Guidelines on 'Know Your Customer' norms And Anti-Money Laundering Measures Alm policy

'Know Your Customer' Standards

The objective of KYC guidelines is to prevent banks from being used, intentionally or unintentionally, by criminal elements for money laundering activities. KYC procedures also enable banks to know/understand their customers and their financial dealings better which in turn help them manage their risks prudently. Banks should frame their KYC policies incorporating the following four key elements:

 
  • Customer Acceptance Policy;
  • Customer Identification Procedures;
  • Monitoring of Transactions; and
  • Risk management
 
For the purpose of KYC policy, a 'Customer' may be defined as :

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);

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 bank, say, a wire transfer or issue of a high value demand draft as a single transaction. Customer Acceptance Policy ( CAP )

 
 

Annex-I

Customer Identification Requirements - Indicative Guidelines

Trust/Nominee or Fiduciary Accounts There exists the possibility that trust/nominee or fiduciary accounts can be used to circumvent the customer identification procedures. Banks should determine whether the customer is acting on behalf of another person as trustee/nominee or any other intermediary. If so, banks may 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. While opening an account for a trust, banks 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. Beneficiaries should be identified when they are defined. In the case of a 'foundation', steps should be taken to verify the founder managers/ directors and the beneficiaries, if defined

FATF Capital finserve

The FATF revised the 40 and the IX Recommendations. The revision of the FATF Recommendation was adopted and published in February 2012. See www.fatf-gafi.org/recommendations for the 2012 FATF Recommendations.

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