Know Your Customer
This document details the Know Your Customer (KYC) guidelines and Anti-Money Laundering guidelines to be followed by the company effective April 1, 2011. This policy will be reviewed annually or on the basis of any material change in the regulatory requirements or business operations of the Company.
The said policy & measures will enable the company to know and understand its customers and their financial dealings better which in turn will help it manage risks prudently. The policy and measures will further help in preventing the company being used, intentionally or unintentionally by unscrupulous and criminal elements for money laundering activities.
For the purpose of KYC policy, a ‘Customer’ is defined as:
- a person or entity that maintains an account and/or has a business relationship with the Company;
- beneficiaries of transactions conducted by professional intermediaries, such as Stock Brokers, Chartered Accountants, Solicitors etc. as permitted under the law, and
- any person or entity connected with a financial transaction which can pose significant reputational or other risks to the Company.
Customer Acceptance Policy (CAP)
- Every bank should develop a clear Customer Acceptance Policy laying down explicit criteria for acceptance of customers. The Customer Acceptance Policy must ensure that explicit guidelines are in place on the following aspects of customer relationship in the bank.
- No account is opened in anonymous or fictitious/benami name.
- Documentation requirements and other information to be collected in respect of different categories of customers depending on perceived risk and keeping in mind the requirements of PML Act, 2002 and instructions/guidelines issued by National Housing Bank from time to time.
- It is important to bear in mind that the adoption of customer acceptance policy and its implementation should not become too restrictive and must not result in denial of Company services to general public, especially to those, who are financially or socially disadvantaged.
- In the event the applicant is either of the following, the loan may be operated by the designated officer of such applicants subject to necessary documents being made available allowing such persons to operate the loan account and which are in conformity with the laws and practices of the land;
- Private Limited/Limited Company;
- Partnership firm.
- Company should prepare a profile for each new customer based on risk categorisation. The customer profile may contain information relating to customer’s identity, social/financial status, nature of business activity, information about his clients’ business and their location etc. The nature and extent of due diligence will depend on the risk perceived by the Company.
- In addition to what has been indicated above, Company should take steps to identify and assess their risk for customers and geographical areas as also for products/ services/ transactions/delivery channels, Company should have policies, controls and procedures, duly approved by their boards, in place to effectively manage and mitigate their risk adopting a risk-based approach.
- Necessary checks before granting loan to new customer so as to ensure that the identity of the customer does not match with any person with known criminal background or with banned entities such as individual terrorists or terrorist organisations etc.
TYPES OF RISK CATEGORIZATION OF CUSTOMER
For the purpose of risk categorisation, individuals:
-entities whose identities and sources of wealth can be easily identified and transactions in whose accounts by and large conform to the known profile, may be categorised as low risk. Illustrative examples of low risk customers are
- Salaried employees whose salary structures are well defined and salary is paid by cheque;
- People belonging to government departments, Public Sector Units, Public Limited Companies, Multinational Companies etc;
- Self-employed customers with proper income documents such as ITR, P&L and Balance sheets etc.
customers would include :
- Salaried applicants with variable income/unstructured income receiving
salary in cheque
- Salaried applicants working with Private limited companies
- Self Employed professionals other than HNIs
- Self Employed customers with sound business and profitable track record
for a reasonable period
- High Net worth Individuals with occupational track record of more than 3
: These are the customers that are likely to pose a higher than average risk to us may be categorized high risk customers depending on customer's background, nature and location of activity, country of origin, sources of funds and his client profile, etc. The Company will examine the case in details based on the risk assessment as per our credit risk policy and guidelines of operations manual. Examples of high risk customers requiring higher due diligence may include
- Non-resident customers
- High net worth individuals, without an occupational track record of more than 3 years.
- Trusts, charities, NGOs and organizations receiving donations.
- Companies having close family shareholding or beneficial ownership,
- Firms with 'sleeping partners'
- Politically exposed persons (PEPs) of foreign origin,
- Non-face to face customers
- Those with dubious reputation as per available public information, etc.
Customer Identification Procedure (CIP)
- The policy approved by the Board of Company should clearly spell out the Customer Identification Procedure to be carried out at different stages, i.e., while establishing a Customary relationship; carrying out a financial transaction or when the Company has a doubt about the authenticity/veracity or the adequacy of the previously obtained customer identification data.
- Customer identification means identifying the customer and verifying his/her identity by using reliable, independent source documents, data or information. Company need to obtain sufficient information necessary to establish, to their satisfaction, the identity of each new customer, whether regular or occasional, and the purpose of the intended nature of Customary relationship
- Customer identification requirements in respect of a few typical cases, especially, legal persons requiring an extra element of caution. Company may, however, frame their own internal guidelines based on their experience of dealing with such persons/entities, normal Company prudence and the legal requirements as per established practices
- Due diligence for High risk customer identification will be as follows
- Address proof will be obtained from all applicants prior to granting a loan. The documents which can be accepted as proof of residence are mentioned in ANNEXURE I;
- Non-resident customers , due diligence including email verification of employment of the customer, collection of a local guarantor & power of attorney along with their identification proofs and verification of their residence/office will be done, if found necessary.
- High net worth individuals , with less than three years occupational track record due diligence including personal discussion with the applicant, analysis of bank statement and financial statements will be done, details of client profile, sources of fund will be obtained, if required.
- Trusts, charities, NGOs and organizations receiving donations, as and when such cases are received due diligence to be undertaken as for other cases in the high risk categories.
- Companies having close family shareholding or beneficial ownership, due diligence including personal discussion with the applicant will be done. In case of company's proportionate income being considered to the extent of the customer's Shareholding in the company- board resolution authorising the director(s) to sign on behalf of the company will be collected. Also signature verification of the person(s) issuing the board resolution will be collected, if necessary.
- Firms with 'sleeping partners’, due diligence including personal discussion with the applicant will be done. If income of the partnership firm is being considered then The Company will collect a letter signed by all the partners authorising the concerned partner(s) to sign on behalf of the partnership to be continued. Also signature verification of the person(s) issuing this authority letter will be collected, if necessary.
Customer Identification Requirements – Indicative Guidelines
In case of salaried employees, it is clarified that with a view to containing the risk of fraud, Company should rely on certificate/letter of identity and/or address issued only from corporate and other entities of repute and should be aware of the competent authority designated by the concerned employer to issue such certificate/letter. Further, in addition to the certificate/letter issued by the employer, company should insist on at least one of the officially valid documents as provided in the Prevention of Money Laundering Rules (viz. passport, driving licence, PAN Card, Voter’s Identity card, etc.) or utility bills for KYC purposes for loan purpose.
Trust/Nominee or Fiduciary Accounts
There exists the possibility that trust/nominee or fiduciary accounts can be used to circumvent the customer identification procedures. Company should determine whether the customer is acting on behalf of another person as trustee/nominee or any other intermediary. If so, company should insist on receipt of satisfactory evidence of the identity of the intermediaries and of the persons on whose behalf they are acting, as also obtain details of the nature of the trust or other arrangements in place. For a loan purpose, the company should take reasonable precautions to verify the identity of the trustees and the settlors of trust (including any person settling assets into the trust), grantors, protectors, beneficiaries and signatories.
Accounts of companies and firms
Company need to be vigilant against business entities being used by individuals as a ‘front’ for obtaining loan with Company. Company should examine the control structure of the entity, determine the source of funds and identify the natural persons who have a controlling interest and who comprise the management. These requirements may be moderated according to the risk perception e.g. in the case of a public company it will not be necessary to identify all the shareholders.
Client accounts opened by professional intermediaries:
When the Company has knowledge or reason to believe that the client account opened by a professional intermediary like Direct Selling Agent or Direct selling team or any other sales intermediary by whatever name called is on behalf of a single client, that client will be identified. Where the Company relies on the 'customer due diligence' (CDD) done by an intermediary like Field investigation agency or technical agency or lawyer or any other operation processing intermediary by whatever name called, the Company will ensure that the intermediary is having a bonafide identity with an established track record.
Accounts of non-face-to face customers:
In the case of non-face-to-face customers, apart from applying the usual customer identification procedures, The Company will do telephonic/personal discussion with the applicant, if necessary. Applicant will be met by the Sales representative of the Company and will fill up the meeting sheet on that basis to mitigate the higher risk involved, as applicable. Certification of all the documents presented may be insisted upon and, if necessary, additional documents may be called for and applicable verification of these documents will be done. In the case of cross-border customers, there is the additional difficulty of matching the customer with the documentation and the Company may have to rely on third party certification/introduction. In such cases, it will be ensured that generally the third party is a regulated and/or supervised entity with an established track record. Hence apart from the existing due diligence for such customers The Company may take resident Indian Co-applicant as a party to the loan proposal or a local resident guarantor to the loan with identity verification.
Monitoring of Transactions
- Ongoing monitoring is an essential element of effective KYC procedures. Since The Company is a housing finance company and all our loans are tenure based with a fixed/variable installment paid through electronic clearing system (ECS) mandate or postdated cheques our monitoring structure will be relevant to our nature of operations. The Company will pay special attention to all unusually large transactions involving large cash and The Company has introduced cash transaction reporting system above Rupees ten lakh. Risk categorization as is mentioned in this policy may be updated as and when required by the management. In case of overdue/default accounts where there is scope for meeting or vetting the profile of this customer again, due diligence if found necessary will be carried out. Subsequent to our sanction, during the period of part disbursement till full disbursement if any unusual transaction/development comes to our knowledge relating to money laundering the same will be verified and notified as required, The Company will ensure that a record of transactions in the accounts is preserved and maintained as required in terms of section 12 of the PML Act, 2002. The Company will ensure that transactions of suspicious nature as defined in ANNEXURE II and/or any other type of transaction notified under section 12 of the PML Act, 2002, is reported to the appropriate law enforcement authority, as and when detected by our officials through the Principal Officer.
- The Company will maintain proper record in accordance with the PML Act, 2002, of all cash transactions (deposits and withdrawals) of Rupees Ten Lakh and above. As a matter of policy, the Company does not accept deposits in cash over Rupees Ten Lakh, No loan is disbursed in cash and No monthly installment above Rupees Ten Lakh is accepted in cash. Any transactions of suspicious nature as per ANNEXURE II are to be reported to the Principal Officer immediately. In addition thereto, the Braches shall on monthly basis furnish a certificate to the Principal Officer evidencing that neither such prohibited transactions and/nor cash transaction as specified in the policy have taken place.
- The Board of Directors of the Company should ensure that an effective KYC programme is put in place by establishing appropriate procedures and ensuring their effective implementation. It should cover proper management oversight, systems and controls, segregation of duties, training and other related matters.
- The Company's internal audit department will evaluate and ensure adherence to the KYC policies and procedures. They will check and verify the application of KYC procedures at the branches and comment on the lapses observed in this regard. The compliance in this regard will also be put up before the Audit Committee of the Board as and when they meet. In addition to this, the Audit Committee will also ensure that the periodic evaluation of the Company's policies and procedures are done to ensure legal and regulatory compliance.
- The Company will apply KYC norms for all existing loan customers on the basis of materiality and risk envisaged by it for such loan accounts;
- Maintenance of Records of Transactions ( As per Rule 3 of the Prevention of Money Laundering Rules 2005) :
- The Company will maintain proper record of the under mentioned transactions:
- All cash transactions of the value of more than rupees one million or its equivalent in foreign currency;
- All series of cash transactions integrally connected to each other which have been valued below rupees one million or its equivalent in foreign currency where such series of transactions have taken place, within a month;
- All cash transactions where forged or counterfeit currency notes or bank notes have been used as genuine and where any forgery of a valuable security has taken place; any such transactions;
- All suspicious transactions as mentioned in ANNEXURE II.
- Records to contain the specified information: The records maintained shall contain the following:-
- the nature of the transactions;
- the amount of the transaction and the currency in which it was denominated;
- the date on which the transaction was conducted.
- Reporting to Financial Intelligence Unit-India: The Principal officer will report information relating to cash and suspicious transactions if detected to the Director, Financial Intelligence Unit-India (FIU-IND) as advised in terms of the PMLA rules, in the prescribed formats as designed and circulated by NHB at the following address:
Financial Intelligence Unit-India,
6th Floor, Hotel Samrat,
New Delhi -110021
A copy of information furnished shall be retained by the Principal Officer for the purposes of official record.
The Company shall ensure that the provisions of PML, Rules framed thereunder and the Foreign Contribution and Regulation Act, 1976, wherever applicable, are adhered to strictly. FCRA regulate the acceptance and utilization of foreign contribution or foreign hospitality received by certain specified persons or associations such as candidates for election, journalist, Judges/Government servants, political party, etc.
However, law permits certain persons or associations to accept the foreign contribution with the approval of the Central Government, as per the provisions of FCRA. In those cases, copy of approval or letter of intimation shall be taken from the customer.
Customer identification procedure features to be verified and documents that will be obtained from customers
Particulars & Features
Accounts of individuals:
Legal name and any other names used
- PAN card
- Voter's Identity Card
- Driving license
- Aadhar card
- Identity card (subject to the Company's satisfaction)
- Letter from a recognized public authority or public servant verifying the identity and residence of the customer to the satisfaction of the company
- A notarised affidavit in case the customer does not have any of the above document
Correct permanent address
- Telephone bill
- Bank Account statement
- Letter from any recognized public authority
- Electricity bill
- Ration card
- Letter from employer (subject to satisfaction of the Company)( any one document which provides customer information to the satisfaction of the Company will suffice) One recent passport size photograph except in case of transactions referred to in Rule 9(1)(b) of the PML Rules.
- Rent Agreement
- A notarised affidavit in case the customer does not have any of the above documents.
Accounts of companies:
- Name of the company
- Principal place of business
- Mailing address of the company
- Telephone/Fax Number
- Certificate of incorporation and Memorandum & Articles of Association
- Resolution of the Board of Directors to open an account and identification of those who have authority to operate the account
- Power of Attorney granted to its managers, officers or employees to transact business on its behalf
- Copy of PAN allotment letter
- Copy of the telephone bill
Accounts of partnership firms:
- Legal name
- Names of all partners and their addresses
- Telephone numbers of the firm and partners
- Registration certificate, if registered
- Partnership deed
- Power of Attorney granted to a partner or an employee of the firm to transact business on its behalf
- Any officially valid document identifying the partners and the persons holding the Power of Attorney and their addresses
- Telephone bill in the name of firm/partners
List of Suspicious Transactions Pertaining to House Loans:
- Customer is reluctant to provide information, data, documents;
- Submission of false documents, data, purpose of loan, details of accounts;
- Refuses to furnish details of source of funds by which initial contribution is made, sources of funds is doubtful etc;
- Reluctant to meet in person, represents through a third party/Power of Attorney holder without sufficient reasons;
- Approaches a branch/office of the company, which is away from the customer's residential or business address provided in the loan application, when there is Company branch/office nearer to the given address;
- Initial contribution made through unrelated third party accounts without proper justification;
- Availing a top-up loan and/or equity loan, without proper justification of the end use of the loan amount;
- Suggesting dubious means for the sanction of loan;
- Where transactions do not make economic sense;
- There are reasonable doubts over the real beneficiary of the loan and the flat to be purchased;
- Encashment of loan amount by opening a fictitious bank account;
- Applying for a loan knowing fully well that the property/dwelling unit to be financed has been funded earlier and that the same is outstanding;
- Sale consideration stated in the agreement for sale is abnormally higher/lower than what is prevailing in the area of purchase;
- Multiple funding of the same property/dwelling unit;
- Usage of loan amount by the customer in connivance with the vendor/builder/developer/broker/agent etc. and using the same for a purpose other than what has been stipulated;
- Multiple funding / financing involving NGO / Charitable Organization / Small / Medium Establishments (SMEs) / Self Help Groups (SHGs) / Micro Finance Groups (MFGs);
- Frequent requests for change of address;
- Overpayment of installments with a request to refund the overpaid amount.