Kyc aml notes

This Master Circular consolidates instructions on the above matters issued up to June 30, Banks and financial institutions FIs have been advised to follow certain customer identification procedure for opening of accounts and monitor transactions of suspicious nature for the purpose of reporting the same to appropriate authority.

A list of circulars issued from time to time in this regard which are consolidated in this Master Circular is given in Annex — III. Any contravention thereof or non-compliance shall attract penalties under Banking Regulation Act.

2009: Indian Banks’ Association (IBA) KYC and AML standards for India

Utility bill which is not more than two months old of any service provider electricity, telephone, post-paid mobile phone, piped gas, water bill. Pension or family pension payment orders PPOs issued to retired employees by Government Departments or Public Sector Undertakings, if they contain the address.

Letter of allotment of accommodation from employer issued by State or Central Government departments, statutory or regulatory bodies, public sector undertakings, scheduled commercial banks, financial institutions and listed companies.

Similarly, leave and license agreements with such employers allotting official accommodation; and. Documents issued by Government departments of foreign jurisdictions and letter issued by Foreign Embassy or Mission in India.

Parameters of risk perception are clearly defined in terms of the nature of business activity, location of the customer and his clients, mode of payments, volume of turnover, social and financial status, etc.

It is important to bear in mind that the adoption of customer acceptance policy and its implementation should not be too restrictive and which result in denial of banking facility to members of the general public, especially those, who are financially or socially disadvantaged. If an individual customer does not have any of the OVDs as mentioned at paragraph 2. Accordingly, in respect of low risk category customers, where simplified measures are applied, it would be sufficient to obtain a certified copy of any one of the documents referred to at proviso to paragraph 2.

The additional documents mentioned at 2. If an individual customer does not possess either any of the OVDs or the documents applicable in respect of simplified procedure as detailed at paragraph 2. If the OVD submitted for proof of identity does not have the proof of address for e. No proof is required to be submitted by the customer for such address. In the event of any change in this address due to relocation or any other reason, customers should intimate the new address for correspondence to the bank within two weeks of such a change.

Banks are advised that KYC verification once done by one branch of the bank should be valid for transfer of the account within the bank if full KYC verification has been done for the concerned account and is not due for periodic updation.

With the introduction of phone and electronic banking, increasingly accounts are being opened by banks for customers without the need for the customer to visit the bank branch. In the case of non-face-to-face customers, apart from applying the usual customer identification procedures, there must be specific and adequate procedures to mitigate the higher risk involved. Certification of all the documents presented should be insisted upon and, if necessary, additional documents may be called for.

In such cases, banks may also require the first payment to be effected through the customer's account with another bank which, in turn, adheres to similar KYC standards. In such cases, it must be ensured that the third party is a regulated and supervised entity and has adequate KYC systems in place.They also play an important role in blockchain-based crypto assets and bitcoin BTC too.

kyc aml notes

Do you really have to upload a selfie of you holding your passport just to trade crypto? Banks are expected to take steps to verify the identity of their customers. To verify their identity and complete KYC verification, customers might have to upload identification documents.

Similarly, in the crypto world, investors may be required to complete KYC verification before participating in an ICO or trading on an exchange. KYC, in other words, is the basic identity verification process used by banks, exchanges, and financial institutions. In most jurisdictions, you cannot sign up for a bank account anonymously. You must give the institution your name and other personal information.

This is KYC in a nutshell. Regulations vary between states and countries. Anti-Money Laundering AML is similar to KYC but with a broader scope: AML refers to measures used by financial institutions and governments to prevent and combat financial crimes, especially crimes involving money laundering, criminal financing, or terrorist activity.

CFT became a crucial part of financial verification starting in late After the September 11, attacks, countries realized they needed to take action to combat the financing of terrorism. KYC is the basic identity verification process used by banks and other financial institutions. AML refers to the measures used by banks and other financial institutions to combat illegal activity — like money laundering or terrorist financing.

KYC is the identity verification process financial institutions use to identify their clients. An Anti-Money Laundering program can consist of all of the following:. CDD may have identified a handful of customers perceived to have a higher risk, for example.

What is the difference between AML and KYC?

These customers are required to complete EDD. These individuals are perceived to have a higher risk because they are more likely to launder money or finance terrorism using the financial institution. Thus, individuals identified through EDD will be regulated and monitored to a higher standard. You make transactions on behalf of your brother-in-law to avoid triggering AML procedures, although your brother-in-law is the ultimate beneficial owner.

Politically Exposed Persons PEPs : P olitically exposed persons PEP verification can identify individuals who are at risk of being bribed or coerced into making certain transactions. These individuals might be identified as high-risk simply because they could be coerced into making problematic transactions — even if the individual is otherwise trustworthy.

A customer may start as a no-risk individual, for example, before gradually progressing to a high-risk individual. AML Compliance Training Programs for Staff: Good financial institutions implement AML policies at every level of the organization — from the automated onboarding system to every level of employee.

Employees will receive training in how to spot, monitor, and report high-risk individuals. These systems will check to verify no high-risk individuals or high-risk transactions have slipped through the cracks.

Automated AML software is far more efficient for any financial institution. Step 3 Upload a photo of the individual holding the selected proof of identity document.

Some verification systems even use blockchain technology to enhance the process. Within less than a year of its creation, the FATF delivered a report containing 40 recommendations. These recommendations described a path towards ending money laundering. As ofa total of 39 countries or regional coalitions have joined the FATF. You can view the full list here. A criminal who has obtained money through illegal means may try to pass that money through a legal business — like any cash-based business.

Ultimately, the money cannot be traced back to the criminal or illegal activity.

kyc aml notes

There are all sorts of ways to launder money. Some criminals use legal businesses to launder money.Use coupon code TOP15 on all courses. Important links: About us Our results Work with us. Login Sign Up.

Know Your Customer

Published on Monday, November 14, It is a process of conversion of illegal money from various sources to appear to have originated from legitimated Legal source. By illegal money we mean to say that the money which has come from illegal sources like drug trading, Smuggling of Gold, Sand etc. The major sources of illegal money are tax evasion, bribe, Smuggling etc. Mostly all financial institutions or government bodies which is wholly or partially governed by government have also been directed to look into this matter if any one find any suspicious activity in any accounts.

Basically money laundering is divided in 3 stages namely 1. It refers to the initial entry point of money. In this stage placement of money occurs through various channels like Placing money in bank account, Smuggling money to abroad, etc. It is the second stage of money laundering. It refers to the complex network of transaction which obscure the link between initial entry point and the end of laundry cycle i.

In this stage the money placed is transferred to various account in small units so as to disrupt among various investments like in business, investments in lands, share market, etc. It is the last stage of money laundering. It refers to the return of funds to the legal economy. Basically integration means merging, consolidate or joining. According to the act a convicted will force rigorous impersonated of 3 to 7 years and fine up to Rupees 5 Lakh. Enforcement Directorate ED.

Objectives 1.In India, there had been laws and regulations for quite some time to address certain aspects of money laundering prevention, like Criminal Law Amendment Ordinance for attachment of proceeds of certain crimes or Reserve Bank of India RBI instructions regarding identification requirements for opening of the bank accounts. Although these Guidance Notes are designed primarily to cover the activities of banks, the contents are generally applicable to other financial institutions and intermediaries covered under the PMLA and are required to adopt KYC Standards.

It should be noted that these Guidance Notes issued by IBA are voluntary and recommendatory in nature. When tailored by a bank to its own risk management architecture and business processes, these Guidelines provide a safety net in respect of Rules and Regulations pertaining to AML.

It may please be noted that these Guidance Notes is an IBA document and the information contained therein is only for the guidance of the industry and ease of understanding of the legal provisions, and for legal purposes the provisions contained in the PMLA and rules there under and instructions issued by RBI from time to time would be applicable.

Report link: here. Sign in. Log into your account. Password recovery. NewsPaper Empowering invstigations. Saturday, April 18, AMLabc Empowering investigations.

AMLabc Empowering invstigations. The Financial Action Task Force leads renewed global effort to counter terrorist financing. Myanmar central bank issues anti-money laundering guidelines.Know your customer KYC is a bank regulation that financial institutions and other regulated companies must perform to identify their clients and ascertain relevant information pertinent to doing financial business with them. What are Objectives of KYC? Money laundering is a growing menace and it not only poses serious threat to the stability and integrity of the financial system but also to the sovereignty and safety of nations worldwide.

In the coming days, challenges before banks would primarily lie in saving themselves from the growing threat of money laundering. These standards have become the international benchmark for framing Anti Money Laundering and combating financing of terrorism policies by the regulatory authorities. KYC discipline assumes critical importance especially in the light of our concerted efforts to widen the reach of banking as part of financial inclusion initiatives.

Once these standards are achieved, a unified KYC for banking system could be thought of. It will relieve the burden comparable on the intermediaries as well as the common man, seeking to make investments.

kyc aml notes

The committee was set up by RBI and if the recommendations are accepted, Bank account holders can expect better standards of service and more secure ways of doing business.

The system avoids duplication of customer details and is interoperable, which means that other market participants can share the data and bring in more uniformity. Know Your Customer. Banks are being extensively sensitised about money laundering and KYC norms.

In India Banks were advised to follow certain customer identification procedure for opening of accounts and monitoring transactions of a suspicious nature for the purpose of reporting it to appropriate authority. Cancel Reply.Post a Comment. Terrorism Financing are 3 types A. State financing: Separate entities are created with organizational and financial support of the state B. Legimate modes : Donations by business,individuals and charity funds C. Private funding:by criminal activities by bank robberies, drug trafficking, kidnaps,exortion.

Money laundering can take several forms, although most methods can be categorized into one of a few types. These include "bank methods, smurfing [also known as structuring], currency exchanges, and double-invoicing". Structuring: Often known as smurfing, this is a method of placement whereby cash is broken into smaller deposits of money, used to defeat suspicion of money laundering and to avoid anti-money laundering reporting requirements.

A sub-component of this is to use smaller amounts of cash to purchase bearer instruments, such as money orders, and then ultimately deposit those, again in small amounts. Such enterprises often operate openly and in doing so generate cash revenue from incidental legitimate business in addition to the illicit cash — in such cases the business will usually claim all cash received as legitimate earnings. Examples are parking structures, strip clubs, tanning salons, car washes, arcades, bars, restaurants, and casinos.

For example, the art market has been accused of being an ideal vehicle for money laundering due to several unique aspects of art such as the subjective value of artworks as well as the secrecy of auction houses about the identity of the buyer and seller. Trusts and corporate vehicles, depending on the jurisdiction, need not disclose their true owner.

Sometimes referred to by the slang term rathole, though that term usually refers to a person acting as the fictitious owner rather than the business entity. A variant on this is to transfer money to a law firm or similar organization as funds on account of fees, then to cancel the retainer and, when the money is remitted, represent the sums received from the lawyers as a legacy under a will or proceeds of litigation.

The individual will then play for a relatively short time. When the person cashes in the chips, they will expect to take payment in a check, or at least get a receipt so they can claim the proceeds as gambling winnings. One way to minimize risk with this method is to bet on every possible outcome of some event that has many possible outcomes, so no outcome s have short odds, and the bettor will lose only the vigorish and will have one or more winning bets that can be shown as the source of money.

The losing bets will remain hidden.

KYC and AML Statement

To outsiders, the proceeds from the sale look like legitimate income. Alternatively, the price of the property is manipulated: the seller agrees to a contract that underrepresents the value of the property, and receives criminal proceeds to make up the difference. Dirty money might be used to pay them. Acquiring banks, which process transactions for merchants who accept credit cards.

Third-party processors, which contract with issuing or acquiring banks to provide transaction processing andother credit card—related services for the banks.

kyc aml notes

Credit card accounts are not likely to be used in the initialplacement stage of money laundering because the industrygenerally restricts cash payments. They are more likely to be usedin the layering or integration stages. Example Money launderer Josh prepays his credit card using illicit funds that he has already introduced into thebanking system, creating a credit balance on his account.Post a Comment.

The PMLA has been further amended vide notification dated March 6, and inter alia provides that violating the prohibitions on manipulative and deceptive devices, insider trading and substantial acquisition of securities or control as prescribed in Section 12 A read with Section 24 of the Securities and Exchange Board of India Act, SEBI Act will now be treated as a scheduled offence under schedule B of the PMLA.

Customer Identification Procedure CIP : Customer identification means undertaking client due diligence measures while commencing an account-based relationship including identifying and verifying the customer and the beneficial owner on the basis of one of the OVDs Small Accounts If an individual customer does not possess either any of the OVDs or the documents applicable in respect of simplified procedure as detailed at paragraph 2.

Where a customer categorised as low risk expresses inability to complete the documentation requirements on account of any reason that the bank considers to be genuine, and where it is essential not to interrupt the normal conduct of business, the bank may complete the verification of identity within a period of six months from the date of establishment of the relationship.

Students with Pakistani and Bangladesh nationality will need prior approval of the Reserve Bank for opening the account. Where the customer is a company, one certified copy each of the following documents are required for customer identification: a Certificate of incorporation; b Memorandum and Articles of Association; c A resolution from the Board of Directors and power of attorney granted to its managers, officers or employees to transact on its behalf and d An officially valid document in respect of managers, officers or employees holding an attorney to transact on its behalf.

Where the customer is a partnership firm, one certified copy of the following documents is required for customer identification: a registration certificate; b partnership deed and c an officially valid document in respect of the person holding an attorney to transact on its behalf. Where the customer is a trust, one certified copy of the following documents is required for customer identification: a registration certificate; b trust deed and c an officially valid document in respect of the person holding a power of attorney to transact on its behalf.

When the client accounts are opened by professional intermediaries: When the bank has knowledge or reason to believe that the client account opened by a professional intermediary is on behalf of a single client, that client must be identified. Banks may hold 'pooled' accounts managed by professional intermediaries on behalf of entities like mutual funds, pension funds or other types of funds.

Banks, however, should not open accounts of such professional intermediaries who are bound by any client confidentiality that prohibits disclosure of the client details to the banks. Where funds held by the intermediaries are not co-mingled at the bank and there are 'sub- accounts', each of them attributable to a beneficial owner, all the beneficial owners must be identified.

Where such funds are co-mingled at the bank, the bank should still look into the beneficial owners. Where the banks rely on the 'customer due diligence' CDD done by an intermediary, they should satisfy themselves that the intermediary is a regulated and supervised entity and has adequate systems in place to comply with the KYC requirements of the customers. It should be understood that the ultimate responsibility for knowing the customer lies with the bank. Explanation- For the purpose of this sub-clause- 1.

KYC exercise should be done at least every two years for high risk customers, every eight years for medium risk customers and every ten years for low risk customers. Such decisions, however, need to be taken at a reasonably senior level. No comments:. Newer Post Older Post Home.


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