINT EUSTATIUS
AND SABA
BOUVET ISLAND
BRAZIL
BRITISH INDIAN OCEAN
TERRITORY
BULGARIA
CHINA
CHRISTMAS ISLAND
COCOS (KEELING) ISLANDS
COLOMBIA
CROATIA
CUBA
CURAAO
CZECH REPUBLIC
EL SALVADOR
FALKLAND ISLANDS
(MALVINAS)
FAROE ISLANDS
FIJI
FRENCH GUIANA
FRENCH POLYNESIA
FRENCH SOUTHERN
TERRITORIES
GEORGIA
GHANA
GREECE
COUNTRY NAME
GRENADA
GUADELOUPE
GUAM
HEARD ISLAND AND
MCDONALD ISLANDS
HOLY SEE (VATICAN CITY
STATE)
HUNGARY
ITALY
KUWAIT
LATVIA
LESOTHO
LITHUANIA
MACEDONIA
MARSHALL ISLANDS
MARTINIQUE
MAYOTTE
MICRONESIA
MONTENEGRO
NAMIBIA
NAURU
NEW CALEDONIA
NIUE
NORFOLK ISLAND
NORTHERN MARIANA
ISLANDS
PALESTINIAN TERRITORY,
OCCUPIED
PERU
PITCAIRN
RUNION
ROMANIA
33
SAINT BARTHLEMY
SAINT HELENA, ASCENSION
AND TRISTAN DA CUNHA
SAINT KITTS AND NEVIS
SAINT LUCIA
SAINT MARTIN (FRENCH
PART)
SAINT PIERRE AND
MIQUELON
SAINT VINCENT &THE
GRENADINES
SAN MARINO
SAUDI ARABIA
SERBIA
SINT MAARTEN (DUTCH PART)
SLOVAKIA
SOUTH AFRICA
SOUTH GEORGIA AND THE
SOUTH SANDWICH ISLANDS
SOUTH SUDAN
SURINAME
SVALBARD AND JAN MAYEN
SWAZILAND
THAILAND
TOKELAU
TRINIDAD AND TOBAGO
TUNISIA
TURKEY
TUVALU
UNITED STATES MINOR
OUTLYING ISLANDS
VIRGIN ISLANDS, BRITISH
VIRGIN ISLANDS, U.S.
WALLIS AND FUTUNA
GREENLAND
COUNTRY NAME
RWANDA
WESTERN SAHARA
Score 1 Countries
AUSTRALIA
AUSTRIA
BELGIUM
BHUTAN
BOTSWANA
BRUNEI DARUSSALAM
CANADA
CAPE VERDE
CHILE
COSTA RICA
DENMARK
DOMINICA
ESTONIA
FINLAND
FRANCE
COUNTRY NAME
GERMANY
HONG KONG
ICELAND
IRELAND
ISRAEL
JAPAN
JORDAN
KOREA, REPUBLIC OF
LUXEMBOURG
MALTA
MAURITIUS
NETHERLANDS
NEW ZEALAND
NORWAY
OMAN
POLAND
PORTUGAL
PUERTO RICO
QATAR
SINGAPORE
SLOVENIA
SPAIN
SWEDEN
SWITZERLAND
TAIWAN, PROVINCE OF CHINA
UNITED ARAB EMIRATES
UNITED KINGDOM
UNITED STATES
URUGUAY
Product Type
The product type variable is used to capture the inherent risk a product and its associated
account types pose to the Bank. Certain products by their very nature are more conducive to
money laundering than others. The table below lists all the products offered by the SCBs
and their associated scores that can broadly be categorised into one of the following:
Product Class
Deposit
Product
Current
Account
Savings
Account
Term Deposit
Retail Loans
Loan
Collateral
Loans
Institutional
Finance
Loan
Re-Finance
Product Sub-Type
Score
Regular
No Frills
Fixed
Reinvestment
Recurring
Special
General Purpose Loan
Consumer Durable Loan
Education Loan
Vehicle Loan
Housing Loan
Gold Loans
Mortgage Loans
Equity Loans
Loan against Deposit/Savings
Instrument
Bills and Letter of Credit
Short Term Loans / Cash Credit
Medium/ Long Term Loans
Short Term Loans / Cash Credit
34
3
1
1
1
1
1
1
1
1
1
1
1
3
2
1
1
2
1
1
2
Product Class
Product
Operations
Product Sub-Type
Medium/ Long Term Loans
Score
1
Transaction Activity CTR and STR

A customers transaction activity profile is a key variable to evaluate a potential money
laundering or terrorist financing risk. There are two variables that measure the transactional
activity variable of a customer: Cash Transaction Reports and Suspicious Activity Reports.
The submission of a Cash Transaction Report denotes a high amount of cash activity within
the accounts of a customer while a Suspicious Transaction Report denotes unusual or
atypical activity within the accounts of the customer.
The table below lists the values and the associated scores for Constitution Type Individual:
Variable
Factor
Less than one
Between one and three
Greater than three
Score
1
2
3
The table below lists the values and the associated scores for Constitution Type Entity:
Variable
Factor
Less than three
Between three and six
Greater than six
Score
1
2
3
The table below lists the values and the associated scores for Constitution Type Individual
and Entity:
Variable
Report
Report
Report
Factor
Score
1
No STR filed
2
One STR filed
Greater than one STR
filed
35
Appendix II to Chapter 6: High Risk Industry Sectors

#
1
2
3
4
5
6
7
8
Group
252
304
321
329
451
452
453
9
10
11
12
13
14
15
454
471
472
473
478
479
561
642
16
661
17
18
19
20
21
22
23
24
662
663
681
682
771
791
799
25
26
27
881
889
920
960
Industry Sector Description

Manufacture of weapons and ammunition
Manufacture of weapons and ammunition
Manufacture of jewellery, bijouterie and related articles
Other manufacturing
Sale of motor vehicles
Maintenance and repair of motor vehicles
Sale of motor vehicle parts and accessories
Sale, maintenance and repair of motorcycles and related parts and
accessories
Retail sale in non-specialized stores
Retail sale of food, beverages and tobacco in specialized stores
Retail sale of automotive fuel in specialized stores
Retail sale via stalls and markets
Retail trade not in stores, stalls or markets
Restaurants and mobile food service activities
Activities of holding companies
Activities auxiliary to financial service activities, except insurance
pension funding
Activities auxiliary to insurance and pension funding
Fund management activities
Real estate activities with own or leased property
Real estate activities on a fee or contract basis
Renting and leasing of motor vehicles
Travel agency and tour operator activities
Other reservation service and related activities
Social work activities without accommodation for the elderly and
disabled
Other social work activities without accommodation
Gambling and betting activities
Other personal service activities
36
Risk
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
H
7 Customer Identification and Verification Program

7.1 Overview
As per the PMLA mandate, a customer identification procedure must be carried out by
the Bank on all its existing and new customers and includes steps for:
Information to be obtained from the customer during the account opening

process of the relationship establishment phase;
If required, verifying the information provided by the customers using
documentary and non-documentary methods;
Specific additional due diligence performed based on the risk perception,
account type and the constitution of the account holder;
Periodic updates to customer identification data after the account is opened
based on risk appraisal of account type and the customer; and
Obtaining additional customer information during the course of a financial
transaction or when the bank doubts the authenticity of previously obtained
customer data or finds it inadequate.
7.2 Applicability
Customer identification is required for any entity or individual that either has an
account in one or more branches of the Bank or uses one or more products of the
bank even as a walk-in customer.
Excepting the applicable relaxations listed in Section 8, the Bank must collect
complete and up to date KYC information from all new and existing customers based
on their constitution, category and risk score.
As per RBI regulations12, any additional information not required for KYC purposes
must not be a part of the account opening form and should be collected separately on
a voluntary basis after explaining the objective to the customer.
7.3 Basis for Customer Identification

The customer identification and verification process of the Bank is based on whether
the customer is a walk-in customer or an existing account holder.
7.3.1
12
Walk-in Customers
Section 2.1 of RBI Master Circular on KYC, AML and CFT norms July 1, 2011
37
Any customer that does not have an account in the Bank or any of its branches and
only requires either the purchase or sale of a monetary instrument is referred to as a
walk-in customer.
Banks sell a variety of monetary instruments (e.g. bankers cheques or drafts,
including foreign drafts, money orders or cashiers checks and travellers checks) in
exchange for currency. Purchase and use of these instruments is a common
method used by money launderers to evade large currency transaction reporting
requirements as they can be then deposited in accounts with other banks to facilitate
the movement of funds through the payment system. In many cases, the persons
involved do not have an
account with the bank from which the instruments are
purchased.
In case of transactions carried out by a walk-in customer, in line with the regulatory
guidelines, the CRO or the BM must verify the identity and address of the customer
when the transaction amount equals or exceeds Rupees fifty thousand (Rs. 50,000),
whether conducted in a single transaction or several seemingly connected
transactions and also in the case of an international money transfer operation. If the
CRO or BM has reason to believe that a customer is intentionally structuring
transactions below the identified threshold they may verify the identity and address
information of the customer. The CRO or BM may also consider filing a STR.
In order to verify the identity and address, the customer conducting the transaction
must be classified into a constitution and category as listed in Appendix 1, Chapter 8
and then the information and documentation corresponding to a high risk
classification must be obtained.
The record for the sale or purchase of monetary instruments must include:
Name of purchaser;
Date of purchase;
Type of instrument purchased;
Serial number;
Amount of each instrument and currency purchased in;
Purpose of instrument; and
Specific identification information.
Section 14.1 defines the record retention requirements for the Bank and it is required
that information on all walk-in customers be recorded in a separate file.
7.3.2
Account Holders
All customers, excepting those qualifying for the relaxations as listed in section 8,
which are currently account holders at the Bank or wish to open a new account, are
subject to the Banks customer acceptance and identification procedures.
7.4 Customer Due Diligence
38
Customer Due Diligence (CDD) can be defined as any measure undertaken by the
Bank to collect and verify information provided by the customer and positively establish
the identity of the customer. As listed in the IBA guidelines, the CRO must perform
CDD on the customer when it:
1.
2.
3.
4.
Establishes a new business relationship;

Carries out an occasional transaction;
Suspects money laundering or terrorist financing; or
Doubts the authenticity of the documents, data or information previously
obtained for the purpose of identification or verification.
Similarly as outlined in the IBA guidelines, if the CRO is unable to apply relevant due
diligence measures, he or she
1. Must not establish a business relationship or carry out an occasional
transaction with the customer;
2. Should not carry out a transaction with or for a customer through a bank
account;
3. Should freeze or terminate all existing business relationships with the
customer; and
4. Should consider reporting it to FIU-IND or to the regulators, in accordance
with the guidelines.
The Bank will perform three types of Due Diligence as follows.
7.4.1 Basic Due Diligence
All customers at the Bank must provide officially valid documents as a part of the
account opening process in order to fulfil their KYC requirements. The documents
required are based on the constitution, category and risk categorisation score of the
customer. All low and medium risk customers must undergo Basic Due Diligence
(BDD). A full list of the documents required for Basic Due Diligence for each type of
customer is provided as a checklist in Appendix I, Section 7, to this chapter.
7.4.2 Simplified Due Diligence
While the current policy has been designed to provide adequate flexibility in the
collection of KYC information and documentary evidence, it has been observed that in
certain cases customers, especially low income groups in rural as well as urban areas,
are not able to provide the documentary evidence required by the Basic Due Diligence
process. RBI guidelines recommend that banks do not exclude financially weaker
sections of society from access to banking services because of the KYC, AML and
CFT requirements13.
Any CDD measures less stringent than the Basic Due Diligence measures are termed
as Simplified Due Diligence (SDD). Customers applicable for Simplified Due Diligence
and its measures are listed separately in Chapter 8.
13
RBI Master Circular on KYC, AML and CFT norms July 1, 2011
39
7.4.3

Any CDD measures more stringent than the Basic Due Diligence measures are termed
as Enhanced Due Diligence (EDD). The policy requires the CRO to perform EDD on
high risk customers identified as part of the Customer Risk Categorisation process. A
full list of the documents required for Enhanced Due Diligence for each type of
customer is provided as a checklist in Appendix I, Section 7, to this chapter.
Any system deployed for KYC information management at the Bank should be
designed to transparently add on the EDD section based on the risk score of the
account.
7.4.4 Steps to perform EDD

If the customer categorisation score is low or medium, no EDD is required on the
customer. The steps for performing enhanced due diligence on high risk customers are
as follows:
1. The CRO must request the customer for any additional information required;
2. If the customer fails to provide the information requested as part of the EDD
process, the BM must be notified with a recommendation for an exception or
a one for account closure;
3. If the customer provides the required information, the CRO must review the
information provided for accuracy, completeness and consistency with
available information on the customer. If the information is found satisfactory,
the CRO may open the account for the customer; and
4. As part of follow-up, the CRO or the BM, in certain cases may send a letter of
thanks by registered post to the recorded address of the customer as well as
the introducer. This would serve as a relationship building exercise and also
allow the Bank to indirectly verify the address provided by customer as well
as the introducer. In case the letter is not delivered and returned to the Bank,
the Bank must try and contact the customer or the introducer to determine
the reason for the return and update the information accordingly. If no contact
is possible and further information is not received, the account must be
closed.
No customer once classified as high risk is exempt from the EDD process.
7.4.5 Special Cases for Documentary Verification
This section covers some of the special cases that could be encountered by the Bank
during documentary verification. It is assumed that for most cases the checklist
provided in Appendix I of this chapter will suffice.
7.4.5.1 Documents in Languages other than English
If the customer provides a document in a language that the CRO cannot read and
understand, he or she must use an internal translation resource to obtain a translation
of the document in either English or Hindi or the State language. At a minimum, the
40
translation must include the full customer name, a description of the type of document,
the date of document and a reference to the content of the document. The translation
must also include the name and designation of the translator within the bank.
7.4.5.2 NREGA Job Card or Aadhar Letter
If the individual has only provided NREGA job card or Aadhar card for complete KYC
purposes, the RBI regulations require that the account opened should be subject to the
conditions and limitations of a small account as defined in Section 2.4.14
7.4.6 Name Screening
As defined by the IBA August 2011 guidelines, Name Screening refers to the process
of determining whether any of the Banks existing or potential customers are part of
any blacklists or regulatory lists. The CRO must take reasonable measures to ensure
that the customer or authorised signatories of the customer do not match with any
known persons having a criminal background. In case of the customer being an entity
the CRO must ensure that the entity is not a banned entity or a terrorist organisation.
1) List Sources
RBI frequently circulates updates and notifications regarding lists such as the Interpol
Terrorism Watch list, UN Sanctions list, United Nation Security Council Resolution
(UNSCR) list and the Wanted Persons list published by the Central Bureau of
Investigation (CBI). Occasionally these lists are also available freely on the website of
the respective organisations.
Companies including but not limited to Dow Jones and LexisNexis provide customized
lists for a fee and include public sources as well as independently researched listings.
In addition the Bank could maintain in-house negative or black-list of internal watchlists containing a list of all individuals and entities that are not permitted to be
customers of the Bank for whatever reason.
2) Updation and Validation of Lists
The PO is responsible for sourcing, updating and validating all the entities or
individuals on the lists. Updates to external lists must be made after a periodic semiannual review of the list or be triggered by an update from one of the list sources itself.
The internal lists are created and updated by the PO and the AML Compliance Group.
The PO is also responsible for circulating the lists to all the branches of the Bank.
3) Distribution of the Lists
The AML Compliance Group must set-up a distribution system to ensure that all
branches receive the lists and any updates in a timely fashion. All the updates
received by the Compliance Group from the RBI or a vendor must be forwarded to all
the branches within 7 days of receipt.
14
Section 2.9 B of RBI KYC Master Circular July 1 2011 circular
41
4) Checking and Management of Matches

As a part of the account opening procedures, the CRO must perform list matching for
every account holder of the individual constitution type. For entity accounts, the senior
managers, beneficial owners and any other individual directly or indirectly connected
with the account must undergo list matching. Additionally, such lists could also contain
the names of entities and countries which are sanctioned and must be matched
against entity names and the countries serviced of all entity account holders.
With every update to the list received, the list matching process must be performed at
a branch level on all account holders. Also RBI regulations require that the updated
lists be maintained in an electronic format.
Identifying a Match
The IBA guidelines from August 201115 provide guidance on determining if a match
can be identified as a positive match. The list matching algorithm must not just be
confined to the name of the individual or entity and should match fields such as date of
birth, address, country of operations, etc. based on the constitution and category of the
account.
Once verified that the match is a positive match, the CRO should forward the match to
the BM at the Branch. Upon BM confirmation, the customer information, account
information and all particulars of the product are forwarded to the PO who is the
ultimate decision making authority on reporting list matches.
In order to confirm the match, the officer responsible is permitted to reach out to the
account holder and verify the details provided. If the officer is satisfied with the
explanation provided by the customer, the customer will be required to provide an
affidavit of the explanation which shall be appended to the KYC file of the account.
Action on Confirmed Matches
The Bank must not open an account if there is a positive match with a negative or a
blacklist during the account opening process. Any existing accounts that match a
negative or blacklist must be frozen immediately and eventually closed.
Once the PO validates the information and confirms the matches, the details of the
account will be forwarded to the following agencies within 1 business day:
1) Joint Secretary (ISI)
Ministry of Home Affairs
Fax no: 011 23092569
Tel no: 011 23092736
Email: Jsis@nic.in
2) UAPA Nodal Officer of RBI
Chief General Manager, Dept. of Banking Operations and Development
15
Section 7.9 KYC Norms and AML Standards Guidance Notes for Banks August 2011
42
Central Office, Reserve Bank of India

Anti-Money Laundering division
Central Office Building, 13th Floor
Shahid Bhagat Singh Marg, Fort, Mumbai 400 001
The Bank shall also file an STR with the FIU-IND covering all the transactions, carried
through or attempted, in the accounts with the positive match.
White-listing
A false positive match is the matching of two individuals that have essentially
different identities. In order to deal with the customer appearing frequently as a false
positive match during the name screening process, the AML Compliance Group will
maintain a white-list that indicates that the customer is acceptable against the given
negative lists. If the same customer is scanned subsequently, the system will not show
a match for the customer.
7.4.7 External Requests for Freezing of Accounts
The FIU-IND or the RBI can also require the Bank to freeze certain accounts by
providing information on the account or the account holder. This request could be a
result of the Bank confirming a positive match or a request from a foreign country
under the U.N. Security Council Resolution 1373 of 2001. The Bank is required to
adhere to the request within 1 business day of receiving the request without prior
intimation to the account holder.
Individuals or entities whose accounts have been frozen are allowed to petition for the
unfreezing of the same by submitting an application containing requisite evidence to
the Bank. The Bank is required to forward a copy of the application along with the
details of the account frozen to:
Joint Secretary (IS-I), Ministry of Home Affairs
Tel no: 011-23092736
Fax no: 011-23092569
Email: jsis@nic.in
Within fifteen days a decision on the unfreezing of the account shall be conveyed to
the account holder.
7.4.8
Adverse Information Checks

In order to capture the risk associated with any publicly available negative news, the
CRO must check for any adverse information on the customer with respect to money
laundering, terrorist financing, fraud investigations, etc.
The procedure to check for any adverse information on the customer is listed below:
43
The CRO must conduct an Internet search using Google. For guidelines on
how to search the Internet using Google, please refer to Annexure A,
Guidelines on Performing Background Checks using Google.
If any relevant and valid negative information is not found, evidence of the
search performed is entered into the KYC file of the account holder as an
attachment and no further action is deemed necessary.
If however, adverse information is available, the CRO is responsible for
saving the information into a document and entering the same into the KYC
file of the customer. The customer must then be referred to the BM for a final
decision on the account. The final decision on the account must be one of the
following:
i. Accept the customer without any further Enhanced Due Diligence
steps if the adverse information is not substantial and does not pose
an increased risk to the Bank.
ii. Accept the customer and perform EDD.
iii. Reject the customer if the risk posed is deemed too high.
7.4.9 Politically Exposed Person

As per the RBI definition16, PEPs are individuals who are or have been entrusted with
prominent public functions in a foreign country e.g., Heads of States or Governments,
senior politicians, senior government/judicial/military officers, senior executives of
state-owned corporations, important political party officials, etc.
Such individuals are considered risky from a money laundering perspective and
require additional due diligence and transactional scrutiny. For the Bank, the risks
associated with these individuals are not just from a compliance perspective but also
from a reputational one.
Companies such as Dow Jones and LexisNexis provide customized PEP lists for a fee
and the Bank can also conduct an Internet search using Google. For guidelines on
how to search the Internet using Google, please refer to Annexure A, Guidelines on
Performing Background Checks using Google.
Once a customer or a person associated with an account is identified as a PEP or the
close relative of a PEP, the Bank is required to perform the following steps:
The CRO or the BM should gather all the available information on the PEP
and confirm it against information available on the public domain;
The CRO or BM must obtain information on the identity of the PEP and
source of funds for the account; and
The PO at the Bank must sign off on the acceptance of the customer,
categorize him as high risk and perform EDD. The account must also be
subjected to enhanced transaction monitoring.
16
RBI KYC Master Circular July 1, 2011 (section 2.5)
44
In the event that an existing customer or beneficial owner is identified as PEP, the PO
along with the AML Compliance Group will be required to sign off on continuing the
relationship. The account and the individual will then be subject to the same process
as above for a new PEP account.
45
Appendix I to Chapter 7: Due Diligence Checklist

Checklist
Constituti
on
1
Individual
Category
Non Resident Indian
Basic Due Diligence

Required Information
Full legal name
Date of birth
Address in India
Product type or account type applied for
Country of residence
Visa type for the country of residence

Additional Information
Current residential address
Introducer information
Source of funds
Anticipated account activity
Documentary Verification
Obtain a copy of passport page containing photograph
to serve as photo identity
Additional Documentary Verification

Obtain an additional photo identity document from list
provided in Appendix II, Chapter 8
Obtain additional address proof document from list in
Appendix II, Chapter 8
Obtain a copy of passport page containing address to

serve as address proof. If the address does not match
address in India, proof can be provided by establishing
relationship using the documents listed in Appendix II,
Chapter 8
Obtain a copy of a valid visa granted for the current

country of residence
46
Checklist
Constituti
on
2
Individual
Category
Foreign National
Basic Due Diligence

Full legal name
Address in India
Nationality
Date of birth
Indian visa type
Information on the Indian employer (name, address
etc.).
PEP check

Address in home country
Source of funds
Obtain a copy of passport pages containing valid Indian
visa and photograph. If the home address is displayed
on the passport, obtain a copy of it
Obtain a copy of the appointment letter along with an
affidavit from the current employer verifying the address
of the foreign national
Obtain a copy of the employers PAN card or TIN
Number

Obtain a copy of another photo identity
Obtain a copy of another address proof
47
Checklist
Constituti
on
3
Individual
Category
Basic Due Diligence

Full legal name
Address in India
Nationality
Date of birth
If applicable, Indian employer information
PEP check

Source of funds
Obtain a copy of the passport pages containing
photograph and address
Obtain a copy of the Person of Indian Origin card
If employed in India, obtain a copy of the appointment
letter along with an affidavit from the current employer
verifying the address of the customer

If available, obtain a copy of the employers PAN card or TIN
number
48
Checklist
Constituti
on
4
Individual
Category
Minor
Basic Due Diligence

Full legal name
Date of birth of minor account holder
Full name of the guardian
Date of birth of guardian
Relationship of minor account holder with guardian
Address of the guardian

Source of funds
Obtain an affidavit from the guardian indicating the
relationship with the minor. Optionally, obtain a copy of
one of the relationship establishment documents listed
in Appendix II, Chapter 8 containing the name of the
minor and the guardian and indicating a relationship
between them.
Obtain a copy of the KYC information (photo and
address proof) of the guardian using the documents in
Appendix II, Chapter 8

Obtain two copies of photo identity proof documents of the
guardian from the Preferred Documents list in Appendix II,
Chapter 8
Obtain two copies of address proof documents of the
guardian from the Preferred Documents list in Appendix II,
Chapter 8
49
Checklist
Constituti
on
5
Individual
Category
Staff
Basic Due Diligence

Full legal name
Date of birth
Home address
Employee code or number

For ex-staff, if employed, obtain current employer
information
Source of funds
For ex-staff members, obtain a copy of one photo
identity document out of the listing in Appendix II,
Chapter 8 except for the identity provided by the Bank
For ex-staff members, obtain a copy of one address
proof document out of the listing in Appendix II, Chapter
8 except for the identity provided by the Bank. In the
case of address proof not being available, the account
holder can provide the address proof using the KYC
information of another individual and establishing the
relationship using the documents listed in Appendix II,
Chapter 8
For ex-staff members, obtain documentation certifying
past employment with the Bank ( pay slip, letter of
appointment, etc)

Obtain two copies of photo identity proof documents from
the Preferred Documents list in Appendix II, Chapter 8
Obtain two copies of address proof documents from the
Preferred Documents list in Appendix II, Chapter 8
50
Checklist
Constituti
on
6
Individual
Category
Basic Due Diligence

Full legal name of Karta
Date of birth
Home address

Source of funds
Obtain a letter from the designated Karta indicating the
account category as HUF and listing the names of
members of the family
Obtain complete KYC information of the Karta (photo
and address proof) for account opening purposes using
the documents list provided in Appendix II, Chapter 8

Karta from the Preferred Documents list in Appendix II,
Chapter 8
Obtain two copies of address proof documents of the Karta
from the Preferred Documents list in Appendix II, Chapter 8
51
Checklist
Constituti
on
7
Individual
Category
Regular
Basic Due Diligence

Full legal name
Date of birth
Home address

Employer information (name, address and industry sector)
Source of funds
Obtain a copy of one photo identity document out of the
listing in Appendix II, Chapter 8
Obtain a copy of one address proof document out of the
listing in Appendix II, Chapter 8. In the case of address
proof not being available, the client can indirectly
provide proof via a combination of the relationship
establishment documents as listed in Appendix II,
Chapter 8 and the KYC (photo and address proof) of the
individual establishing relationship with

Obtain two copies of photo identity proof documents from the
52
Checklist
Constituti
on
8
Individual
Category
Joint
Basic Due Diligence

Full legal name of all the account holders
Date of birth of all account holders
Home address of all the account holders
Relationship between account holders

Obtain all the information for a high risk classification of
each member of the joint account based on their
respective category within the individual constitution
Source of funds
Obtain complete KYC documentation on all account
holders based on their category within the individual
constitution

Obtain all the documentation for a high risk
classification of each member of the joint account
based on their respective category within the individual
constitution
53
Checklist
Constituti
on
9
Business
Entities
Categor
y
Proprietorship
Basic Due Diligence

Name of proprietorship
Address of proprietorship
Full legal name of the proprietor
Home address of the proprietor
Industry sector of proprietorship
Obtain a letter of proprietorship to be completed by the
client
Obtain a copy of any two of the documents under Proof
of Proprietorship Documents listing in Appendix II,
Chapter 8
Obtain KYC documentation of the proprietor (photo and
address proof) from Appendix II, Chapter 8 for account
opening purposes

Products and services offered
Markets serviced (domestic/ international/ high risk
jurisdictions)
Purpose of account (vendor accounts, accounts receivable,
etc.)
Source of funds
Copy of financials
proprietor from the Preferred Documents list in Appendix II,
Chapter 8
proprietor from the Preferred Documents list in Appendix II,
Chapter 8
Attach results of address validation through registered post.
Optionally, perform a site visit to verify the address of the
concern
54
Checklist
Constituti
on
10
Business
Entities
Categor
y
Private Limited
Basic Due Diligence

Name of the company
Principal place of business
Mailing address of the company
Telephone/Fax number
Industry sector of concern
Names and addresses of account operators and
beneficial owners

jurisdictions)
etc.)
Source of funds
Obtain a copy of the Certificate of Incorporation for the
entity
Obtain a copy of the Memorandum and Articles of
Association for the entity
If available, obtain a copy of the license for the line of
business of the entity or any other government
registration document available for the entity
Obtain a copy of the PAN card or TIN number of the
entity
Obtain a copy of the board resolution listing the
authorized signers for the account. Optionally, obtain a
power of attorney or official document authorizing the
individuals operating the account

Copy of financials or annual reports
Public information in standard industry guides, periodicals,
publications
concern
55
Obtain complete KYC documentation of all account

operators based on their category within the individual
constitution
Checklist
Constituti
on
11
Business
Entities
Categor
y
Cooperative
Basic Due Diligence

Name of cooperative
Principal address of the cooperative
Industry sector of cooperative
Names and addresses of authorized account operators
and senior managers

jurisdictions)
etc.)
Source of funds
Obtain a copy of the registration documents for the
entity
Obtain a copy of the Byelaws of the cooperative

publications
56

constitution

concern
57
Checklist
Constituti
on
12
Business
Entities
Categor
y
Partnership
Basic Due Diligence

Name of partnership
Office address of the partnership
Telephone/Fax number of the partnership
Names and addresses of all the partners
Industry sector of partnership

jurisdictions)
etc.)
Source of funds
Obtain a copy of the partnership deed signed by all the
partners
business of the partnership. Or optionally if partnership
is registered, obtain a copy of registration documents
If available, obtain a copy of the PAN card or TIN
number of the entity
Obtain a copy of the telephone bill (within 6 months of
account opening date) in the name of the entity or the
partners
Obtain complete KYC documentation of all partners
based on their category within the individual constitution

concern
58
Checklist
Constituti
on
13
Business
Entities
Categor
y
Basic Due Diligence

Name of the entity
Office address of the entity
Telephone/Fax number of the entity
Names and addresses of all the partners and senior
managers

jurisdictions)
Purpose of account (vendor accounts, accounts
receivable, etc.)
Source of funds
partners
business of the partnership. Or optionally, obtain a copy of the
registration documents
Obtain a copy of the PAN card or TIN information of the entity
Optionally, obtain a power of attorney or legal document
authorizing members of the partnership to operate the
account
If available, obtain a copy of the telephone bill (within 6
months of account opening) in the name of the entity
Obtain complete KYC documentation of all partners based on
their category within the individual constitution

Public information in standard industry guides,
periodicals, publications
Attach results of address validation through registered
post. Optionally, perform a site visit to verify the
address of the concern
59
Checklist
Constituti
on
14
Business
Entities
Categor
y
Public Limited
Basic Due Diligence

Name of the company
Names and addresses of authorized account operators, senior
managers and beneficial owners

jurisdictions)
receivable, etc.)
Source of funds
If available, obtain a copy of the license for the line of business
of the entity. Optionally obtain a government registration
document for the entity
Obtain a copy of the PAN card or TIN number of the entity
Obtain a copy of the Certificate of Incorporation for the entity
Obtain a copy of the Memorandum and Articles of Association
for the entity
Obtain a copy of the board resolution listing the authorized
signers for the account. Optionally, obtain a power of attorney
or official document authorizing the individuals operating the

Obtain name and address of beneficial owners of
the entity
Attach results of address validation through
registered post. Optionally, perform a site visit to
verify the address of the concern
60
account
Obtain complete KYC documentation of all account operators
Checklist
Constituti
on
15
Business
Entities
Categor
y
Basic Due Diligence

Name of the entity
Mailing address of the entity
Name and address information of Karta and senior managers

jurisdictions)
receivable, etc.)
Source of funds
of the entity. Optionally, obtain any government registration
document available for the entity
Obtain a declaration from the Karta regarding the setting up of
the account
Obtain all KYC documentation of the Karta based on the
Kartas categorization within the individual constitution
If available, obtain a copy of the PAN card or TIN number of the
entity

61
62
Checklist
Constituti
on
16
Trust
Categor
y
Public
Basic Due Diligence

Legal name of trust
Complete address of trust
Names of trustees, settlors and signatories
Names and addresses of account operators, founders
and the senior managers

receivable, etc.)
Purpose of trust
Source of funds
Obtain a copy of the trust deed
Obtain a copy of the certificate of registration for the
trust
Any officially valid document identifying trustees, settlors
and authorized signatories
Obtain complete KYC information of all account
constitution
Obtain a copy of the managing body resolution listing
the authorized signers for the account. Optionally,
obtain a copy of the power of attorney or official
document authorizing the members operating the
account

63
Checklist
Constituti
on
17
Trust
Categor
y
Private
Basic Due Diligence

Legal name of trust
Purpose of trust
Names and addresses of account operators, trustees,
senior managers and the beneficiaries

etc.)
Details of international presence
Source of funds
Obtain, if available, a copy of the trust deed
entity
Any official document identifying trustees, settlors and
beneficiaries
the authorized signers for the account. Optionally, obtain
a copy of the power of attorney or official document
authorizing the members operating the account

publications
Obtain name and address of beneficial owners, trustees
and senior managers of the trust
concern
64
constitution
65
Checklist
Constituti
on
18
Categor
y
Trust
Basic Due Diligence

Legal name of trust
Purpose of trust
Names and addresses of account operators, trustees

etc.)
Source of funds
trust
beneficiaries
listing the members authorized to operate the account
If available, obtain a copy of the Annual Reports and
financial documents of the entity

publications
concern
66

constitution
Checklist
Constituti
on
19
Categor
y
Society
Basic Due Diligence

Legal name of Society
Purpose of Society
Complete address of Society
Names and addresses of account operators, trustees and
beneficial owners

etc.)
Source of funds
copy of the power of attorney or official document
Obtain a copy of the Byelaws of the society
entity

publications
concern
67

constitution
68
Checklist
Constituti
on
20
Categor
y
Section 25
Basic Due Diligence

Legal name of organization
Purpose of organization
Complete address of organization

etc.)
Source of funds
Association of the entity
entity
Optionally, obtain a copy of the Annual Reports and

publications
concern
69
constitution
70
Checklist
Constituti
on
21
Categor
y
Registered
Basic Due Diligence

Purpose of Society
Names and addresses of account operators

Obtain a copy of the Annual Reports or financial
documents of the entity
entity
constitution

publications

etc.)
Source of funds

concern
71
Checklist
Constituti
on
22
Categor
y
Unregistered
Basic Due Diligence

Name of Society
Purpose of Society

Optionally, a copy of the Annual Reports or financial
constitution

publications

etc.)
Source of funds

concern
72
Checklist
Constituti
on
23
Government, Government Agency or Categor
Entity
y
State Government
Basic Due Diligence

Legal name
Purpose of government body;
Complete address

Obtain an authorization letter from the government
body wishing to open an account indicating the officials
authorized to operate the account
constitution

concern

etc.)
Additional Checks
It is recommended that the bank verify the request to
open the account through an enquiry with the
controlling department of the government
73
Checklist
Constituti
on
24
Entity
y
Central Government
Basic Due Diligence

Legal name
Purpose of government body
Complete address

Obtain an authorization letter from the government body


etc.)
74
wishing to open an account indicating the officials


concern
Additional Checks
open the account through an enquiry with the controlling
department of the government
75
Checklist
Constituti
on
25
Entity
y
State
Undertaking
Government
Basic Due Diligence

Legal name
Industry sector of undertaking
Complete address

Obtain a copy of the Certificate of Incorporation of the
entity
Obtain a copy of the audited annual report
Obtain a board resolution indicating the officials

concern

etc.)
Additional Checks
76
department of the government agency or entity
Checklist
Constituti
on
26
Entity
y
Central Government Undertaking
Basic Due Diligence

Legal name
Complete address

entity
constitution

concern

etc.)
Additional Checks
77

78
Checklist
Constituti
on
27
Entity
y
Liquidator
Basic Due Diligence

Legal name
Complete address
Name of company under liquidation
Industry sector of company under liquidation


concern

etc.)
Obtain a copy of the court order of appointment to act as

liquidator
79
Checklist
Constituti
on
28
Entity
y
Government Authorities, Autonomous & Regulatory

Bodies
Basic Due Diligence

Legal name
Complete address


concern

etc.)
Additional Checks
80
Checklist
Constituti
on
29
Entity
y
Local Bodies
Basic Due Diligence

Legal name
Complete address

constitution

concern

etc.)
Additional Checks
81
Checklist
Constituti
on
30
Financial
Institutions
Categor
y
Public Sector Banks
Basic Due Diligence
Legal name
Complete address
Names and addresses of account operators and senior
managers
jurisdictions)
receivable, etc.)
Obtain a copy of the RBI registration or license information for
the bank
Obtain a copy of the board resolution or an official letter
indicating the officials authorized to operate the account
Obtain a copy of the Memorandum, Certificate of
Incorporation and the Articles of Association for the bank
It is desirable to obtain, in affidavit form, the KYC policy of the
bank
Obtain a copy of the annual audited report for the previous

Obtain information on AML measures implemented
82
financial year
Checklist
Constituti
on
31
Financial
Institutions
Categor
y
Private Sector Banks
Basic Due Diligence

Legal name
Complete address
Names and addresses of beneficial owners, account
operators and senior managers

jurisdictions)
receivable, etc.)
Obtain a copy of the RBI registration or license
information for the bank
Obtain a copy of the PAN card or TIN of the entity
Obtain a copy of the annual audited report for the
previous financial year
Obtain a copy of the Articles of Association and
Certificate of Incorporation for the bank

publications
post. Optionally, perform a site visit to verify the address of
the concern
83
Basic Due Diligence

If the company is held by a publically traded company,
obtain information on parent companys ownership, listing
and nature of activities
requesting for the creation of the account and indicating
the officials authorized to operate the account
It is desirable to obtain, in affidavit form, the KYC policy of
the bank
constitution
Obtain information on the Board and CEO of the bank
including current country of domicile

Obtain name and address of beneficial owners of the bank
84
Checklist
Constituti
on
32
Financial
Institutions
Categor
y
Basic Due Diligence

Legal name
Complete address
Holding bank information (name, address, registration
information)
managers

bank
If available, obtain a copy of the RBI registration or
license information for the bank
Obtain a copy of the Byelaws of the bank
It is desirable to obtain, in affidavit form, KYC policy of
the bank

concern

jurisdictions)
etc.)
85
constitution
Checklist
Constituti
on
33
Financial
Institutions
Categor
y
Urban Cooperative Banks
Basic Due Diligence

Legal name
Complete address
managers

jurisdictions)
receivable, etc.)
Obtain a copy of the PAN card or TIN number of the bank
If available, obtain a copy of the RBI registration or license
It is desirable to obtain, in affidavit form, KYC policy of the bank
financial year
requesting for the creation of the account and indicating the
officials authorized to operate the account

86
Obtain complete KYC documentation of all account operators based

on their category within the individual constitution
Checklist
Constituti
on
34
Financial
Institutions
Categor
y
Basic Due Diligence

Legal name
Complete address
managers

jurisdictions)
etc.)
bank
the bank

publications
concern
87

Checklist
Constituti
on
35
Financial
Institutions
Categor
y
District Cooperative Banks
Basic Due Diligence

Legal name
Complete address
Names and addresses of account operators and senior managers

Markets serviced (domestic/ international/ high
risk jurisdictions)
receivable, etc.)
88

Obtain a copy of the Byelaws the bank

financial year
Obtain a copy of the board resolution or an official letter requesting
for the creation of the account and indicating the officials
Obtain complete KYC documentation of all account operators based on
Checklist
Constituti
on
36
Financial
Institutions
Categor
y

Obtain information on AML measures
implemented
Basic Due Diligence

Legal name
Complete address

jurisdictions)
etc.)
Obtain a copy of the license to operate for entity or NFBC

publications
89
status with the Reserve Bank of India

financial year
Obtain a copy of the Memorandum, Articles of Association
for the entity and Certificate of Incorporation for the entity
Checklist
37
Constitution Financial
Institutions

concern
AML policies and procedures implemented
Obtain name and address of beneficial owners of the

entity
Category Non-Banking Financial Company
Basic Due Diligence

Legal name
Complete address

Any additional information on purpose of business
jurisdictions)
90
etc.)
entity
Obtain a copy of the license to operate for entity
Obtain a copy of the Memorandum, Articles of
Association and the Certificate of Incorporation of the
entity
constitution

publications

concern
Obtain name and address of beneficial owners of the entity
Appendix II to Chapter 7: List of Officially Valid Documents
91
Verification documents for individuals (identity and address proof) are divided into preferred and acceptable documents. It is recommended that
whenever available, documents from the preferred list should be used for verification purposes.
Photo Identity Documents

Preferred Documents
Acceptable Documents
Driving License
PAN Identity Card
Passport
Voter Identity Card
Aadhaar card*
Govt. Department Identity Card
Letter from MP/MLA/MC/GZ Officer including a notarized photograph
NREGA Job Card*
Social Security Card (If Applicable)
Address Proof Documents

Preferred Documents
Driving License
Passport
Voter Identity Card
Any id containing address issued by Govt.

Bank Account Statement (for six months prior to account opening)
Bank Passbook
Employer certificate (not older than six months from account opening)
Gas Bill (not older than six months from account opening)
Income Tax Return (latest)
Letter from MP/MLA/MC/GZ Officer attesting to address
NREGA Job Card
Property Tax Assessment Order
Residential Permit issued by state police
Water Bill (not older than six months from account opening)
92
* Please note that if the Aadhar Card,

Aadhar Letter or the NREGA Job
card is exclusively provided for KYC
purposes, then the bank account
opened will be subjected to all
conditions
and
limitations
prescribed for small accounts as
described in section 2.4
Relationship Establishment Documents

Listed Documents
Birth Certificate
Marriage Certificate
PAN Card
Passport
School certificate showing relationship
Voter ID Card
Any other document establishing relationship issued by the Govt. of India
Proof of Proprietorship Documents

(Any two documents required in the name of the proprietary concern)
List of Documents
Certificate/license issued by Municipal Authorities under Shop & Establishment Act

Certificate/registration document issued by Sales Tax/Service Tax/ Professional Tax authorities
CST/VAT certificate
License issued by Registering authority like Certificate of Practice issued by Institute of Chartered
Accountants of India, Institute of Cost Accountants of India, Institute of Company Secretaries of India, Indian
medical Council and Food and Drug Control Authorities
Registration certificate issued in the name of the proprietary concern by the Central Government or State
Authority Department
Sales and Income Tax returns
IEC (Importer Exporter Code) issued by the office of DGFT
93
8 Relaxations to KYC Information Collection

Requirements
Relaxation in Due Diligence procedures also known as SDD as defined in section 7.4.2 are
prescribed to allow customers access to banking services in spite of not being able to
produce the requisite documentation at the time of account opening.
8.1 Small Accounts

A definition of small accounts is provided in Section 2.4 and these accounts are
allowed relaxations in procedures subject to the following conditions:
The individual wishing to create the account produces a self-attested

photograph and affixes his or her signature or thumb print on the account
opening form;
The designated officer of the bank, while opening the small account, certifies
with his or her signature that the above step was conducted in the officers
presence;
The branch at which the small account has been created is on CBS or is in a
branch where it is possible to manually monitor the account and ensure that
foreign remittances are not credited to the account and that the stipulated
limits on aggregate monthly and annual transactions are not breached, before
any transactions are allowed to take place;
No foreign remittances shall be permitted to be credited into a small account

unless the identity of the individual operating the account has been fully
established by the production of valid documents via the usual KYC
procedures;
The small account is monitored and when any suspicion of money laundering
or financing of terrorism or a high risk scenario is reported through the
monitoring mechanism, then the identity of the individual shall be established
via the usual KYC procedures within two months; and
A small account shall initially remain operational for a period of twelve months
beyond which only if the account holder provides evidence of having applied
for the officially required identifying documents shall the account be permitted
to operate. The entire relaxation of documentary provisions shall be reviewed
with respect to the account at the end of a twenty four month period.
If the conditions of a Small Account are violated, the account shall be required to fulfil
its CDD obligations, based on the new constitution and category assigned, within a
period of 30 days. Failing KYC compliance beyond this period, it is recommended that
activity on the account be restricted or considered for closure.
8.2 Customers through Introducer

Individuals in urban and rural areas belonging to low income groups are sometimes
not able to produce documents required to meet the CDD requirements of the Bank.
94
As per the RBI norms17, if these individuals intend to keep balances not exceeding
Rupees fifty thousand (Rs. 50,000) in all their accounts taken together and the total
credit in all their accounts taken together is not expected to exceed Rupees one lakh
(Rs. 1,00,000) in a year; then
The Bank can open an account subject to:
Introduction provided by another account holder who has been subjected to a full
KYC procedure and is compliant. The introducers account at the Bank should be
at least six months old, currently active and not have any transaction reports filed
against it. The photograph of the individual proposing to open the account as
well as the address of the account holder must be certified by the introducer.
OR
Any other documentary evidence not part of the standard checklist for the individual
customer type which is however to the satisfaction of the Bank can be accepted.
The condition for Simplified Due Diligence requires the individual stay in the prescribed
limits. Should the individual exceed the limits, no further transactions will be permitted
until the full CDD compliance process is completed. In order not to inconvenience the
customer, it is advised that the bank notify the customer once the balance reaches
Rupees forty thousand (Rs. 40,000) or total credit in the account in the year reaches
Rupees eighty thousand (Rs. 80,000) requesting that CDD compliance procedures be
completed else operations on the account would cease upon reaching the limit.
Note that this relaxation facility is only provided for account holders of the constitution type
individual.
17
Section 2.8 of RBI Master Circular on KYC, AML and CFT norms July 1, 2011
95
9 Account Opening Process

9.1 Determine Type of the Customer and Obtain Basic Customer
Information
Based on constitution and category as specified in Section 5, the Staff Assistant
(SA) must obtain basic information from the customer and enter the information
into the customers KYC file.
Even if the customer is an existing account holder or has transferred from another
branch of the Bank, the customer (individual or entity) must complete an account
opening form for the current branch.
9.2 Obtain or Calculate the Customer Risk Categorisation Score

The CRO must enter all the basic information collected into the KYC file of the
customer and, if available, obtain the customer risk categorisation score from the
KYC system. In the absence of an automated risk scoring module or system, the
CRO must manually calculate the customer risk categorisation score on a risk
scoring form. The customer categorisation score determines if any EDD needs to
be performed on the customer.
9.3 Determine If Customer qualifies for Simplified Due Diligence

Once the basic customer information is in the KYC file, the CRO must document
whether a request for SDD has been made. If so, the CRO must obtain any
available documentary and non-documentary evidence establishing the basis of
the requirement and should capture it in the KYC file of the customer. It is the
BMs prerogative to exempt the customer from BDD based on the information
provided by the CRO.
Relaxations are granted for small accounts and for certain accounts with valid
introducer information as described in Chapter 8. Once SDD has been performed,
no documentation shall be required unless the terms of the relaxation are
violated.
At the end of the small account relaxation period, if the documentation is still
incomplete or the account is perceived as being too high a risk, the CRO must
notify the BM with a recommendation for closure of the account.
9.4 Verify the Identity of the Customer Using Documentary Methods

Once the CRO obtains the identifying information requested from the customer
and adds it to the KYC file of the customer, the CRO must then conduct
appropriate CDD measures and ascertain the identity of the customer using
documentary evidence based on the submitted. The checklist in Appendix I,
96
Chapter 7, covers the appropriate documentary evidence required for a particular

customer type. Section 7.4 covers the policies and procedures to be followed for
Customer Due Diligence. The CRO must also consider special cases of
documentary verification as described in Section 7.4.5.
Based on the risk score generated, the CRO could be required to perform either
BDD or EDD as described in section 7.4.1 or 7.4.3 and any information or
documents required as a result of it must also be requested from the customer.
Detailed checklist of information and documents to be collected from customers
for BDD or EDD are presented in Appendix I of Chapter 7. The list of officially
valid documents is presented in Appendix II of Chapter 7.
In the case where the customer is an existing account holder, and wishes to open
a new account, the CRO or the officer permitting operations on the account must
ensure that the customers existing account is compliant and if so must only
request the deficit of documentation between the new and existing account types.
In the case where the customer has transferred from another branch, the CRO
must reach out to the previous branch and obtain the KYC, AML and CFT related
documentation from the branch within a period of 30 days.
At the end of the process, if the documentation is still incomplete or the account is
perceived as being too high a risk, the CRO must notify the Branch Manager with
a recommendation for closure of the account.
9.5 Perform Background Checks

Any individual associated with an account as the owner, account operator or
beneficiary must undergo the name screening or list matching process as
described in Section 7.4.6. Foreign nationals should undergo a PEP check as
described in Section 7.4.9. Individuals and Entities should also undergo adverse
information checks.
Additionally, the Bank could use the PAN verification services provided by the
Income Tax Department18 to verify the PAN information of customers that have
provided it.
Additionally, in the case where the EDD process requires the use of nondocumentary methods for verification, the CRO is required to conduct the process
of non-documentary verification. The outcome of the verification process and the
decision following the outcome must be recorded in the KYC file of the customer
along with a list of next steps for the account.
At the end of the non-documentary verification process, if the account is
perceived as being too high a risk, the CRO must notify the BM with a
recommendation for closure of the account.
9.6 Collect Introducer Information

18 PAN verification services are available via the Tax Information Network of the Income Tax
Department at https://www.tin-nsdl.com/
97
It is recommended that the introducer information be captured as a part of the

account opening process. The CRO is responsible for ensuring that a relationship
exists between the customer and the introducer. The officer must also verify that
the introducers account is KYC compliant and is responsible for ensuring that the
introducer has not previously introduced an excessive number of accounts. The
CRO must also note if the introducer is a staff member at the bank and if so, a
relationship truly exists between the staff member and the customer.
9.7 Identify Details for Entity Customers

The CRO is required to create a profile of the entity from the information provided
and the documentary and non-documentary evidence submitted. This profile must
contain details as to whether the entity is public or private, services provided by
the entity, etc.
For customers such as mutual funds or investment vehicles that do not disclose
the names of underlying investors or managing members, the CRO is required to
make a greater effort to identify the names of key management personnel as well
as obtain a general description of the funds targeted investor audience and
capture it in the KYC file of the customer. The officer must obtain a prospectus or
investment management agreement from the entity in order to ascertain this
information.
If the above mentioned documents are not available, the information can be
obtained directly from the entity in the form of an email from an official email id,
signed letter on the company letterhead or any other such official document.
9.8 Identify Controlling Parties and Beneficial Owners

The CRO must identify and ascertain the controlling parties and beneficial owners
for an entity. As complex ownership structures may be used to conceal the origin
of funds and identity of the ultimate beneficial owner, the account opening officer
should perform all the due diligence required to identify the individuals, families
and entities which are the ultimate beneficial owners of the entity.
9.9 Obtain Approvals

After completion of all of the above steps, the customer file must be signed off by
the CRO with identifying information such as name and designation of the officer
and entered into the file. The BM has the authority to either accept the customer,
reject the customer or to refer the account to the PO for further disposition.
98
Customer
SA
Appendix I to Chapter 9: Account Opening

Flowchart
Goes to the Bank
Obtains basic customer

information from the customer
Determine risk level
Check if SDD is
applicable
CRO
Simplified
Due
Diligence
Introducer
Information Capture
Individual or
Entity?
ID controlling
parties
No
Entity
Customer Due
Diligence
Individual
Perform background
checks
Yes
Submit for approval
BM
No
Approved?
99
Ye
s
Customer
rejected
Customer
Accepted
10 Customer Information Update

The prescribed regulatory guidelines require customer information to be
periodically reviewed and updated based on the customer risk categorisation
score. Additionally, any new KYC related information on a customer received
between periodic reviews must trigger an update to the customer information on
file. The IBA guidelines from August 2011 define KYC Updation as a process of
customer identification and consequent re-affirmation of his identity using reliable,
independent source documents, data or information available, in addition to the
collection of a photograph.
10.1 Schedule of Reviews

Periodic reviews conducted on all customers will help verify that the information the
Bank has on file is up-to-date and accurate.
In tune with the RBI regulations, the Bank will follow a risk based approach towards
updating customer information. Based on the customers risk categorisation, the
schedule for a periodic review is listed below:
Risk
Categorization
High Risk
Medium Risk
Low Risk
Review
Period
1 Year
2 Years
3 Years
10.2 Procedures for Periodic Reviews

Procedures to be followed for conducting periodic reviews on the customers are listed
below:
Using the information on file, the CRO shall initiate the process by
reaching out to the customer, for the additional information or
documentation refresh, as per the requirements of the policy. Annexure
B provides guidance and scripts for communicating with the customer.
The CRO shall also provide a 30 day window to the customer for the
submission of all the required information and documentation. The
attempt to contact, its outcome and the decision following the attempt
must be logged into the KYC file of the customer along with a list of next
steps for the account.
If the necessary documentation is not received by the 25th day of the

initial contact with the customer, the CRO shall contact the customer via
the information available on file and request an update. Annexure B
provides guidance and scripts for communicating with the customer. On
100
the basis of the update provided, the CRO shall provide a further 15 day
extension bringing the total exemption period to 45 days. The attempt to
contact its outcome and the decision following the attempt must be
logged into the KYC file of the customer along with a list of next steps for
the account.
At the end of the exemption period, if the documentation is still

incomplete, the CRO must transfer the account to the BM with a
recommendation for restricting activity on the account by freezing it.
Upon receipt of information from the Customer, the CRO shall enter the
information into the KYC file of the customer and escalate any material
findings as necessary (e.g. change in risk rating of the customer or
identification of a PEP). Based on these findings, the BM can request
additional information or documentation from the customer subject to the
earlier defined extension periods. Any written information or
communication obtained from the customer should constitute a part of
this update.
Once the CRO has verified the information and completed the process,
the Officer shall sign off on the updates provided including information
identifying the Officer.
10.3 Change in Category or Constitution

In the event that an entity or individual account type requests a change in its
category or constitution, the CRO or BM must examine both the current customer
type and the requested customer type and obtain only the KYC information and
documentation in deficit of the new requirements.
The CRO must request the customer to complete a new account opening form
and provide it to the bank.
101
11 Account Cancellation and Closure

This section lists out the procedure to be followed by the BM for the closure of a
customer account or cancellation of a transaction for one of the following reasons:
If the account or transaction poses a high risk from a money laundering

or terrorist financing perspective.
Failure of the customer to update or provide the required KYC
information.
Senior Management recommends closure of the account.
Recommendation for account closure by regulatory authorities.
11.1 Initiation of Customer Relationship Closures

The BM and the CRO must jointly agree to close the account in the case of one
or more of the above mentioned reasons. The BM will document the decision to
close the account in the KYC file and shall initiate the following procedure:
11.1.1 Internal Notification
The BM must notify each of the individuals or groups listed below before
proceeding with account closure:
AML Compliance Group

Audit department
In the case of an external recommendation, the regulatory authorities must be

notified. A copy of the notification letter must be attached to the KYC file of the
account holder.
11.1.2 Scheduling Closure
The BM in consultation with Senior Management at the head office will
determine the appropriate schedule and timeline for the closure of the account
based on the following two factors:
Reason for closure of the account; and

Extent of pending business between the bank and the account holder
The CRO shall notify the client of

effective day of closure, at least 30
of the notification communication
account holder. The closure will be
date mandated for account closure.
the decision to close the account and the

days before the actual closure date. A copy
must be attached to the KYC file of the
effective on the end of business day on the
In the event of a request for extension on the account closure date, only the BM
is authorized to do so after explicitly notifying the CRO and the Senior
102
Management at the branch of the Bank. The decision to grant an extension

must also be recorded in the KYC file of the customer.
11.1.3 Transaction cancellation
In the case of transactions by walk-in customers where there isnt an associated
account, the BM will determine if any additional steps are required beyond
cancelling the transaction (e.g., prohibiting any further activity, such as account
opening, for the non-customer). In order to do so for walk-in customers, the
Bank should add them to their negative or black-list.
103
12 Internal controls
Internal Controls are necessary in order to limit the Banks KYC, AML and CFT risk.
The internal controls are designed to annually measure the overall KYC, AML and CFT
risk the Bank faces and the effectiveness of the Bank in addressing them. The PO and
the AML Compliance Group are responsible for developing and implementing the
controls that will track the compliance with the prescribed policy and procedures
including conducting and updating the various risk assessments as discussed below.
12.1 Products and Services Offered by the Bank

AML Compliance group must ensure that all existing products and new products are
evaluated and analysed from a KYC, AML and CFT risk perspective. The evaluation
must include the approach to calculating the score for the Product Risk variable in the
Customer Risk Categorisation model. All new products must be added to the model
and assigned an appropriate risk score.
12.2 Customer Acceptance and Identification Procedures

The AML Compliance Group must annually review the different types of customers
being accepted, their risk level and the documentation being provided for proper
identification of the customer. Particular attention must be paid to high risk customers
ensuring that the enhanced due diligence procedures are being followed. Any
grievances regarding the customer acceptance and identification policy or procedure,
for particular customer types, must be addressed as part of the review. Updates to the
customer acceptance and identification policy or procedure must also be addressed as
part of the review.
12.3 Country Risk Assessment Procedures

The PO and the AML Compliance Group are responsible for ensuring that the country
risk rankings are annually reviewed and updated. Regulators from time to time send
notices regarding updates to the UN sanction lists or jurisdictions that are not
compliant with the Financial Action Task Force (FATF) recommendations. The Bank
must ensure that these countries are appropriately scored and regularly updated The
overall methodology of risk ranking the countries must also be reviewed periodically to
apply changes in the World Bank governance rankings, changes in the Transparency
International Corruption Index or changes in FATF membership, etc.
12.4 Customer Risk Assessment Procedures

The Bank currently performs customer risk categorisation using seven (7) variables for
Individuals and seven (7) variables for Entities. The AML Compliance Group and the
PO must annually review the customer risk categorisation model and ensure that the
variables chosen continue to remain relevant and the data behind the variables is
accurately being captured and scored.
104
12.5 KYC, AML and CFT Policy and Procedure Reviews

The policy requires the Bank to conduct an annual review of its KYC, AML and CFT
policies and procedures and their implementation to ensure:
The Bank complies with updates or changes to regulatory requirements;
The Bank is abreast of best practices and new techniques in the field of
KYC, AML and CFT.
12.6 Actions of the AML Compliance Group

12.6.1 Self-assessment Procedures
Create KYC, AML and CFT questionnaires to test the knowledge of the CRO,
BM and other senior officials at each branch regarding the current policies
and procedures being followed.
Use the results of the test to obtain a true picture of the understanding of
policies and procedures at the bank so as to apply any corrective measures if
necessary.
Any feedback obtained through the questionnaires shall be used to identify
any additional money laundering and terrorist financing risks currently present
but not yet identified by the Compliance Group at the Bank.
12.6.2 Updates on Policy and Procedures
Disseminate to the officers, through training and education, any updates or

changes in the regulatory policy as described in Section 15.
Obtain industry best practices and provide them to the officers at the Bank.
12.6.3 Perform Audits
Perform internal audits on the information and documents collected by the

branches as a part of the KYC process.
Track deficiencies and document corrective actions to be performed for the
accounts at the Bank.
12.6.4 Perform Quality Assurance Tests
Verify if Enhanced Due Diligence was performed in adherence to the policy

and procedures outlined for all high risk accounts. For a certain subset of
accounts, verify that the due diligence performed adhered to policies and
procedures.
Review the relevant supporting documentation to check for conformance with
applicable regulations.
105
13 Transaction Monitoring and Reporting

13.1 Introduction
The PMLA 2002 and the Rules specified there under (Rule 3), requires the Bank to
monitor and furnish the following types of transaction reports:
Cash Transaction Reports (CTRs)

Suspicious Transaction Reports (STRs)
Counterfeit Currency Reports (CCRs)
Non Profit Organisation Transaction Reports (NTRs)
13.2 Reporting Formats

The above mentioned transaction reports can be filed in any of the following reporting
formats currently available to the Bank:
Manual Reports;
Electronic Reports using fixed width file format; and
Electronic Reports using XML file format.
The XML file format is the preferred file format by the Financial Intelligence UnitIndia (FIU-IND). The FIU-IND has also provided a data conversion utility from the
fixed file format to the XML file format. Details of the XML file format and conversion
utilities to it from the fixed file format to XML (Reporting Format Guide version 2.0)
can
be
downloaded
directly
from
the
FIU-IND
website:
http://fiuindia.gov.in/furnishing-reportingformat.htm
13.3 Submission of Reports to FIU-IND

The Bank is expected to submit the report in an electronic form and should make
reasonable efforts to send reports in the electronic format rather than the paper based
format. The FIU-IND has designed the FINnet Gateway Portal as a comprehensive
interface between the reporting entities (in this case the Bank) and FIU-IND for
submission of the above mentioned four transaction reports. The Bank must register
with FIU-IND to gain access to the portal which will allow the PO to upload the reports
in the prescribed XML file format.
In the event that Bank is not able to upload the report or has been requested by FIUIND to submit the report using a CD, the Bank must create a CD of the report in the
XML file format. The CD created must contain a label mentioning the name of the
Bank, unique identification code, type of report (CTR/STR/CCR/NTR), batch number,
month and year of report for the purpose of identification. In case the size of data files
exceeds the capacity of one CD, the data files should be compressed by using Winzip
8.1 or ZipItFast 3.0 (or higher version) compression utility to ensure quick and smooth
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acceptance of the file. The CD should be virus free and must be accompanied by a
summary of reports duly signed by the principal officer.
If the Bank is not able to upload the report onto the FINnet Gateway Portal or create a
CD with the required XML format then it may have to file the transaction report
manually. In case of manual submission the Bank will use the FIU-IND provided PDF
form based utilities to capture data and print the report as per the specified format. The
report must be sent to FIU-IND at the following address:
Director, FIU-IND
Financial Intelligence Unit-India
6th Floor, Hotel Samrat
Chanakyapuri, New Delhi 110021
India
In urgent cases the form must also be faxed to +91 11 26874459.
13.4 CTRs
Rule 3, sub-rule (A) and (B) of the Prevention of Money Laundering Rules, 2005
require Banks to monitor and report cash transactions that meet the following criteria:
All cash transactions of the value of more than Rupees ten lakhs
(Rs.10,00,000) or its equivalent in foreign currency; and
All series of cash transactions integrally connected to each other which have
been valued more than rupees ten lakhs (Rs. 10,00,000) or its equivalent in
foreign currency where such series of transactions have taken place within a
calendar month.
Note on Integrally Connected Transactions:

As clarified by the RBI guidelines, integrally connected cash transactions are
transactions where the sum of debits or the sum of credits for an account is more than
ten lakhs in a month. Further, only transactions above Rs.50, 000 should be reported
by the Bank as part of the integrally connected cash transactions.
13.4.1 CTR Filing Procedures
The manual format and general instructions for filing out a complete CTR, as
provided by the FIU-IND, are provided in Annexure C to this chapter.
1. For branches not under the CBS, the monthly CTR will be compiled at the
branch by the BM and forwarded to the PO of the Bank for approval and
onward transmission to the FIU-IND.
2. For branches that are under CBS, the CTR reports will be compiled centrally
at the data centre and forwarded to the PO of the Bank for approval and
onward transmission to the FIU-IND.
3. A summary of the CTR for the Bank as a whole will be compiled by the PO
every month in one of the prescribed formats as described in Section 13.2.
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4.
The PO will sign and submit the CTR to FIU-IND in one of the submission
formats described in Section 13.3.
5. A copy of the monthly CTR submitted to FIU-IND on behalf of the branch
must be sent to and made available at each of the concerned branches for
production to auditors or inspectors as required.
13.4.2 Time Frames for Filing a CTR
Rule 8 of the Prevention of Money Laundering Rules, 2005 specifies the time limit for
furnishing the transaction reports to the FIU-IND. A CTR report must be submitted by
the PO of the Bank every month by the 15th of the succeeding month.
13.4.3 Exemptions
CTR should contain only transactions carried out by the Bank on behalf of its clients
or customers. Transactions between the internal accounts of the bank are to be
excluded.
While filing a CTR of a series of integrally connected transactions, details of
individual transactions below Rs. Fifty Thousand (Rs. 50,000) need not be furnished.
13.5 STRs
13.5.1 Introduction
Rule 2 of the Prevention of Money Laundering Rules, 2005, defines a suspicious
transaction as follows:
"Suspicious transaction" means a transaction referred to in clause (h), including an
attempted transaction, whether or not made in cash which, to a person acting in good
faith(a) gives rise to a reasonable ground of suspicion that it may involve proceeds of
an offence specified in the Schedule to the Act, regardless of the value
involved; or
(b) appears to be made in circumstances of unusual or unjustified complexity; or
(c) appears to have no economic rationale or bonafide purpose; or
(d) gives rise to a reasonable ground of suspicion that it may involve
financing of the activities relating to terrorism;
Explanation: Transaction involving financing of the activities relating to terrorism
includes transaction involving funds suspected to be linked or related to, or to be
used for terrorism, terrorist acts or by a terrorist, terrorist organization or those who
finance or are attempting to finance terrorism.
(h) "Transaction" includes deposit, 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.
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This section describes the policy and procedure of the Bank developed to identify,
investigate and report unusual and potentially suspicious activity related to the
customers of the Bank.
13.5.2 Potential Indicators of Suspicious Activity or Red Flags
In order to raise awareness and assist the Bank staff in recognising the types and
patterns of customer behaviour and/or transactions that might require further review
to determine whether the activity is suspicious, some examples in the form of red
flags are listed below. The lists are categorised and provided as illustrative guidelines
and do not necessarily mean that the behaviour or transaction should always be
considered suspicious. The indicators only suggest that a closer review of the
behaviour or transaction may be warranted.
Behavioural Indicators
Customers with unusual or excessively nervous demeanor.

Discussion of record-keeping or reporting duties of transactions with the
intention of avoiding them.
Threatening of an employee in order to deter record-keeping or reporting
duties.
Suggestion of gratuity to an employee of the Bank.
Reluctance to proceed with a transaction on being informed of record keeping
/ information verification or currency transaction reporting requirements
relevant to the Bank.
Apparent hidden agenda or abnormal behaviour (i.e., forgo or bypass
opportunities to avail higher interest rates on account balances)
Uncharacteristic transfers or exchanges of large sums of money not
associated with the account or customer type (e.g. minor or student account)
Agent, attorney or financial advisor acting on behalf of the customer without
proper documentation such as a power of attorney.
Customers who appear to have accounts with several institutions within the
same locality without any apparent logical reason.
Customers who use separate tellers to conduct cash transaction or if
applicable, foreign exchange transactions.
A customer who often visits the safe deposit area immediately before making
cash deposits, especially deposits just under defined threshold levels.
Identification Circumstances
Customers who are reluctant in providing information normally requested at

the time of account opening; provide minimal or seemingly fictitious
information or providing information that is hard to verify at the time of
account opening.
Identification documents seem forged, unusual or tampered with.
Opening of an account without identification, local references, introducer or a
local address.
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Residential and work address provided is outside the Banks immediate

service area or perhaps closer to another branch of the same Bank.
A customer/company who is reluctant to provide complete information
regarding the purpose of the business, prior banking relationships, officers or
directors, or its locations.
A customer who has no record of past or present employment but makes
frequent large transactions.
A customer/company who is reluctant to reveal details about its activities or to
provide financial statements.
Welcome letter to a new customer that is returned due to an incorrect
address.
Home or business phone disconnected or always unanswered.
Cash Transactions
Frequent withdrawal of large cash amounts that do not appear to be

consistent with or justified by the customer's business activity.
Entity or Company transactions, both deposits and withdrawals, that are
denominated by unusually large amounts of cash, rather than by way of
debits and credits normally associated with the normal commercial operations
of the company, e.g. cheques, letters of credit, bills of exchange, etc.
Depositing cash by means of numerous credit slips by a customer such that
the amount of each deposit is not substantial, but the total of which is
substantial.
Exchanging an unusually large amount of small denomination notes for those
of higher denomination.
Deposits of cash containing many large denomination bills.
Deposits that are large sums of cash wrapped in currency straps stamped by
other banks.
Several large cash transactions at different branches for the same customer,
account or related accounts (e.g., same or similar account names, common
beneficial owners, common signatories) on the same day.
Frequent purchase of monetary instruments for cash, especially below
reporting thresholds.
Cash withdrawals from a previously dormant/inactive account, or from an
account which has just received an unexpected large credit by a funds
transfer;
Other Indicators
High velocity in the movement of funds, where however, beginning and

ending daily balances are low.
A customer having a large number of accounts with the same bank, with
frequent transfers between different accounts.
Placing funds in term deposits and using them as security for more loans.
Large deposits immediately followed by funds transfers.
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Sudden surge in activity level.

Customer regularly issues large value cheques without balance and then
deposits cash.
Customers who repay the problem loans unexpectedly.
Retail deposit of many cheques but rare withdrawals for daily operations.
Multiple deposits of money orders, Banker's cheques, drafts of third parties.
Multiple deposits of Banker's cheques, demand drafts, cross/ bearer cheques
of third parties into the account followed by immediate cash withdrawals.
Substantial difference between the anticipated and actual transaction activity
of the customer.
The decision to investigate and report suspicious behaviour or specific transactions

determined as unusual must be based upon the particular facts and circumstances
relating to the transactions or activity in question. Furthermore, an illustrative list of
red flags is not a substitute for the judgment required to determine whether a
particular transaction is suspicious or not.
13.5.3 Transaction Types for Monitoring
Rule 3 of the Prevention of Money-laundering Rules, 2005 lists the transaction types
for the reporting of all suspicious transactions as follows:
Transactions whether or not made in cash and by way of
(i)
Deposits and credits, withdrawals into or from any accounts in whatsoever

name they are referred to in any currency maintained by way of :
(a) Cheques including third party cheques, pay orders, demand drafts,
cashiers cheques or any other instrument of payment of money including
electronic receipts or credits and electronic payments or debits, or
(b) Travellers cheques, or
(c) transfer from one account within the same banking company, financial
institution and intermediary, as the case may be, including from or to
Nostro and Vostro accounts, or
(d) Any other mode in whatsoever name it is referred to;
(ii)
Credits or debits into or from any non-monetary accounts such as d-mat

account, security account in any currency maintained by the banking
company, financial institution and intermediary, as the case may be;
(iii)
Money transfer or remittances in favour of own clients or non-clients from

India or abroad and to third party beneficiaries in India or abroad including
transactions on its own account in any currency by any of the following:(a)
(b)
(c)
(d)
Payment orders, or
Cashiers cheques, or
Demand drafts, or
Telegraphic or wire transfers or electronic remittances or transfers, or
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(e)
(f)
(g)
(h)
(iv)
Internet transfers, or
Automated Clearing House remittances, or
Lock box driven transfers or remittances, or
Remittances for credit or loading to electronic cards, or (i) any other mode
of money transfer by whatsoever name it is called;
Loans and advances including credit or loan substitutes, investments and

contingent liability by way of:
(a) Subscription to debt instruments such as commercial paper, certificate of
deposits, preferential shares, debentures, securitized participation, interbank participation or any other investments in securities or the like in
whatever form and name it is referred to, or
(b) Purchase and negotiation of bills, cheques and other instruments, or
(c) Foreign exchange contracts, currency, interest rate and commodity and
any other derivative instrument in whatsoever name it is called, or
(d) Letters of credit, standby letters of credit, guarantees, comfort letters,
solvency certificates and any other instrument for settlement and/or credit
support;
(v)
Collection services in any currency by way of collection of bills, cheques,

instruments or any other mode of collection in whatsoever name it is referred
to.
13.5.4 Automated Transaction Monitoring

Unusual or suspicious activity, especially related to behavioural indicators or
identification circumstances as listed in the red flags section above, is best
determined by BMs, CROs, SAs and other account opening officers who rely on their
vast experience and personal knowledge of the customers. However, their capability
to detect complex structuring of transactions to avoid threshold limits and unusual or
suspicious activity over time is limited without the assistance of automated
transaction monitoring systems.
Section 2.21 (iv) (d) of the RBI Master Circular 2011 reiterates that banks as part of
the monitoring process are required to put in place appropriate software applications
for the effective identification and reporting of unusual or suspicious transactions.
Automated transaction monitoring systems help identify a base-line level of activity
that can be termed as reasonable or normal for a particular type of customer and
generate alerts for transactions that fall outside the normal pattern of activity.
13.5.4.1
Transaction Monitoring Categories
All the patterns of activity can be broadly classified into the following three major
categories:
a. Cash Activities Including Structuring
b. Wire or Funds Transfers
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c. Unusual Activity
13.5.4.2
Selection of Transaction Monitoring Rules
The specific transaction monitoring rules for implementation at the Bank and their
thresholds are selected and set by the AML Compliance Group and the PO of the
Bank. The rules and thresholds are based on the Banks client base, products
offered, observed level of transactional activity for a particular customer type and
guidelines prescribed by the regulatory bodies or guidance issued by development
agencies such as the IBA.
Transaction Monitoring Rules
The set of rules chosen for each category are listed below.
Cash Activities Including Structuring
1. Accounts where cash activity represents a statistically significant portion of
the total funds in/out of the account. In other words, the ratio of currency
deposits/withdrawals as compared to the total account activity;
2. Multiple cash deposits such that the amount of each deposit is not
substantial, but the total of the deposits is substantial within a specified timeframe;
3. Frequent withdrawals or deposits of large cash amounts, depending upon the
customer type, in a 9 day rolling calendar period;
4. Multiple cash deposits/withdrawals in a 30 day rolling period where the
aggregate of the deposits/ withdrawals is between Rs. 9,00,000 and Rs.
9,99,999;
5. Two or more purchases of monetary instruments between Rs. 40,000 and Rs.
49,999 by the same purchaser within 2 days of each other;
6. Multiple occurrences of purchase of monetary instruments over Rs. 1,00,000
on consecutive days over a 3 day period;
Funds Transfers
1. Excessive transfers to multiple unique beneficiaries from a single customers
account or related accounts, inconsistent with past behavior;
2. Excessive transfers from multiple unique originators to the Banks customers
account or related accounts, inconsistent with past behavior;
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3. Concentration of funds (by domestic funds transfer) into a single account over
a specific time period followed by a funds transfer out of the account for the
same or similar amount.
4. Series of cash deposits followed by an outgoing funds transfer for the same
amount (or within a +/- five percent bound) within a 9 calendar day period.
5. Series of cash withdrawals following an incoming funds transfer for the same
amount (or within a +/- five percent bound) within a 9 calendar day period.
Unusual Activity
1. Transactions occurring within nine (9) calendar days where the ratio of funds
inflow to funds outflow is between an upper bound of 110 % and a lower
bound of 90%;
2. Large value transaction in a dormant account;
3. Customers engaging in any transaction for any account type over Rs. X in a
single transaction;
4. Multiple occurrences of a customer regularly issuing large value cheques
without sufficient balance and then depositing cash;
5. Large number of accounts introduced by the same introducer;
6. Significant deviation from the known transaction pattern of the customer; and
7. Multiple Customers having same address/telephone number/id.
13.5.4.3
Update of Transaction Monitoring Rules
Based on the periodic review of the quality of alerts being generated, the AML
Compliance Group or the PO may from time-to-time recommend changes to a
particular rule or its threshold. All such instances, where a change is requested by
the AML Compliance Group or the PO, must be documented and approved in writing
by the Senior Management of the Bank including the Managing Director or the CEO.
13.5.4.4
Alert Generation and Processing
Customers and their accounts that trigger the above rules will cause an alert to be
generated within the automated monitoring system. All the alerts generated within the
system are scored with the alert score indicating the overall likelihood of the
suspicious nature of the activity. The alert score takes into account the customer risk
categorisation level thereby incorporating a risk based approach for transaction
monitoring.
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The BM must initially review the alerts generated for customers and accounts at his
branch. On review, if the activity is deemed unusual or potentially suspicious, the BM
must recommend the alert to the AML Compliance Group for further investigation. All
alerts that are deemed as false positives may be cleared by the BM and closed out
within the system.
13.5.5 Manual Alerts
Suspicious Activity based on behavioural indicators and identification circumstances
will require an employee to create a Manual Alert within the system that can then be
automatically routed as required to the BM or AML Compliance Group. An employee
must file a manual alert within 2 business days of the occurrence of the suspicious
activity or event.
Important Notice for Suspicious Transaction Monitoring
The following important points must be noted with respect to the Banks obligation to
file a STR:
Only the Banks PO and his or her designee is allowed to file a STR with the
FIU-IND.
Every employee has a responsibility to refer potentially suspicious activity for
investigation to his supervisor.
Employees do not have to be certain that illegal activity has occurred; the
existence of suspicion is sufficient. An employees obligation is to refer
potentially suspicious activity to the Banks PO in a prescribed manner, who
will investigate the matter. The PO is responsible for determining whether a
SAR should be filed.
Statutory deadlines, outlined in section 13.5.15, determine the timeline for
filing a SAR, therefore prompt referral of potentially suspicious activity is
critical.
13.5.6 STR Filing Obligations

The PO of the Bank must file an STR if he or she has reasonable ground to believe
that the attempted transaction(s), transaction(s) or a series of integrally connected
transactions involve proceeds of an offense, generally irrespective of the amount of
the transaction(s), as described in Section 12 of the PMLA 2002. The Schedule to
the PMLA, 2002 lists all such offences and is provided as Appendix I to this chapter.
13.5.7 Communication with Authorities and Voluntary STRs
In situations where the STR filing obligations are not met, the Bank may choose to
voluntarily file an STR. This decision must be made by the PO in order for the Bank
to provide assistance to the authorities in the enforcement of the PMLA.
The PO may contact officers empowered and required to assist authorities in the
enforcement of the PMLA about any emergent or otherwise deserving situation. Any
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such contact should be documented by the PO in a separate file or electronically in

the KYC/AML system. A complete list of officers empowered and required to assist
authorities in the enforcement of the PMLA are provided in Appendix I - Other
Authorities for Enforcement of the PMLA, to this chapter. However, such contact
does not substitute for the obligation to file a STR, if that obligation otherwise is
present.
13.5.8 Prohibition of Disclosure
Rule 8 of the Prevention of Money Laundering Rules, 2005 prohibits a financial
institution that files a STR from notifying any person involved in the suspicious
transaction that the transaction has been reported. In light of the highly confidential
nature of STRs, and to guard against unauthorized disclosure of this information,
information concerning STR filings will only be shared with employees on a need to
know basis.
Under no circumstances may a customer be tipped off or informed of a STR,
investigation related to an STR, STR content, or the Banks concerns about potential
suspicious activity. Furthermore, employees should not put any apparent restrictions
on operations in accounts (which would alert the customers) for which a STR has
been filed. Any inquiries in this regard must be referred to the PO promptly.
Every employee has a responsibility to refer potentially suspicious activity for
investigation to his supervisor
13.5.9 Protection from Civil Liability for Reporting Information in a STR
Illegal or suspicious activity reported on STRs is protected under Section 14 of the
PMLA 2002 and neither the Bank nor its officers will be held liable for civil
consequences of the filing of a STR. The Banks employees are always under a duty
to act with the utmost of good faith regarding the reporting of potentially suspicious
activity.
Note:
The PMLA contains no protection from criminal liability with respect to any
reports filed with the FIU. However, protection from criminal liability is provided
by a provision in the Indian Penal Code (Chapter IV s.76), which specifies
that no criminal offence can occur with respect to an act done by a person who is
either legally bound to do the act, or who believes in good faith that he/she is legally
bound by law to do it. Under this provision, criminal liability does not exist for filing a
STR in good faith.
13.5.10
Prohibition on Retaliation
No employee shall be subject to retaliation of any kind by the BM, PO, Bank staff and
senior management for escalating, investigating or reporting potentially suspicious
activity.
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13.5.11
Failure to Comply with the Banks Policy
Any failure to comply with this policy and the underlying principles within it could
potentially expose the Bank to significant legal, regulatory, reputational, and financial
risk. This could potentially result in regulatory censure and, in some cases, criminal
liability for the Banks staff, with corresponding reputational damage and the need for
remedial action. Failure to comply with this policy by staff would, therefore, be
regarded as grounds for disciplinary action.
13.5.12
Escalation and Referral of Potentially Suspicious Activity
All employees have a duty to refer potentially suspicious activity. Employees must
report potentially suspicious activity to his or her supervisor through written
correspondence for documentation or by creating a manual alert in the monitoring
system. The supervisor must immediately inform the AML Compliance Group within
the Bank, responsible for follow-up and further review of the escalated activity. All
automated alerts generated by the system are initially reviewed by the BM and
reported to the AML Compliance Group if deemed suspicious.
The responsibility of investigating and arriving at a conclusion of whether a STR
needs to be filed lies with the AML Compliance Group and ultimately the PO. If
available, the reporting employee must also be able to provide any additional
information required by the AML Compliance group during the review of the
escalated activity.
If an employee believes that his or her supervisor may be involved in the potentially
suspicious activity, the employee may contact the PO or the CGM-Banking directly
without supervisor notification.
Depending on the circumstances of a particular case, the filing of a STR may be
warranted even where a prospective customer has not yet opened an account at the
Bank. An employee who identifies potential suspicious conduct involving a
prospective customer, who has not yet opened an account, should still report such
information by generating a manual alert. The manual alert must provide as much
detail as possible regarding the customer and his or her intended transactions.
13.5.13
STR Filing Procedures
The manual format and general instructions for filing out a complete STR, as
provided by the FIU-IND, are provided in Annexure D to this chapter.
1. Once a decision to file a STR has been reached by the AML Compliance
Group, a draft copy of the STR must be completed (along with all the
supplemental documents) and submitted to the PO. The PO will approve the
STR and submit it using one of the reporting formats mentioned in Section
13.2.
2. The AML Compliance Group must maintain a copy of the STR for a period of
ten years since the date of filing an STR. Any physical documentation must
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be locked in a separate storage area accessible to only the AML Compliance

Group and the PO. All electronic evidence and documents must be backedup and made accessible on request.
3. The PO must create, update and maintain a STR log that includes the
following:
a.
b.
c.
d.
e.
f.
g.
h.
i.
j.
k.
STR Number
Activity Referral Date
Review Start Date
Review Complete Date
STR Type
STR Author
Customer or Entity Name
Customer ID or Account Number
Total Unusual Activity Amount in Rupees
Reason for Reporting
Comments
Only the PO and the AML Compliance Group must have access to the STR
log.
4. AML Compliance Group must provide monthly statistics on the STRs filed and
alerts investigated must be presented to Senior Management for review.
Discussions with management should include recommendations such as
closure of accounts, limits of permissible activity, updates to risk scoring
model, additional rules for alert detection, etc.
5. The individual or entity on whose name the STR is filed should be added to
the internal watch-list of the Bank to ensure no accounts in the same name
exist in different branches of the Bank.
13.5.14
On-going Duty to Report
If unusual activity in the account continues, employees must continue to report the
activity to their supervisor or the AML Compliance Group. Previous referrals on the
account do not necessarily discharge an employee from his or her duty to report
ongoing or potentially new suspicious activity. Employees must continue to maintain
confidentiality with respect to the account and customer under review.
13.5.15
Time Frames for Filing a STR
If any attempted transaction, transaction or a series of integrally connected

transactions are identified as suspicious in nature, they must be submitted as a STR
within 7 working days of arriving at that conclusion.
The total time frame from the review of an alert(s), either manual or automated, to the
submission of a STR must not exceed 60 days. The BM and subsequently the AML
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Compliance Group must initiate the review promptly and complete it in a reasonable
amount of time not exceeding the 60 day time limit specified above.
In the event of serious violations of law or regulation that require immediate attention,
in addition to promptly faxing the STR information to FIU-IND, the PO must notify by
phone or in person the appropriate law enforcement agency and document the
conversation.
13.5.16
STR Dispute Resolution
The decision to file or not to file a STR finally rests with the PO. If an employee or a
member of the AML Compliance Group disagrees with the POs decision to not file a
STR, he or she may contact the General Manager of the Banking Department.
If the General Manager of the Banking Department agrees with the employees
recommendation to file a STR, the General Manager will present the proposed STR
filing to Senior Management for assessment and final disposition. The POs decision
not to file a STR will be documented in a memorandum and stored along with the
documents pertaining to the review.
13.5.17
Supplemental STRs
If a STR on an individual or entity was filed previously and the unusual activity
continues, a supplemental STR needs to be prepared and filed. The STR reporting
format takes into account if an STR is related to a previous filing and allows for the
filing of a supplemental STR. The PO must specially bring to the notice of Senior
Management the supplemental filing and a decision on how to respond to the
recurrent indicators of suspicious activity must be taken. Senior Management may
consider restricting the account or in certain cases closure of the account.
13.5.18
Closing Accounts Due to Continued Suspicious Activity
The AML Compliance Group and the PO shall maintain a STR log that lists all the
accounts and customers that have been subjected to a STR filing. The AML
Compliance group must review the log and try and identify patterns of activity, trends
and any other indicators for categorisation into the types of unusual or suspicious
activity detected. In the event that the activity persists and supplemental STRs are
filed, the PO, in consultation with Senior Management may decide on terminating the
relationship with the customer and closing related accounts.
Banks must be careful in the manner in which the customer is dealt with while closing
the account. As described in Section 13.5.7, the Bank must not disclose that a STR
or multiple STRs have been filed on the customer.
13.5.19
STR Record Retention
Rule 6 of the PML Rules, 2005 stipulates that all records referred to in Rule 3, The
Maintenance of Records of Transactions, that include transactions identified as
potentially suspicious must be maintained for a period of ten years from the date of
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the transactions between the client and the Bank. The record retention policy of the
Bank is described in Section 14.
13.5.20
Regulatory and Law Enforcement Requests
Occasionally the Bank and its employees may be contacted by regulatory authorities
or law enforcement agencies for additional documentation on a STR filed or to check
for activity of certain customers at the Bank. All such requests must be immediately
routed to the PO of the Bank.
Prior to fulfilling any request, the PO must verify the authenticity of the request (i.e.
that the requestor is a representative of an appropriate regulatory or law enforcement
agency). The verification methods may include requiring written requests on
letterhead that should be followed up with a phone call to the certified phone number
of the appropriate agency confirming the request.
Once a request is received and confirmed, the request along with its pertinent details
must be logged and stored separately in either electronic or file format with the PO.
13.6 CCRs
Rule 3, sub-rule (C) of the Prevention of Money Laundering Rules, 2005 require Banks
to monitor and report all cash transactions where forged or counterfeit currency notes
or bank notes have been used as genuine or where any forgery of a valuable security
or a document has taken place facilitating the transactions.
13.6.1 CCR Filing Procedures
1. All employees have a duty to refer counterfeit currency. Employees must report
counterfeit currency detected to the BM immediately.
2. The employee and/or BM must attempt to understand or extract information from
the customer regarding the movement of the currency (how he or she came into
possession of the currency) identified as counterfeit.
3. The BM must seize the counterfeit currency from the customer and forward
them to the PO for further inspection.
4. The employee must create a counterfeit currency alert in the monitoring system.
5. The PO will sign and submit the CCR to FIU-IND in one of the submission
formats described in Section 13.3
13.6.2 Time Frames for Filing a CCR
furnishing the transaction reports to the FIU-IND. A CCR report must be submitted by
the PO of the bank no later than 7 working days from the date of occurrence of the
transaction containing the counterfeit currency.
120
13.7 NTRs
Rule 3, sub-rule (BA) of the Prevention of Money Laundering Rules, 2005 require
Banks to monitor and report all transactions involving receipts by non-profit
organisations of value more than rupees ten lakhs (Rs. 10,00,000), or its equivalent
in foreign currency.
Rule 2, sub-rule (1) clause (CA), defines Non-Profit Organisation (NPO) as any entity
or organisation 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 25 of the Companies Act, 1956. The Bank must pay special attention to any
unregistered associations operating as a NPO and if applicable, must file a NTR for
the same.
13.7.1 NTR Filing Procedures
1. The automated monitoring system will automatically create an alert within the system
for any transaction involving receipts by non-profit organisations of value more
than Rupees ten lakhs (Rs. 10,00,000), or its equivalent in foreign currency.
2. The BM must verify that the customer or the account that receives the money is
indeed a non-profit organisation.
3. The PO will sign and submit the NTR to FIU-IND in one of the submission formats
described in Section 13.3
13.7.2 Time Frames for Filing a NTR
furnishing the transaction reports to the FIU-IND. A NTR report must be submitted by
the PO of the bank no later than 7 working days from the date of occurrence of the
transaction.
13.8 Special Note on Wire Transfers

Wire transfer is an electronic transfer of funds from one person or institution (entity)
to another. Because of the capability of transferring funds instantaneously wire
transfers have become the preferred mode of transfer of funds, especially
internationally. There are two types of wire transfers:
Domestic wire transfers are any transfers where the originator and the
beneficiary banks are located within the same country. A transaction involving
a chain of wire transfers that take place within the borders of single country is
a domestic wire transfer even if the system used for effecting the transactions
is located outside the country.
Cross-Border wire transfers mean any wire transfer where the originator
and the beneficiary banks or financial institutions are located in different
countries. It may include any chain of wire transfers that has at least one
cross-border element.
121
Because of lesser human intervention and reduced scrutiny, wire transfers also lend
themselves as a preferred method for criminals and terrorists to transfer their funds.
To address this, the Financial Action Task Force in its Special Recommendations
has recommended some minimum requirements for wire transfers.
13.8.1 Requirements of Domestic Transfers
The CRO must ensure that the following minimum requirements are met while taking
an order for a domestic wire transfer:
Information accompanying all domestic wire transfers of Rs. 50,000 and

above must include complete originator information including name, address
and account number etc. unless this information can be made available to the
beneficiary bank by other means.
If a bank has reason to believe that a customer is intentionally structuring wire
transfers below Rs. 50,000 to several beneficiaries in order to avoid reporting
or monitoring, the bank must insist on complete customer identification before
accepting the transfer. In case of no cooperation from the customer, efforts
should be made to establish his identity and an STR must be filed with FIUIND.
13.8.2 Requirements of Cross Transfers

The CRO must ensure that the following minimum requirements are met while taking
an order for a cross border wire transfer:
All cross border wire transfers must include complete originator information
that is accurate.
Information accompanying all cross border wire transfers must include the
name, address and account number and place where account exists. In the
absence of an account number a unique reference number as prevalent in the
country concerned must be included.
Where several individual transfers from a single originator are bundled in a
batch file for transmission to beneficiaries in another country, they may be
exempted from including full originator information, provided they include the
originators account number or unique reference number as mentioned
above.
13.8.3 Exemption from Wire Transfer Requirements

Inter-Bank transfers and settlements where both the originator and beneficiary are
banks or financial institutions are exempted from the above requirements.
122
Appendix I to Chapter 13: Other Authorities for

Enforcement of the PMLA
Section 54 of the Prevention of Money Laundering Act, 2002 empowers and requires various
authorities to assist in the enforcement of the act. The following officers are hereby
empowered and required to assist the authorities in the enforcement of this Act, namely:(a)
(b)
Officers of the Customs and Central Excise Departments;

Officers appointed under sub-section (1) of Section 5 of the Narcotic Drugs and
Psychotropic Substances Act, 1985 (61 of 1985);
(c)
Income-tax authorities under sub-section (1) of Section 117 of the Income-tax

Act, 1961 (43 of 1961);
(d)
Officers of the stock exchange recognized under Section 4 of the Securities

Contracts (Regulation) Act, 1956 (42 of 1956);
(e)
Officers of the Reserve Bank of India constituted under sub-section (1) of

Section 3 of the Reserve Bank of India Act, 1934 (2 of 1934);
(f)
Officers of Police;
(g)
Officers of enforcement appointed under sub-section (1) of Section 36 of the

Foreign Exchange Management Act, 1973 (40 of 1999);
(h)
Officers of the Securities and Exchange Board of India established under

Section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992);
(i)
Officers of any other body corporate constituted or established under a Central

Act or a State Act; and
(j)
Such other officers of the Central Government, State Government, local

authorities or banking companies as the Central Government may, by
notification, specify, in this behalf.
123
14 Customer Record Retention and Sharing

14.1 Maintenance and Preservation of Records
The rules and regulations regarding maintenance and preservation of records are
based on the type of record:
1. Transaction Record: Records of all transactions, domestic or international,
shall be maintained for at least ten years after the date of completion of the
transaction and should include all necessary information to allow for the
exact reconstruction of the transaction (including receiver information,
amount, currency, etc.).
2. Account Records: KYC information collected as a part of account opening
and updates shall also be maintained for at least ten years after the date of
account closing. This shall also include customer profiles or risk levels
generated during the course of the relationship with the customer.
3. Transaction Reports: Any STRs, CTRs or other reports recorded by the
bank must be retained by the bank for at least ten years after the date of
filing. All the documents, office records and memorandum pertaining to the
transactions, purpose thereof and findings and notes on the same at the
branch or bank level must also be retained.
4. Training and Education: All records of training conducted in the areas of
KYC, AML and CFT shall be retained for a period of ten years from the
completion of the training session and shall also include a list of attendees
and their designation and the date and location of the training programme.
All the identification and transaction records must be maintained in a manner to
be available to competent authorities, bank officials or audit teams on request.
14.2 Information Sharing, Legal Process and Other Matters

14.2.1 Principal Officer
As per the definition of the RBI, the PO is responsible for sharing all the information
with third parties such as enforcement agencies, banks and other institutions. The
officer will act as the designated compliance officer for the Bank and will liaison with
all regulatory authorities as described in Section 4.2.4.
14.2.2 Sharing Process
The information sharing process between the Bank and other authorities shall be
conducted in the following manner:
The PO will be contacted by bank authorities, regulatory or law enforcement
officials for a request for information sharing. The PO can share customer
124
information with agencies or officers of agencies listed in Appendix 1, Chapter

13
Once a request is received, all pertinent information is logged and the case
file is also copied to the legal team at the bank.
The PO is required to review the requests to determine its validity. In case
where the Officer decides to deny the information sharing request, a copy of
the decision and documents in support of it must be forwarded to Senior
Management.
A request for information sharing regarding an account or transaction could
potentially lead to a Suspicious Activity Report being filed by the PO if the
Officer independently corroborates the account to be containing information
and transactions that could be deemed suspicious in nature.
The regulatory authorities could periodically provide the Bank with a list of
names of individuals/entities to be matched against their customers. If the
particulars of a customer at the Bank match the details provided in the list, the
Bank must notify the Joint Secretary, Ministry of Home affairs along with the
UAPA Nodal Officer, the regulatory authorities and the FIU-IND. Internally
details of matches should go into the KYC file of the customer as well as be
forward to the Senior Management. Regulations require that once identified,
these individuals or entities must be prevented from conducting financial
transactions and all of their transactions, actual or attempted, must be
covered in an STR19.
In the case where the PO accepts the request for information sharing from a
regulatory authority, the name of the account holder could be entered into the
Banks internal watch list.
In addition, the PO will process all the requests from the regulatory agencies
to freeze, seize or attach funds and other financial assets held by, on behalf
of or at the direction of individuals or entities that are suspected of money
laundering and terrorist financing related activities.
Procedure for implementation of Section 51A of the Unlawful Activities (Prevention) Act, 1967 File
no. 17015/10/2002-IS-VI
19
125
15 Training and Education

15.1 Customer Education
Implementation of a KYC programme requires banks to ask for additional information
that previously would have never been asked for. The customer could question the
motive and the purpose of collecting this additional information. It is advised that the
bank create specific literature, pamphlets, brochures, etc. to educate the customer
regarding the need and the objectives of a KYC, AML and CFT programme. These
brochures must contain information on:
Purpose of the information collected being to meet guidelines from regulatory

authorities such as the RBI.
Information collected for KYC purposes must be differentiated from the
information required for other purposes such as marketing with the KYC
related information being clearly marked as mandatory.
15.2 Training
It is advised that all employees undergo a training programme tailored to their
respective job profiles:
1. CROs: The CROs perform a majority of the customer interaction and so are
required to be very familiar with the policies and procedures and be able to
justify the reasons for the same. They will need to educate the customers and
field questions or queries the customer might have. As they also serve as the
de-facto account opening officers, they will also be required to undergo training
for the systems put in place by the Bank for KYC, AML and CFT compliance.
2. Audit teams: The audit teams will be required to have an in-depth
understanding of the policies and procedures put in place and the systems
used for their implementation so that they can perform an effective audit of the
compliance of the bank.
3. Principal Officers and Senior Management: These officials will primarily be
concerned with the policies and procedures as they will be responsible for the
creation and updates to the same. In addition, the PO will be required to
understand the systems put in place to sign off on exceptions or evaluate any
exceptions.
4. Other staff: The general staff at the bank will be required to understand the
policies and procedures so as to correctly obtain customer information and
documentation required and meeting compliance requirements.
Records of employees attending training must be maintained and any
employees failure to undergo new employee or annual training must be
recorded.
126
15.3 KYC for Existing and New Employees

As a part of the hiring process the Bank will require any new employee to undergo the
KYC procedure for an individual i.e. submit identity and address proof. It will be the
responsibility of the Human Resources department at the Bank to ensure that the
documentation submitted by the staff member is updated with time as per KYC, AML
and CFT norms.
It is required that all new employees undergo KYC, AML and CFT training within the
first three months of joining.
15.4 Training formats

The training for AML and KYC policies and procedures will be available to the
employees in the following formats:
1. Circulars distributed: Circulars distributed by government agencies such as
NABARD, RBI and FIU-IND should be sent across to all concerned bank
officials with any changes in policy and procedure highlighted and notes on
customizing the same to the Bank.
2. Classroom training: Classroom teaching will cover the laws and regulations
related to KYC, AML and CFT as well as the banks policies and procedures
on the same. Any conferences or seminars attended by the staff shall fall
under this category.
3. Computer based training: Computer based training shall be primarily used as
a tool to test the knowledge of the officers that have undergone training.
4. On-the-Job training: All staff members will receive on-the-job training in
addition to the formal training sessions described above.
127
Annexure A: Guidelines on Performing Background

Checks using Google
The Google search engine shall be used by the officers of the Bank to perform background
and adverse information checks on new and existing customers. In order to obtain the
desired results the search process must be performed using the following steps:
1. Access the Google website
The Google website can be accessed by typing on the web browser:
http://www.google.com
Once the page is loaded, the user is presented with the default Google homepage as
shown below:
2. Perform the search

To search for an individual or entity, type the customer name within quotation marks.
Ensure that the quotation marks enclose the name of the customer.
If the desired result of the query is to provide adverse information, add the following
string as is after entering the name of the customer:
Scam OR Investigation OR Fraud OR Criminal OR Terrorism OR Regulatory OR
Fine OR Laundering OR Penalty OR Jail
A search for adverse information for the entity XYZ Corp needs to be entered as shown
below:
128
For each alias of the customer, a separate search must then be performed by replacing
the old name with the alias.
3. Results of search
As a result of the search, one of the two following screens will be displayed:
1) No search results
The screenshot below displays the Google result for a search for XYZUW Corp
which does not yield any results.
In the case of no results for the customer name or any of the aliases, the
background search will be ended with the search and the results logged.
2) Search results found

129
In the case where results are found, further parsing and validation of the results
will be required and should be performed by clicking on the Advanced Search link
of the page as shown:
Click on Advanced Search

for tools to assist in parsing
lt
4. Parsing and validating the results

The results obtained must then be parsed so that they are relevant to the criteria of the
Bank criteria and refer to customer in question. It is recommended that the validation of
customer identity be performed at least across the following four parameters:
1) Match granularity: The name of the individual or entity must exactly match the
name being searched or one of the aliases. Failing this criterion no result should
be considered a match.
2) Location: The information found should place the individual or entity in the same
country as in the Bank records.
3) Content: The information published must pertain to an actual crime in the area of
money laundering and terrorist financing committed by the customer. It is
recommended that instead of looking for isolated incidents, the officer performing
the screening look for a pattern of ongoing or recent illegal activities.
4) Age of information: It is recommended that the information be screened on the
basis of the date of publishing and only three years from the current date be
considered.
Beyond these, the officer performing the search is free to use any other additional
criteria as seen fit with the Banks policy. The Advanced Search link on the Google
webpage contains additional parameters that can assist with the parsing as shown:
130
Search by Date
Search by Location
131
Annexure B: Letter to Individual Customers Regarding

KYC Compliance
The following is the sample letter written to individual customers requesting for the update of
KYC information on file:
Branch Manager, Branch name or number
State Cooperative Bank
Address 1
Address 2
City, State
Date: DD/MM/YYYY
Subject: Compliance required to meet RBI Guidelines on Know Your Customer Norms
Dear Sir or Madam,
The Reserve Bank of India guidelines on Know Your Customer (KYC) Norms requires us to
perform periodic updates on the identity and address proof of account holders. We regret to
inform you that as per our records your account is not compliant with the current regulations
in place.
We request you to provide us the documents listed below along with the completed KYC
compliance forms enclosed with this letter on or before DD/MM/YYYY at a bank working day
during the regular office hours. We shall retain a copy of the documents for our records and
return the originals immediately after.
Please note that if the documentation is not received within 30 days of the date of letter, the
regulations require us to restrict operations on your account leading up to the closure of the
account for non-compliance.
1) Documents accepted as identity and address proof
Documents Accepted as Proof of Documents accepted as Address
Identity
Proof
(Any one)
(Any one)
Passport
Passport
PAN Identity Card
Voter ID
Driving License
Driving License
132
NREGA Job Card
Ration card
Aadhaar card
Depository Account Statements
Government Department Identity card
Letter from MP/MLA/MC/GZ Officer

attesting to address
Voter Identity Card
Bank Account Statement (six months

from date of submission)
NREGA Job Card
Bank Passbook
Govt. Department Identity
Employer certificate (six months from

account opening)
Aadhaar card
Social Security Card
Income Tax Return
Letter from MP/MLA/MC/GZ Officer

including a notarized photograph
Any other id containing address issued

by Govt.
Residential Permit issued by state
police
Water Bill (six months from date of
submission)
Gas Bill (six months from date of
submission)
Any documents that are currently expired will not be acceptable for KYC purposes. If you
have submitted your documents after DD/MM/YYYY, you are not required to submit them
again.
We trust you will treat the matter of KYC Compliance as most urgent and thank you for your
continued support of our banking establishment.
Yours faithfully,
Name
Designation
133
Annexure C: Schedule of Offences

As per 2(1)(y) of the Prevention of Money Laundering Act, 2002, Scheduled offence means
The offences specified under Part A of the Schedule, or
The offences specified under Part B of the Schedule if the total value involved in
such offences is thirty lakh Rupees or more, or
The offences specified under Part C of the Schedule.
The Schedule to the Prevention of Money Laundering Act, 2002 lists all such offences.
Offences to Part A of the Schedule
Paragraph 1 - The Indian Penal Code, 1860
Section
121
121A
489A
489B
Description of Offence
Waging, or attempting to wage war or abetting waging of war, against the Government
of India.
Conspiracy to commit offences punishable by section 121 against the State.
Counterfeiting currency notes or bank notes.
Using as genuine, forged or counterfeit currency notes or bank notes
Paragraph 2 - The Narcotic Drugs and Psychotropic Substances Act, 1985

Section
15
16
17
18
19
20
21
Contravention in relation to poppy straw.
Contravention in relation to coca plant and coca leaves.
Contravention in relation to prepared opium.
Contravention in relation to opium poppy and opium.
Embezzlement of opium by cultivator.
Contravention in relation to cannabis plant and cannabis.
Contravention in relation to manufactured drugs and preparations
22
23
Contravention in relation to psychotropic substances.

Illegal import into India, export from India or transhipment of narcotic drugs and
psychotropic substances
External dealings in narcotic drugs and psychotropic substances in contravention of
section 12 of the Narcotics Drugs and Psychotropic Substances Act, 1985.
Contravention of orders made under section 9A of the Narcotic Drugs and Psychotropic
Substances Act, 1985
24
25A
27A
29
Financing illicit traffic and harbouring offenders.

Abetment and criminal conspiracy.
134
Paragraph 3 - The Explosive Substances Act, 1908

Section
3
Causing explosion likely to endanger life or property.
4
Attempt to cause explosion, or for making or keeping explosives with intent to endanger
life or property.
5
Making or possessing explosives under suspicious circumstances.
Paragraph 4 - The Unlawful Activities (Prevention) Act, 1967

Section
10 read with section 3
11 read with sections 3,
7
16A
Penalty for being member of an unlawful association, etc.
Penalty for dealing with funds of an unlawful association.
17
18
18A
18B
19
20
21
38
39
Punishment for raising fund for terrorist act.

Punishment for conspiracy, etc.
Punishment for organising of terrorist camps.
Punishment for recruiting of any person or persons for terrorist act.
Punishment for harbouring, etc.
Punishment for being member of terrorist gang or organization.
Punishment for holding proceeds of terrorism.
Offence relating to membership of a terrorist organization.
Offence relating to support given to a terrorist organization.
Punishment for unlawful activities.

Punishment for terrorist act.
Punishment for making demands of radioactive substances, nuclear
devices, etc.
Offences to Part B of the Schedule

Paragraph 1 - The Indian Penal Code, 1860
Section
120 B
255
257
258
259
260
302
304
307
308
Criminal conspiracy.
Counterfeiting Government stamp.
Making or selling instrument for counterfeiting Government stamp.
Sale of counterfeiting Government stamp.
Having possession of counterfeit Government stamp.
Using as genuine a Government stamp known to be counterfeit.
Murder.
Punishment for culpable homicide not amounting to murder.
Attempt to murder.
Attempt to commit culpable homicide.
135
Section
327
329
364A
384 to
389
392 to
402
411
412
413
414
417
418
419
420
421
422
423
424
467
471
472
and
473
475
and
476
481
482
483
484
485
486
487
488
Voluntarily causing hurt to extort property, or to constrain to an illegal act.
Voluntarily causing grievous hurt to extort property, or to constrain to an illegal act.
Kidnapping for ransom, etc.
Offences relating to extortion
Offences relating to robbery and dacoity.
Dishonestly receiving stolen property.
Dishonestly receiving property stolen in the commission of a dacoity.
Habitually dealing in stolen property.
Assisting in concealment of stolen property.
Punishment for cheating.
Cheating with knowledge that wrongful loss may ensure to person whose interest
offender is bound to protect.
Punishment for cheating by personation.
Cheating and dishonesty inducing delivery of properties.
Dishonest or fraudulent removal or concealment of property to prevent distribution
among creditors.
Dishonestly or fraudulently preventing debt being available for creditors.
Dishonest or fraudulent execution of deed of transfer containing false statement of
consideration.
Dishonest or fraudulent removal or concealment of property.
Forgery of a valuable security, will, etc.
Using as genuine a forged document or electronic record.
Making or possessing counterfeit seal, etc. with intent to commit forgery.
Counterfeiting device or mark.
Using a false property mark.
Punishment for using false property mark.
Counterfeiting a property mark used by another.
Counterfeiting a mark used by a public servant.
Making or possession of any instrument for counterfeiting a property mark.
Selling goods marked with a counterfeit property mark.
Making a false mark upon any receptacle containing goods.
Punishment for making use of false mark.;
Paragraph 2 - The Arms Act, 1959

Section
25
To manufacture, sell, transfer, convert, repair or test or prove or expose or offer for sale
or transfer or have in his possession for sale, transfer, conversion, repair, test or proof,
any arms or ammunition in contravention of section 5 etc.
26
To do any act in contravention of any provisions of section 3, 4, 10 or 12 of the Arms
Act, 1959 in such manner as specified in sub-section (1) of section 26 of the said Act
etc.
27
Use of arms or ammunitions in contravention of section 5 or use of any arms or
ammunition in contravention of section 7 of the Arms Act, 1959.
136
Section
28
Use and possession of fire arms or imitation fire arms in certain cases.
29
Knowingly purchasing arms from unlicensed person or for delivering arms, etc., to
person not entitled to possess the same.
30
Contravention of any condition of a licence or any provisions of the Arms Act, 1959 or
any rule made there under.
Paragraph 3 - The Wild Life (Protection) Act, 1972

Section
51 read
with
section 9
51 read
with
section
17A
51 read
with
section 39
51 read
with
section 44
51 read
with
section 48
51 read
with
section
49B
Hunting of wild animals
Contravention of provisions of section 17A relating to prohibition of picking,
uprooting, etc., of specified plants.
Contravention of provisions of section 39 relating to wild animals, etc., to be
Government property.
Contravention of provisions of section 44 relating to dealings in trophy and animal
articles without licence prohibited.
Contravention of provisions of section 48 relating to purchase of animal, etc., by
licensee.
Contravention of provisions of section 49B relating to prohibition of dealings in
trophies, animal articles etc., derived from scheduled animals.
Paragraph 4 - The Immoral Traffic (Prevention) Act, 1956

Section
5
6
8
9
Procuring, inducing or taking person for the sake of prostitution.
Detaining a person in premises where prostitution is carried on.
Seducing or soliciting for purpose of prostitution.
Seduction of a person in custody.
Paragraph 5 - The Prevention Of Corruption Act, 1988

Section
7
Public servant taking gratification other than legal remuneration in respect of an official
act.
8
Taking gratification, in order, by corrupt or illegal means, to influence public servant.
9
Taking gratification, for exercise of personal influence with public servant.
137
10
13
Abetment by public servant of offences defined in section 8 or section 9 of the

Prevention of Corruption Act, 1988.
Criminal misconduct by a public servant.
Paragraph 6 - The Explosives Act, 1884

Section
9-B
9-C
25 read
with
section 3
28
25 read
with
section 3
Punishment for certain offences.
Offences by Companies.
Contravention of export trade in antiquities and art treasure.
Paragraph 7 - The Antiquities and Arts Treasures Act, 1972

Section
25 read
with
section 3
28
Paragraph 8 - The Securities and Exchange Board Of India Act, 1992

Section
12A read
with
section 24
Prohibition of manipulative and deceptive devices, insider trading and substantial
acquisition of securities or control.
Paragraph 9 - The Customs Act, 1962

Section
135
Evasion of duty or prohibitions.
Paragraph 10 - The Bonded Labour System (Abolition) Act, 1976

Section
138
16
18
20
Punishment for enforcement of bonded labour.

Punishment for extracting bonded labour under the bonded labour system.
Abetment to be an offence.
Paragraph 11 - The Child Labour (Prohibition and Regulation) Act, 1986

Section
14
Punishment for employment of any child to work in contravention of the provisions of
section 3.
Paragraph 12 - The Transplantation Of Human Organs Act, 1994

Section
18
Punishment for removal of human organ without authority.
19
Punishment for commercial dealings in human organs.
20
Punishment for contravention of any other provision of this Act.
Paragraph 13 - The Juvenile Justice (Care and Protection Of Children) Act,2000

Section
23
Punishment of cruelty to juvenile or child.
24
Employment of juvenile or child for begging.
25
Penalty for giving intoxicating liquor or narcotic drug or psychotropic substance to
juvenile or child.
26
Exploitation of juvenile or child employee.
Paragraph 14 - The Emigration Act,1983

Section
24
Offences and penalties.
Paragraph 15 - The Passport Act,1967

Section
12
Offences and penalties.
Paragraph 16 - The Foreigners Act,1946

139
Section
14
Penalty for contravention of provisions of the Act, etc.
14B
Penalty for using forged passport.
14C
Penalty for abetment.
Paragraph 17 - The Copyright Act,1957

Section
63
63A
63B
68A
Offence of infringement of copyright or other rights conferred by this Act.
Enhanced penalty on second and subsequent convictions.
Knowing use of infringing copy of computer programme.
Penalty for contravention of section 52A.
Paragraph 18 - The Trade Marks Act,1999

Section
103
Penalty for applying false trademarks, trade description, etc.
Penalty for selling goods or providing services to which false trademark or false trade
104
description is applied.
105
Enhanced penalty on second or subsequent conviction.
107
Penalty for falsely representing a trade mark as registered.
120
Punishment of abetment in India of acts done out of India.
Paragraph 19 - The Information Technology Act, 2000

Section
72
Penalty for breach of confidentiality and privacy.
75
Act to apply for offence or contravention committed outside India.
Paragraph 20 - The Biological Diversity Act,2002

Section
55 read with 6
Penalties for contravention of section 6, etc.
Paragraph 21 - The Protection Of Plant Varieties and Farmers Rights Act,2001

140
70
68
71
68
72
68
73
68
Section
read with
read with
read with
read with
Penalty for applying false denomination, etc.
Penalty for selling varieties to which false denomination is applied.
Penalty for falsely representing a variety as registered.
Penalty for subsequent offence.
Paragraph 22 - The Environment Protection Act,1986

Section
15 read with 7
15 read with 8
Penalty for discharging environmental pollutants.
Penalty for handling hazardous substance.
Paragraph 23 - The Water (Prevention and Control Of Pollution) Act,1974

Section
41(2)
Penalty for pollution of stream or well.
43
Penalty for contravention of provisions of section 24.
Paragraph 24 - The Air (Prevention And Control Of Pollution) Act,1981

Section
37
Failure to comply with the provisions for operating industrial plant.
Paragraph 25 - The Suppression of Unlawful Acts Against Safety Of Maritime

Navigation and Fixed Platforms on Continental Shelf Act, 2002
Section
3
Offences against ship, fixed platform, cargo of a ship, maritime navigational facilities,
etc.
Offences to Part C of the Schedule

An offence which is the offence of cross border implications and which is specified in,(1)
Part-A; or
141
(2)
Part-B without any threshold; or the offences against property under chapter
XVII of the Indian Penal Code.
142
Annexure D: Manual Format for Filing Cash Transaction

Report
The CTR in manual form consists of the following four (4) forms:
1.
2.
3.
4.
Summary of Cash Transaction Reports (Contains summary of enclosed CTRs)

CTR Form (Details of bank account and cash transactions)
Annexure C.1 Individual Detail Sheet (Identification details of individual)
Annexure C.2 Legal Person/Entity Detail Sheet (Identification details of legal
person /entity)
Summary of Cash Transaction Reports

PART 1: DETAILS OF THE SUMMARY
1.1 Month and year of summary
1.2 Is this a supplementary to an earlier summary?
NO
YES
(Tick as
applicable)
1.3 Date of sending original summary if this is a supplemental report.
Separate summary should be furnished for each month. Supplementary summary is
required
to be submitted where a summary for the month has already been submitted.
In case of
supplementary summary, only additional CTRs need to be enclosed.
PART 2: DETAILS OF PRINCIPAL OFFICER
2.1 Name of Bank
2.2 BSR code
2.3 ID allotted by FIU-IND
ID allotted by FIU-IND may be left blank till the same is communicated by FIU-IND.
2.4 Category of bank
D for Co-operative Bank
2.5 Name of principal officer
Principal Officer is the officer designated by the Bank under PMLA, 2002
2.6 Designation
2.7 Address (No., Building)
2.8 Street/Road
2.9 Locality
2.10 City/Town, District
2.11 State, Country
2.12 Pin code
2.13 Tel (with STD code)
2.14 Fax
2.15 E-mail
PART 3: STATISTICS FOR THE MONTH
143
3.1
3.2
3.3
3.4
3.5
3.6
Number of total branches

Number of branches which have sent reports (including NIL report)
Number of branches which have submitted CTRs (excluding NIL report)
Number of original CTRs (bank accounts) enclosed with this summary
Number of original CTRs (bank accounts) should match with the original CTRs
enclosed with this summary
Number of replacement CTRs (bank accounts) enclosed with this summary
Number of replacement CTRs (bank accounts) should match with the replacement
CTRs enclosed with this summary. All replacement CTRs received from branches
should be enclosed at the end of the reports for the month.
Total original CTRs (bank accounts) reported for the month (cumulative)
This figure should be the cumulative total of 3.4. above for the all the summaries of
the month
CTR Form
PART 1: DETAILS OF REPORT
1.4 Date of sending report
Date of sending report is the date on which the principal officer sends the report to
Director (FIU-IND).
1.2 Is this a replacement to an earlier report?
NO
YES
(Tick as
applicable)
1.3 Date of sending original report if this is a replacement report.
Replacement report is a report submitted in replacement of an earlier CTR. When a
replacement report is submitted, date of submitting original CTR may be mentioned
and the
complete CTR has to be submitted again.
PART 2: DETAILS OF REPORTING BRANCH
2.1 Name of Bank
2.2 BSR code
2.5 Street/Road
2.6 Locality
2.8 State, Country
2.9 Pin code
2.11 Fax
2.12 E-mail
144
PART 3: DETAILS OF BANK ACCOUNT

A separate CTR is required to be filed for each reported bank account
3.1 Account Number
3.2 Type of Account
A. Savings Account
B. Current Account
C. Cash Credit Account
3.3 Type of Account Holder
A. Individual
B. Legal Person/Entity
C. Central/ State Government
D. Central/ State Government owned undertaking
E. Other
3.4 Date of Account Opening DD-MM-YYYY
PART 4: LIST OF ACCOUNT HOLDERS
List of Account Holders
Name of Individual/Legal Person/Entity
Customer ID/number
Mention A for Individual and B for Legal Person/Entity
Annexure
PART 5: LIST OF OTHER RELATED PERSONS

List of Related Persons (other than mentioned above)
Customer ID/number
Annexure
Mention B for Authorised Signatory, D for Introducer. E for Guarantor, Z for others
Mention A for Individuals, B for Legal Person/Entity
Relation
PART 6: DETAILS OF TRANSACTIONS

Transaction Details
Date of Transaction
Debit (D for Debit and C for Credit)
Amount in Rupees
Remarks
PART 7: CUMULATIVE TOTALS
Cumulative Totals
Total debits in the bank account in the financial year
Total credits in the bank account in the financial year
(Total of entries in the bank account from 1st April of the financial year till the date of
reporting)
145
Annexure C.1 Individual Detail Sheet

Use separate for each individual. Kindly fill in CAPITAL.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
Name of bank (with branch)

BSR code
Annexure enclosed with (Tick as applicable)
A. Cash Transaction Report
B. Counterfeit Currency Report
C. Suspicious Transaction Report
Full name of individual
Customer ID/number
(If allotted )
Name of father/spouse
Occupation
Date of birth
Sex (M/F)
Nationality
Identification document
Passport
Election ID card
PAN card
ID card
Driving license
Account introducer
Other (Specify)
Identification number
(Number mentioned in the identification document)
Issuing authority
(Authority which had issued the document)
Place of Issue
(Place where the document was issued)
PAN
Communication address: No., Building
Street/Road
Locality
City/Town, District
State, Country
Pin code
Tel (with STD code)
Mobile number
E-mail
Name of Organisation/Employer
Second Address (Permanent address/Place of work): No., Building
Street/Road
Locality
City/Town, District
State, Country
Pin code
Tel (with STD code)
Annexure C.2 Legal Person/Entity Detail Sheet

146
Use separate annexure for each individual. Kindly fill in CAPITAL.

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22

BSR code
Annexure enclosed with (Tick as applicable)
Name of legal person/entity
Customer ID/number
(If allotted )
Nature of business
Date of incorporation
Type of Constitution
Sole Proprietorship
Partnership Firm
HUF
Society
Association
Trust
Liquidator
LLP
Others (Specify)
Not Categorised
Registration number
(Number mentioned in the deed/document)
Registering Authority
(Authority which had registered the deed/document)
Place of Registration
(Place where the deed/document was registered)
PAN
Communication address : No., Building
Street/Road
Locality
City/Town, District
State, Country
Pin code
Tel (with STD code)
Fax (with STD code)
E-mail
List of directors /partners / members and other related persons
Customer ID/number
Relation
Annexure
Annexure E: Manual Format for Filing Suspicious

Transaction Report
The STR in manual form consists of the following four (4) forms:
147
1. STR Form (Details of suspicious transactions)

2. Annexure D.1 Individual Detail Sheet (Identification details of individual)
3. Annexure D.2 Legal Person/Entity Detail Sheet (Identification details of legal
person /entity)
4. Annexure D.3 Account Detail Sheet (Details of bank account and transactions)
STR Form
PART 1: DETAILS OF REPORT
3.5 Date of sending report
Date of sending report is the date on which the principal officer sends the report to
Director (FIU-IND).
1.2 Is this a replacement to an earlier report?
NO
YES
(Tick as
applicable)
1.3 Date of sending original report if this is a replacement report.
Replacement report is a report submitted in replacement of an earlier STR. When a
replacement report is submitted, date of submitting original STR may be mentioned
and the
complete STR has to be submitted again.
PART 2: DETAILS OF PRINCIPAL OFFICER
2.1 Name of Bank
2.2 BSR code
2.4 Category of bank
2.5 Name of principal officer
2.6 Designation
2.8 Street/Road
2.9 Locality
2.11 State, Country
2.12 Pin code
2.14 Fax
2.15 E-mail
PART 3: DETAILS OF REPORTING BRANCH / LOCATION
Particulars of the branch/location in which the reported accounts are maintained should be
submitted in this part.
3.1 Name of Branch/Location
148
3.2 BSR code

3.5 Street/Road
3.6 Locality
3.8 State, Country
3.9 Pin code
3.11 Fax
3.12 E-mail
PART 4: LIST OF INDIVIDUALS LINKED TO TRANSACTIONS
Customer ID/number may be given if allotted by bank. Enclose a separate Annexure D.1 for
each individual.
Name of Individual
D.1 #
Customer ID/number (if allotted)
Annexure
PART 5: LIST OF LEGAL PERSONS/ENTITIES LINKED TO TRANSACTIONS

Customer ID/number may be given if allotted by bank. Enclose a separate Annexure D.2 for
each legal person/entity. Include the details about individuals (Director/Partner/Member etc.)
related to the legal person/entity
Name of legal person/entity
D.2 #
Customer ID/number (if allotted)
Annexure
PART 6: LIST OF ACCOUNTS LINKED TO TRANSACTIONS

Enclose a separate Annexure D.3 for each account
Account Number
Name of First Account Holder
Annexure D.3 #
PART 7: DETAILS OF SUSPICIOUS TRANSACTION

7.1 Reasons for suspicion (Tick as many as applicable. Multiple selections are possible).
A
Identity of client
accounts
D
Activity in account
transaction
Z
Background of client
Multiple
Nature of transaction
Value of
Other reason (specify)
7.2 Grounds of Suspicion (Mention summary of suspicion and sequence of events)
149
Annexure D.1 Individual Detail Sheet

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32

BSR code
Annexure enclosed with (Tick a as applicable)
D. Cash Transaction Report
E. Counterfeit Currency Report
F. Suspicious Transaction Report
Full name of individual
Customer ID/number
(If allotted )
Name of father/spouse
Occupation
Date of birth
Sex (M/F)
Nationality
Identification document
Passport
Election ID card
PAN card
ID card
Driving license
Account introducer
Other (Specify)
Identification number
(Number mentioned in the identification document)
Issuing authority
(Authority which had issued the document)
Place of Issue
(Place where the document was issued)
PAN
Communication address : No., Building
Street/Road
Locality
City/Town, District
State, Country
Pin code
Tel (with STD code)
Mobile number
E-mail
Name of Organisation/Employer
Second Address (Permanent address/Place of work): No., Building
Street/Road
Locality
City/Town, District
State, Country
Pin code
Tel (with STD code)
Annexure D.2 Legal Person/Entity Detail Sheet

150

23 Name of bank (with branch)
24 BSR code
25 Annexure enclosed with (Tick a as applicable)
D. Cash Transaction Report
E. Counterfeit Currency Report
F. Suspicious Transaction Report
26 Name of legal person/entity
27 Customer ID/number
(If allotted )
28 Nature of business
29 Date of incorporation
30 Type of Constitution
Sole Proprietorship
Partnership Firm
HUF
Society
Association
Trust
Liquidator
LLP
Others (Specify)
Not Categorised
31 Registration number
(Number mentioned in the deed/document)
32 Registering Authority
(Authority which had registered the deed/document)
33 Place of Registration
(Place where the deed/document was registered)
34 PAN
35 Communication address : No., Building
36 Street/Road
37 Locality
38 City/Town, District
39 State, Country
40 Pin code
41 Tel (with STD code)
42 Fax (with STD code)
43 E-mail
44 List of directors /partners / members and other related persons
Customer ID/number
Relation
Annexure
Annexure D.3 Account Detail Sheet
1
2

BSR code
151
Annexure enclosed with (Tick a as applicable)

4 Account Number
5 Type of Account
D. Savings Account
E. Current Account
F. Cash Credit Account
6 Type of Account Holder
F. Individual
G. Legal Person/Entity
H. Central/ State Government
I. Central/ State Government owned undertaking
J. Other
7 Date of Account Opening DD-MM-YYYY
8 List of Account Holders
Customer ID/number
Annexure
Mention A for Individual and B for Legal Person/Entity
9 List of Related Persons (other than mentioned above)
Customer ID/number
Relation
Annexure
Mention B for Authorised Signatory, D for Introducer. E for Guarantor, Z for others
10 Transaction Details
Date of Transaction
Mode (A- Cheque, B- Transfer within Branch, C- Cash, D- Demand Draft, EElectronic Funds Transfer, F- Travellers Cheque, Z-Other (Specify))
Debit (D for Debit and C for Credit)
Amount in Rupees
Remarks
11 Cumulative Totals
Total debits in the bank account in the financial year
Total credits in the bank account in the financial year
(Total of entries in the bank account from 1st April of the financial year till the date of
reporting)
12 Write up about transactions (transactions mentioned in 10 above)
Annexure F: Manual Format for Filing of Counterfeit

Currency Transaction Report
The CCR in manual form consists of the following two (2) forms:
1. Summary of Counterfeit Currency Reports (Contains summary of enclosed CCRs)
2. CCR Form (Details of branch and counterfeit currency)
Summary of Counterfeit Currency Reports
152
PART 1: DETAILS OF THE PRINCIPAL OFFICER

1.1
1.2
1.3
Name of Bank
Branch Reference Number
ID allotted by FIU-IND
ID allotted by FIU-IND may be left blank till the same is communicated by
FIU-IND.
1.4
Category of bank
1.5
Name of principal officer
1.6
Designation
1.7
Address (No., Building)
1.8
Street/Road
1.9
Locality
1.11 State, Country
1.12 Pin code
1.14 Fax
1.15 E-mail
PART 2: STATISTICS
2.1 Number of Counterfeit Currency Reports enclosed
2.2 Total Value of Counterfeit Currency
Total Value of counterfeit currency detected in the enclosed reports. (Sum of
value is
in 2.8 of each CCR).
CCR Form
Kindly fill in CAPITAL. Read the instructions before filling the form.
PART 1: DETAILS OF REPORTING BRANCH/LOCATION
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
1.10
1.11
1.12
Name of Entity
Name of Branch/Location
Branch Reference Number
ID allotted by FIU-IND
Address (No., Building)
Street/Road
Locality
City/Town, District
State, Country
Pin code
Tel (with STD code)
Fax
153
1.13
E-mail
PART 2: DETAILS OF COUNTERFEIT CURRENCY

This section contains the details of counterfeit currency. Total value of counterfeit currency
should match with the total calculated value of Denomination X Number of pieces.
#
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
Denomination Number of Pieces

1,000
500
100
50
20
10
5
Total value of Counterfeit Currency
Value
PART 3: DETAILS OF DETECTION

1.14
1.15
1.16
1.17
1.18
1.19
1.20
Date of Cash Tendering

Total Cash Deposited
Date of Detection
Detected at
A
Cash Counter
B
Branch Level
C
Currency Chest
D
RBI's CVPS
Z
Other
Whether local police station has been informed
Details of FIR (if available)
Additional Information, if any
PART 4: DETAILS OF RELATED PERSONS

4.1 Name of Tendering Person
4.2 Name of Account Holder
4.3 Account / Card No.
154
Yes
No
Checklist for Customer Due Diligence
1 Customer Classification
In order to determine the appropriate information and documentation that must be collected, all the customers at the bank are classified into
distinct constitution types and categories within them.
1.1 Constitution
The information required from the customer is based on the customer type of the account holder and is referred to as the constitution.
The following constitution types are applicable to the Bank:
Individuals: All accounts opened by individuals or groups acting in an individual capacity (e.g. Joint Accounts, Hindu Undivided
Family) are present in this category.
Business Entities: Accounts of specific corporate entities, separate and distinct from the individuals who finance it.
Financial Institutions: Institutions that provide financial services to its members or clients including private, public and co-operative
sector banks as well as non-banking institutions such as money-services businesses and chit funds.
Government, Government Agency or Entity: Any permanent or non-permanent organization in the machinery of the government
including departments, ministries and other types of public bodies.
Trust: Trusts are classified into two types - Public trusts that are generally formed for charitable and religious purposes and are not
intended for commercial activities while private trusts generate income for specified beneficiaries.
Non Profit Organizations: Non-profit organizations or charities can be registered as trusts, societies or a private limited non-profit
company under Section 25 of the Companies Act. These exist independently of the government, are self-governed, produce benefits
for individuals or groups outside the membership of the organization and are prohibited from disbursing monetary residual to
members. Religious organizations are set up primarily for religious purposes and must be registered with the Income Tax
Department.
Societies and Associations: A society or an association is an institution owned by its members in that the funds are raised from
membership and are then used to provide common services to all the members of the organization.
2
Based on these definitions, a particular customer could fit into one or more constitutions listed above but will hold the same customer
risk categorisation value from a KYC and AML compliance standpoint.
1.2 Categories
All the categories for the constitutions can be broadly grouped under individual and entity constitution types as listed below:
1.2.1
Individuals
The constitution type individual consists of the following sub-categories:
Non-Resident Indian: A Non-Resident Indian (NRI) is an Indian citizen who resides out of India for employment, business or other
reasons for an uncertain duration of stay. NRI accounts may provide for special tax and repatriation benefits due to the status of the
account holder.
Foreign National: A foreign national is an individual not of Indian nationality but currently residing in the country for various purposes.
Persons of Indian Origin: A person of Indian origin is an individual who is not a citizen of India but has Indian ancestry and has
obtained a valid PIO card.
Minor: A minor account is an account created and operated in the name of a minor (under the age of 18) and represented by a
guardian or custodian. Upon the minor attaining majority, the right of the guardian to operate the account shall cease.
Staff: Account created and operated by current or past employees of the bank.
Hindu Undivided Family: The Hindu Undivided Family (HUF) is a joint family consisting of members descending from a common
ancestor. A senior member is designated as the Karta responsible for managing the account for the HUF.
Single: Any Indian citizen above the age of 18 and not falling under any of the categories listed above account is considered a single
account holder.
Joint: A joint account type is created in the combined name of all the depositors, each of whom acting in his or her own individual
capacity. A joint account can be created between any number of Individual, Minor, Staff and NRI constitution types.
1.2.2
Entities
Each constitution in the entity section consists of categories as listed below:
Business Entities
Business Entities
Proprietorship
Partnership
Co-operative
Government, Government
Agency or Entity
State Government
Central Government
Government of India Undertaking
Government Authorities,
Autonomous & Regulatory Bodies
Liquidator
Local Bodies
Private Banks
Public Sector Banks
State Co-operative Banks
District Co-operative Banks
Urban Co-operative Banks
Non Profit Organisations

Trust
Society
Section 25 Company
Unregistered Entity
Societies & Associations

Registered
Unregistered
Trusts
Public
Private
Due Diligence Checklist

Checklist
Constituti
on
1
Individual
Category
Non Resident Indian
Basic Due Diligence

Full legal name
Date of birth
Address in India
Country of residence
Visa type for the country of residence

Current residential address
Source of funds
Obtain a copy of passport page containing photograph
to serve as photo identity

Obtain an additional photo identity document from list
provided in the following section
Obtain additional address proof document from list in the
following section
Obtain a copy of passport page containing address to

serve as address proof. If the address does not match
address in India, proof can be provided by establishing
relationship using the documents listed in the following
section
Obtain a copy of a valid visa granted for the current

country of residence
Checklist
Constituti
on
2
Individual
Category
Foreign National
Basic Due Diligence

Full legal name
Address in India
Nationality
Date of birth
Indian visa type
Information on the Indian employer (name, address
etc.).
PEP check

Source of funds
Obtain a copy of passport pages containing valid Indian
visa and photograph. If the home address is displayed
on the passport, obtain a copy of it
Obtain a copy of the appointment letter along with an
affidavit from the current employer verifying the address
of the foreign national
Obtain a copy of the employers PAN card or TIN
Number

Checklist
Constituti
on
3
Individual
Category
Basic Due Diligence

Full legal name
Address in India
Nationality
Date of birth
If applicable, Indian employer information
PEP check

Source of funds
Obtain a copy of the passport pages containing
photograph and address
Obtain a copy of the Person of Indian Origin card
If employed in India, obtain a copy of the appointment
letter along with an affidavit from the current employer
verifying the address of the customer

If available, obtain a copy of the employers PAN card of TIN
number
Checklist
Constituti
on
4
Individual
Category
Minor
Basic Due Diligence

Full legal name
Date of birth of minor account holder
Full name of the guardian
Date of birth of guardian
Relationship of minor account holder with guardian
Address of the guardian

Source of funds
Obtain an affidavit from the guardian indicating the
relationship with the minor. Optionally, obtain a copy of
one of the relationship establishment documents listed
in the following section containing the name of the minor
and the guardian and indicating a relationship between
them.
Obtain a copy of the KYC information (photo and
address proof) of the guardian using the documents in
the following section

guardian from the Preferred Documents list in the
following section
guardian from the Preferred Documents list in the
following section
Checklist
Constituti
on
5
Individual
Category
Staff
Basic Due Diligence

Full legal name
Date of birth
Home address
Employee code or number

For ex-staff, if employed, obtain current employer
information
Source of funds
For ex-staff members, obtain a copy of one photo
identity document out of the listing in the following
section except for the identity provided by the Bank
For ex-staff members, obtain a copy of one address
proof document out of the listing in the following section
except for the identity provided by the Bank. In the case
of address proof not being available, the account holder
can provide the address proof using the KYC
information of another individual and establishing the
relationship using the documents listed in the following
section
For ex-staff members, obtain documentation certifying
past employment with the Bank ( pay slip, letter of
appointment, etc)

Obtain two copies of photo identity proof documents from
the Preferred Documents list in the following section
Preferred Documents list in the following section
Checklist
Constituti
on
6
Individual
Category
Basic Due Diligence

Full legal name of Karta
Date of birth
Home address

Source of funds
Obtain a letter from the designated Karta indicating the
account category as HUF and listing the names of
members of the family
Obtain complete KYC information of the Karta (photo
and address proof) for account opening purposes using
the documents list provided in the following section

Karta from the Preferred Documents list in the following
section
Obtain two copies of address proof documents of the Karta
from the Preferred Documents list in the following section
10
Checklist
Constituti
on
7
Individual
Category
Regular
Basic Due Diligence

Full legal name
Date of birth
Home address

Employer information (name, address and industry sector)
Source of funds
Obtain a copy of one photo identity document out of the
listing in the following section
Obtain a copy of one address proof document out of the
listing in the following section. In the case of address
proof not being available, the client can indirectly
provide proof via a combination of the relationship
establishment documents as listed in the following
section and the KYC (photo and address proof) of the
individual establishing relationship with

Obtain two copies of photo identity proof documents from the
11
Checklist
Constituti
on
8
Individual
Category
Joint
Basic Due Diligence

Full legal name of all the account holders
Date of birth of all account holders
Home address of all the account holders
Relationship between account holders

Obtain all the information for a high risk classification of
each member of the joint account based on their
respective category within the individual constitution
Source of funds
Obtain complete KYC documentation on all account
holders based on their category within the individual
constitution

Obtain all the documentation for a high risk
classification of each member of the joint account
based on their respective category within the individual
constitution
12
Checklist
Constituti
on
9
Business
Entities
Categor
y
Proprietorship
Basic Due Diligence

Name of proprietorship
Address of proprietorship
Full legal name of the proprietor
Home address of the proprietor
Industry sector of proprietorship
Obtain a letter of proprietorship to be completed by the
client
Obtain a copy of any two of the documents under Proof
of Proprietorship Documents listing in the following
section
Obtain KYC documentation of the proprietor (photo and
address proof) from the following section for account
opening purposes

jurisdictions)
etc.)
Source of funds
Copy of financials
proprietor from the Preferred Documents list in the following
section
proprietor from the Preferred Documents list in the following
section
concern
13
Checklist
Constituti
on
10
Business
Entities
Categor
y
Private Limited
Basic Due Diligence

Name of the company
Names and addresses of account operators and beneficial
owners

jurisdictions)
receivable, etc.)
Source of funds
Obtain a copy of the Certificate of Incorporation for the
entity
Association for the entity
business of the entity or any other government registration

post. Optionally, perform a site visit to verify the address
of the concern
14
signers for the account. Optionally, obtain a power of

attorney or official document authorizing the individuals
operating the account
constitution
Checklist
11
Constituti Business
Categor Cooperative
on
Entities
y
Basic Due Diligence

Name of cooperative
Principal address of the cooperative
Industry sector of cooperative
Names and addresses of authorized account operators
and senior managers

jurisdictions)
etc.)
Source of funds
entity
Obtain a copy of the Byelaws of the cooperative

publications
concern
15
constitution
Checklist
Constituti
on
12
Business
Entities
Categor
y
Partnership
Basic Due Diligence

Name of partnership
Office address of the partnership
Telephone/Fax number of the partnership
Names and addresses of all the partners
Industry sector of partnership

jurisdictions)
etc.)
Source of funds
partners
business of the partnership. Or optionally if partnership
is registered, obtain a copy of registration documents
If available, obtain a copy of the PAN card or TIN
number of the entity

concern
16
Obtain a copy of the telephone bill (within 6 months of

account opening date) in the name of the entity or the
partners
Obtain complete KYC documentation of all partners
Checklist
Constituti
on
13
Business
Entities
Categor
y
Basic Due Diligence

Name of the entity
Office address of the entity
Telephone/Fax number of the entity
Names and addresses of all the partners and senior
managers

jurisdictions)
receivable, etc.)
Source of funds
partners
business of the partnership. Or optionally, obtain a copy of the
registration documents
Obtain a copy of the PAN card or TIN information of the entity
Optionally, obtain a power of attorney or legal document

17
authorizing members of the partnership to operate the

account
If available, obtain a copy of the telephone bill (within 6
months of account opening) in the name of the entity
Obtain complete KYC documentation of all partners based on
Checklist
Constituti
on
14
Business
Entities
Categor
y
Public Limited
Basic Due Diligence

Name of the company
Names and addresses of authorized account operators, senior
managers and beneficial owners

jurisdictions)
receivable, etc.)
Source of funds
of the entity. Optionally obtain a government registration
document for the entity

18
Obtain a copy of the Certificate of Incorporation for the entity

Obtain a copy of the Memorandum and Articles of Association
for the entity
signers for the account. Optionally, obtain a power of attorney
or official document authorizing the individuals operating the
account
Checklist
Constituti
on
15
Business
Entities
Categor
y
the entity
Basic Due Diligence

Name of the entity
Mailing address of the entity
Name and address information of Karta and senior managers

jurisdictions)
receivable, etc.)
Source of funds
of the entity. Optionally, obtain any government registration
Obtain a declaration from the Karta regarding the setting up of

19
the account
Obtain all KYC documentation of the Karta based on the
Kartas categorization within the individual constitution
If available, obtain a copy of the PAN card or TIN number of the
entity
Checklist
Constituti
on
16
Trust
Categor
y

Public
Basic Due Diligence

Legal name of trust
Names of trustees, settlors and signatories
Names and addresses of account operators, founders

receivable, etc.)
Purpose of trust
Source of funds
trust
Any officially valid document identifying trustees, settlors
and authorized signatories

20
Obtain complete KYC information of all account

constitution
the authorized signers for the account. Optionally,
obtain a copy of the power of attorney or official
document authorizing the members operating the
account
Checklist
Constituti
on
17
Trust
Categor
y
Private
Basic Due Diligence

Legal name of trust
Purpose of trust
Names and addresses of account operators, trustees,
senior managers and the beneficiaries

etc.)
Source of funds
21
Obtain, if available, a copy of the trust deed
entity
beneficiaries
constitution
Checklist
Constituti
on
18
Categor
y

publications
Obtain name and address of beneficial owners, trustees
and senior managers of the trust
concern
Trust
Low Risk
Legal name of trust
Purpose of trust

22

etc.)
Source of funds
trust
beneficiaries
listing the members authorized to operate the account
constitution
Checklist
Constituti
on
19
Basic Due Diligence
Categor
y

publications
concern
Society

23
Purpose of Society
Names and addresses of account operators, trustees and
beneficial owners
etc.)
Source of funds
entity
constitution
Checklist
Constituti
on
20
Categor
y

publications
concern
Section 25
24
Basic Due Diligence

Legal name of organization
Purpose of organization
Complete address of organization

etc.)
Source of funds
entity
Optionally, obtain a copy of the Annual Reports and
constitution

publications
concern
25
Checklist
Constituti
on
21
Categor
y
Registered
Basic Due Diligence

Purpose of Society

Obtain a copy of the Annual Reports or financial
entity
constitution

publications

etc.)
Source of funds

concern
26
Checklist
Constituti
on
22
Categor
y
Unregistered
Low Risk
Name of Society
Purpose of Society

Optionally, a copy of the Annual Reports or financial
constitution

publications

etc.)
Source of funds

concern
27
Checklist
Constituti
on
23
Entity
y
State Government
Basic Due Diligence

Legal name
Purpose of government body;
Complete address

Obtain an authorization letter from the government
body wishing to open an account indicating the officials
constitution

concern

etc.)
Additional Checks
open the account through an enquiry with the
controlling department of the government
28
Checklist
Constituti
on
24
Entity
y
Basic Due Diligence

Legal name
Complete address
Central Government

etc.)
29

concern
Additional Checks
department of the government
Checklist
Constituti
on
25
Entity
y
Basic Due Diligence

Legal name
Complete address
State
Undertaking
Government

etc.)
30
entity

concern
Additional Checks
Checklist
Constituti
on
26
Entity
y
Basic Due Diligence

Legal name
Complete address
Central Government Undertaking

31
etc.)
entity
constitution

concern
Additional Checks
32
Checklist
Constituti
on
27
Entity
y
Liquidator
Basic Due Diligence

Legal name
Complete address
Name of company under liquidation
Industry sector of company under liquidation


concern

etc.)
Obtain a copy of the court order of appointment to act as

liquidator
33
Checklist
Constituti
on
28
Entity
y
Government Authorities, Autonomous & Regulatory

Bodies
Low Risk
Legal name
Complete address


concern

etc.)
Additional Checks
34
Checklist
Constituti
on
29
Entity
y
Local Bodies
Basic Due Diligence

Legal name
Complete address

constitution

concern

etc.)
Additional Checks
35
Checklist
Constituti
on
30
Financial
Institutions
Categor
y
Public Sector Banks
Basic Due Diligence
Legal name
Complete address
managers
jurisdictions)
receivable, etc.)
Obtain a copy of the RBI registration or license information for
the bank
Obtain a copy of the Memorandum, Certificate of
Incorporation and the Articles of Association for the bank
It is desirable to obtain, in affidavit form, the KYC policy of the
bank

36
Basic Due Diligence

financial year
Checklist
Constituti
on
31
Financial
Institutions
Categor
y
Private Sector Banks
Basic Due Diligence

Legal name
Complete address

jurisdictions)
receivable, etc.)
Obtain a copy of the RBI registration or license
Obtain a copy of the PAN card or TIN of the entity

publications
post. Optionally, perform a site visit to verify the address of
37
Basic Due Diligence

Obtain a copy of the Articles of Association and
Certificate of Incorporation for the bank
If the company is held by a publically traded company,
obtain information on parent companys ownership, listing
and nature of activities
It is desirable to obtain, in affidavit form, the KYC policy of
the bank
constitution

the concern
Obtain name and address of beneficial owners of the bank
38
Checklist
Constituti
on
32
Financial
Institutions
Categor
y
Basic Due Diligence

Legal name
Complete address
Holding bank information (name, address, registration
information)
managers

bank
the bank

concern

jurisdictions)
etc.)
39

constitution
Checklist
Constituti
on
33
Financial
Institutions
Categor
y
Urban Cooperative Banks
Basic Due Diligence

Legal name
Complete address
managers

jurisdictions)
receivable, etc.)
financial year

40

Obtain complete KYC documentation of all account operators based
on their category within the individual constitution
Checklist
Constituti
on
34
Financial
Institutions
Categor
y
Basic Due Diligence

Legal name
Complete address
managers

jurisdictions)
etc.)
bank

publications
41
the bank
Checklist
Constituti
on
35
Financial
Institutions
Categor
y
concern
District Cooperative Banks
Basic Due Diligence

Legal name
Complete address
Names and addresses of account operators and senior managers

Markets serviced (domestic/ international/ high
risk jurisdictions)
receivable, etc.)

42

Obtain a copy of the Byelaws the bank
financial year
Obtain a copy of the board resolution or an official letter requesting
for the creation of the account and indicating the officials
Obtain complete KYC documentation of all account operators based on
Checklist
Constituti
on
36
Financial
Institutions
Categor
y
Basic Due Diligence

Legal name
Complete address
Names and addresses of beneficial

Obtain information on AML measures
implemented

owners,
account

jurisdictions)
receivable, etc.)

43

Obtain a copy of the license to operate for entity or NFBC
status with the Reserve Bank of India
financial year
Obtain a copy of the Memorandum, Articles of Association for
the entity and Certificate of Incorporation for the entity
Checklist
Constituti
on
37
Financial
Institutions
Categor
y



the entity
Basic Due Diligence

Legal name
Complete address

Any additional information on purpose of business
44
jurisdictions)
etc.)
entity
Obtain a copy of the license to operate for entity
Obtain a copy of the Memorandum, Articles of
Association and the Certificate of Incorporation of the
entity
constitution

publications

concern
Obtain name and address of beneficial owners of the entity
List of Officially Valid Documents
45
Verification documents for individuals (identity and address proof) are divided into preferred and acceptable documents. It is recommended that
whenever available, documents from the preferred list should be used for verification purposes.
Photo Identity Documents

Preferred Documents
Driving License
PAN Identity Card
Passport
Voter Identity Card
Aadhaar card*
Govt. Department Identity Card
Letter from MP/MLA/MC/GZ Officer including a notarized photograph
NREGA Job Card*
Social Security Card (If Applicable)
Address Proof Documents

Preferred Documents
Driving License
Passport
Voter Identity Card
Any id containing address issued by Govt.

Bank Account Statement (for six months prior to account opening)
Bank Passbook
Employer certificate (not older than six months from account opening)
Gas Bill (not older than six months from account opening)
Income Tax Return (latest)
Letter from MP/MLA/MC/GZ Officer attesting to address
NREGA Job Card
Residential Permit issued by state police
Water Bill (not older than six months from account opening)
46
* Please note that if the Aadhar Card,

Aadhar Letter or the NREGA Job
card is exclusively provided for KYC
purposes, then the bank account
opened will be subjected to all
conditions
and
limitations
prescribed for small accounts as
described in section 2.4 of the KYC,
AML and CFT Programme.
Relationship Establishment Documents

Listed Documents
Birth Certificate
Marriage Certificate
PAN Card
Passport
School certificate showing relationship
Voter ID Card
Any other document establishing relationship issued by the Govt. of India
Proof of Proprietorship Documents

(Any
documents required in the name of the proprietary c
Listtwo
of Documents
Certificate/license issued by Municipal Authorities under Shop & Establishment Act

Certificate/registration document issued by Sales Tax/Service Tax/ Professional Tax authorities
CST/VAT certificate
License issued by Registering authority like Certificate of Practice issued by Institute of Chartered
Accountants of India, Institute of Cost Accountants of India, Institute of Company Secretaries of India, Indian
medical Council and Food and Drug Control Authorities
Registration certificate issued in the name of the proprietary concern by the Central Government or State
Authority Department
Sales and Income Tax returns
IEC (Importer Exporter Code) issued by the office of DGFT
47

KYC, AML & CFT Programme For State Cooperative Banks

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KYC, AML & CFT Programme For State Cooperative Banks

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KYC, AML & CFT

January 31, 2012

KYC & AML Programme

Original Issue Date:

4th October 2011

High Net-Worth Individual....................................................................................... 11

Controlling Parties .................................................................................................. 11

Financial Intermediary ............................................................................................ 12

Ordering Bank ........................................................................................................ 12

Intermediary Bank .................................................................................................. 13

Legislative and Regulatory Framework ......................................................................... 14

Defined legal frameworks ....................................................................................... 14

Prevention of Money Laundering Act 2002 ..................................................... 14

Rules under PMLA .......................................................................................... 14

Unlawful Activities (Prevention) Act, 1967....................................................... 14

Applicable Regulatory Authorities........................................................................... 14

Reserve Bank of India ..................................................................................... 14

National Bank for Agriculture and Rural Development .................................... 15

Financial Intelligence Unit India.................................................................... 15

Consequences of Non-Compliance ........................................................................ 15

Penalties for Non-Compliance......................................................................... 15

Reputational Risk ............................................................................................ 15

Governing Structure and Roles and Responsibilities at State Cooperative Banks........ 17

Governing Policies and Procedures ....................................................................... 17

Roles and Responsibilities ..................................................................................... 18

Board of Directors ........................................................................................... 18

Senior Management ........................................................................................ 18

Principal Officer ............................................................................................... 18

AML Compliance Group .................................................................................. 19

Audit and Compliance Department ................................................................. 19

Customer Relationship Officer ........................................................................ 19

Customer Classification ................................................................................................. 21

Customer Acceptance Policy......................................................................................... 24

Fictitious or Benami names .................................................................................... 24

Customer Risk Categorisation ................................................................................ 24

Business Imperative ........................................................................................ 24

Application of Rating Methodology.................................................................. 25

Risk categorisation review............................................................................... 27

Appendix I to Chapter 6: Customer Risk Categorisation Variables and Scores ................... 29

Customer Identification and Verification Program ......................................................... 37

Basis for Customer Identification ............................................................................ 37

Walk-in Customers .......................................................................................... 37

Account Holders .............................................................................................. 38

Customer Due Diligence......................................................................................... 38

Basic Due Diligence ........................................................................................ 39

Simplified Due Diligence ................................................................................. 39

Enhanced Due Diligence ................................................................................. 40

Steps to perform EDD ..................................................................................... 40

Special Cases for Documentary Verification ................................................... 40

External Requests for Freezing of Accounts ................................................... 43

Adverse Information Checks ........................................................................... 43

Politically Exposed Person .............................................................................. 44

Appendix I to Chapter 7: Due Diligence Checklist ................................................................ 46

Relaxations to KYC Information Collection Requirements ............................................ 94

Customers through Introducer ................................................................................ 94

Account Opening Process ............................................................................................. 96

Determine Type of the Customer and Obtain Basic Customer Information............ 96

Obtain or Calculate the Customer Risk Categorisation Score................................ 96

Determine If Customer qualifies for Simplified Due Diligence ................................ 96

Verify the Identity of the Customer Using Documentary Methods .......................... 96

Perform Background Checks.................................................................................. 97

Collect Introducer Information ................................................................................ 97

Identify Details for Entity Customers ...................................................................... 98