Page 142 - DMGT303_BANKING_AND_INSURANCE

Unit 7: KYC Norms and Anti Money Laundering

7.2 Obligations under Prevention of Money Laundering Act 2002 Notes

Section 12 of PML Act 2002 has placed certain obligations on every banking institution and
intermediary, which include - (i) Maintaining a record of prescribed transactions, (ii) Furnishing
information of prescribed transactions to the specified authority, (iii) Verifying and maintaining
records of the identity of its clients (iv) Preserving records in respect of (i), (ii) and (iii) above for
a period of ten years from the date of cessation of transactions with the clients.

Definition of Customer

A customer for the purpose of this policy is defined as: (i) a person or an entity that maintains an
account and/or has a business relationship with the Bank; (ii) one on whose behalf the account
is maintained (i.e. the beneficial owner); (iii) beneficiaries of transactions conducted by
professional intermediaries, such as Stock Brokers, Chartered Accountants, Solicitors, etc. as
permitted under the law; and (iv) any person or entity connected with a financial transaction
which can pose significant reputational or other risks to the bank.

Notes Section 12 of PML Act 2002 has placed certain obligations on every banking institution
and intermediary.

Key Elements of the Policy

(i) Customer Acceptance Policy
(ii) Customer Identification Procedures
(iii) Monitoring of Transactions and

(iv) Risk Management
Customer Acceptance Policy: The Bank will: (i) classify customers into various risk categories
and based on risk perception decide on acceptance criteria for each category of customers; (ii)
accept customers after verifying their identity as laid down in Customer Identification Procedures;
(iii) not open accounts in the name of anonymous/fictitious/benami persons; and (iv) while
carrying out due diligence, ensure that the procedure adopted will not result in denial of banking
services to the general public especially those who are financially or socially disadvantaged.

Customer Identification Procedures: The first requirement of customer identification procedures
to be satisfied that (i) a prospective customer is who he/she claims to be, (ii) The second
requirement of customer identification procedures is to ensure that sufficient information is
obtained on the nature of the business that the customer expects to undertake, and any expected,
or predictable, pattern of transactions and the information collected will be used for profiling
the customer, (iii) the identity is to be verified for: (a) the named account holder; (b) the beneficial
owners; (c) the signatories to an account; and (d) the intermediary parties, (iv) The Customer
Identification Procedures are to be carried out at the stages: (a) While establishing a banking
relationship; (b) When the bank feels it is necessary to obtain additional information from the
existing customers based on the conduct or behavior of the account.
Documents to verify the name/identity of the customer: (a) passport, (b) PAN card, (c) voter
identity card, (d) driving license with photograph, (e) identity card, (f) letter from a recognized
public authority verifying the identity and residence of the customer to the satisfaction of the
branch official authorized to open the account, (g) confirmation/letter from employer/other
bank (subject to satisfaction of the branch official authorized to open the account).

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