Preamble :In terms of the guidelines issued by the Reserve Bank of India on the 29th November, 2004 on Know Your Customers (KYC) Standards - Anti Money Laundering (AML) Measures, banks are required to put in place a comprehensive policy framework covering KYC Standards and AML Measures. The guidelines issued by the Reserve Bank of India take into account the recommendations made by the Financial Action Task Force (FATF), an inter governmental agency, on AML Standards and on combating financing of terrorism. The guidelines also incorporate aspects covered in the Basel Committee document on customer due diligence which is a reflection of the international financial community's resolve to assist law enforcement authorities in combating financial crime. This policy document is prepared in line with the RBI guidelines and incorporate the Bank's approach to customer identification procedures, customer profiling based on the risk perception and monitoring of transactions on an ongoing basis.

Definition of Money Laundering :Section 3 of the Prevention of Money Laundering (PML) Act, 2002 has defined the "Offence of money laundering as under :-

 "Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party   or   is  actually  involved in any process or activity connected with the proceeds of  crime and projecting it as untainted property shall be guilty of offence of money  laundering."

 Money launderers use the banking system for cleansing 'dirty money' obtained from criminal activities with the objective  of hiding/disguising its source. The process of money laundering involves creating a web of financial transactions so as to hide the origin and true nature of these funds.

For the purpose of this document, the term money laundering would also cover financial transactions where the end use of funds goes for terrorist financing irrespective of the source of the funds.

Obligations under Prevention of Money Laundering (PML) Act, 2002
Section 12 of PML Act, 2002 places certain obligations on every banking company, financial institution and intermediary, which include.

• maintaining a record of prescribed transactions-

• furnishing information of prescribed transactions to the specified authority

• verifying and maintaining records of the identity of its clients.

• preserving records in respect of (i), (ii) (iii) above for a period of ten years from the date of cessation of transaction with the clients.

These requirements would come into effect after Govt. of India frames rules under the Act.

Money Laundering - Risk Perception: Money Laundering activities expose the Bank to various risks such as operational risks, reputation risk, compliance risk and legal risk.

• To prevent criminal elements from using the Banking System for money laundering activities.

• To enable the Bank to know / understand the customers and their financial dealings better, which in turn would help the Bank to manage risks prudently.

• To put in place appropriate controls for detection and reporting of suspicious activities in accordance with applicable laws/laid down procedures.

• To comply with applicable laws and regulatory guidelines.

• To take necessary steps to ensure that the concerned staff are adequately trained in KYC/AML Procedures.

Scope :This policy is applicable to all branches/offices of the Bank and is to be read in conjunction with related operational guidelines issued from time to time.

Definition of a Customer :A customer for the purpose of this policy is defined as :

• A person or an 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 transactions.

Key Elements of the Policy :

• Customer Acceptance Policy

• Customer Identification Procedures

• Monitoring of Transactions; and

• Risk Management

Customer Acceptance Policy The Bank will :

• classify customers into various risk categories and based on risk perception decide on acceptance criteria for each category of customers;

• accept customers after verifying their identity as laid down in Customer Identification Procedures;

• Not open accounts in the name of anonymous/fictitious/benami persons;

• strive not to inconvenience the general public, especially those who are financially or socially disadvantaged.

Customer Identification Procedures :The first requirement of customer identification procedures is to be satisfied that a prospective customer is who he/she claims to be.

The second requirement of customer identification procedures is to ensure that sufficient information is obtained on the nature of the business that the customers expects to undertake and any expected or predictable pattern of  transactions.

The information collected will be used for profiling the customer.

 Identity to be verified for :-

• The named account holder

• Beneficial owners

• Signatories to an account and

• Intermediate parties.

The Customer Identification Procedures are to be carried out at the following stages

• While establishing a banking relationship

• when the Bank feels it is necessary to obtain additional information from the existing customers based on the conduct or behavior of the account.

Wherever applicable, information on the nature or business activity, location, mode of payments, volume of turnover, social and financial status etc. will be collected for completing the profile of the customer.

Customers will be classified into three risk categories namely High Medium and Low, based on the risk perception. The risk categorization will be reviewed periodically.

Customer Identification will be carried out in respect of non-account holders approaching bank for high value one-off transaction as well as any person or entity connected with a financial transaction which can pose significant reputational or other risks to the Bank.

Monitoring of Transactions : Monitoring of transactions will be conducted taking into consideration the risk profile of the account. Special attention will be paid to all complex, unusually large transactions and all unusual patterns which have no apparent economic or visible lawful purpose. Transactions that involve large amounts of cash inconsistent with the normal and expected activity of the customer will be subjected to detailed scrutiny.

After due diligence at the appropriate level in the Bank, transactions of suspicious nature and/or any other type of transaction notified under PML Act, 2002 will be reported to the appropriate authority and a record of such transactions will be preserved and maintained for a period as prescribed in the Act.

Risk Management :While the Bank has adopted a risk based approach to the implementation of this policy. It is necessary to establish appropriate framework covering proper management oversight, systems, controls and other related matters.

Bank's Internal Audit of compliance with KYC/AML Policy will provide an independent evaluation of the same including legal and regulatory requirements. Concurrent/Internal Auditors shall specifically check and verify the application of KYC/AML procedures at the branches and comment on the lapses observed in this regard. The compliance in this regard will be placed before the Audit Committee of the Board at quarterly intervals.

 All employees training programmes will have a module on KYC Standards - AML Measures so that members of the staff are adequately trained in KYC/AML procedures. 

The Principal Officer designated by the Bank in this regard will have an important responsibility in managing oversight and coordinating with various functionaries in the implementation of KYC/AML Policy.

Customer Education :The Bank recognizes the need to spread awareness on KYC, Anti Money Laundering measures and the rationale behind them amongst the customers and shall take suitable steps for the purpose.

Introduction of New Technologies : Bank will pay special attention to the money laundering threats arising from new or developing technologies and take necessary steps to prevent its misuse for money laundering activities. Bank will ensure that appropriate KYC Procedures are duly applied to the customers using the new technology driven products.

KYC for the existing accounts :While the KYC guidelines will apply to all new customers, the same would be applied to the existing customers on the basis of materiality and risk. However, transactions in existing accounts would be continuously monitored for any unusual pattern in the operation of the accounts. On the basis of materiality and risk the existing accounts of companies, firms, trusts, charities, religious organizations and other institutions are subjected to minimum KYC standards which would establish the identity of the natural/legal person and those of the 'beneficial owners' Similarly, the Bank will also ensure that term/recurring deposit accounts are subject to revised KYC procedures at the time of renewal of the deposits on the basis of materiality and risk.

Branches and subsidiaries outside India :This policy shall also apply to the branches, subsidiaries and majority owned joint ventures located abroad to the extent local laws permit. Based on this policy, each foreign office is required to put in place an Anti Money Laundering Policy (duly approved), which shall also contain, the KYC guidelines and Suspicious Activity Reporting (SAR) Procedures as may be required by the rules and regulations of the host country.

Correspondent Banking :This Policy will apply to our dealings with correspondent banks. For correspondent banking relationship an appropriate due diligence procedure will be laid down keeping in view KYC Standards existing in the country where the correspondent bank is located and the track record of the correspondent bank in the fight against money laundering and terrorist financing.

Principal Officer (Money Laundering Reporting Officer) :Bank will designate a senior officer as Principal Officer who shall be responsible for implementation of and compliance with this policy.

His illustrative duties will be as follows -

• Monitoring the implementation of the Bank's KYC/AML Policy.

• Reporting of Transactions and sharing of the information as required under the law.

• Maintaining liaison with law enforcement agencies.

• Ensuring submission of periodical reports to the Top Management/Board.

Review of the Policy :The Policy will be reviewed at yearly intervals or as and when considered necessary by the Board.