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Compliance ontrack

Evangelizing Core Compliance across the Branch Banking Franchisee which is the first line of Defense.

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COMPLIANCE ONTRACK
How we manage our business internally—and how we think and work with our customers, partners,
vendors, communities, not to forget the Regulators—impacts our productivity and success. It is not
enough to just do the right things; we have to do them the right way.
The standards of business conduct and the Code of Commitment to Customers are an extension
of Axis Bank’s core values and the foundation for our business tenets. They reflect our collective
commitment to ethical business practices and regulatory compliance. At a higher level, they
summarize, and are supported by, the principles and policies that govern our businesses both in
India and at our overseas offices.
This edition of Compliance on Track covers critical aspects of Regulatory compliance in the
Branch Banking space from a Compliance risk perspective
ACCOUNT OPENING AT BRANCHES
ACTIVITY CONTROL
CHECKING ACCOUNT OPENING FORMS
FOR COMPLETENESS
Checking of Documents towards fulfilment of KYC & AML norms as
specified by bank at the time of Account Opening
Sighting of Originals for verification of documents by sourcing channel
during Account Opening based on Account Type & Constituent and in
accordance to bank's internal guidelines
BOH / BH to scrutinize all AOFs sourced for the day and check for gaps if
any, so that the same can be rectified before sending the forms for
account opening
RBI GUIDELINE ON DEFINITION OF A CUSTOMER, CUSTOMER
ACCEPTANCE POLICY AND RISK PARAMETERS FOR RISK
CATEGORIZATION
DEFINITION OF
CUSTOMER FOR THE
PURPOSE OF KYC AS
PER RBI GUIDELINE
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
Beneficiaries of transactions conducted by professional intermediaries, such as Stock
Brokers, Chartered Accountants, Solicitors etc. as permitted under the law
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
The list of acceptable documents for opening of accounts of individuals and entities is
reviewed periodically and revised instructions disseminated to branches , in line with
RBI guidelines issued from time to time
BASIC TENETS OF KYC POLICY
CUSTOMER ACCEPTANCE Acceptance of legitimate and bonafides customers
CUSTOMER IDENTIFICATION
Correct Identification of customers at the time of Account Opening for assigning
a risk profile to the customer
TRANSACTION MONITORING In Customer Accounts to prevent and detect undesirable activities
RISK MANAGEMENT Identification of Risks posed by customers and their transactions
RISK PARAMETERS
( FOR RISK
CATEGORIZATION)
Parameters of risk perception are clearly defined in terms of:
a ) Nature of business activity
b ) Location of customer and his clients
c ) Mode of payments
d ) Value and Volume of transaction
e ) Social and financial status etc. to enable categorisation of customers into low,
medium and high risk
CUSTOMER
IDENTIFICATION
PROCEDURE
a) Customer identification means identifying the customer and verifying his/her
identity by using reliable, independent source documents, data or information.
b) There are two aspects of Customer Identification. One is establishing identity and
the other is establishing present residential address.
c) To ensure that the latest details about the customer are available, banks have
been advised to periodically update the customer identification data based upon the
risk category of the customers
Identification of Beneficial Owner as per RBI guidelines
Customer
Constitution
Controlling Ownership Interact
Companies Any individual shareholder who is entitled to an ownership of more
than 25% of share or capital or profits
Partnership Firms Any individual partner who is entitled to an ownership of more than
15% of the capital or profits
Unincorporated
association or Body of
Individuals
Any individual member who is entitled to an ownership of more than
15% of profit or capital or property
Trusts Any settler of the Trust , Trustee , the protector , the beneficiaries
with 15% and above interest in the trust and any other natural person
exercising ultimate effective control over the trust
CUSTOMER IDENTIFICATION PROCEDURE
STAGES OF MONEY LAUNDERING
Money Laundering
Placement
Depositing into Accounts Teller / ATM / Electronic Remittances
Conversion of Currency
Exchanging small denomination currency notes for
larger denominations
Cross Border Remittances Remittance of Money Overseas
Layering
The process of separating the proceeds of criminal
activity from their origin.. Disguising the origin
through the movement of funds through multiple
accounts and through various banks / financial
institutions
Use of layers of complex financial transactions :
Loans, Letter of Credits, Investments & Insurance
Integration
The process of using an apparent legitimate
transaction to disguise the illicit proceeds allowing
the laundering of funds to be disbursed back to the
criminal
Funds often are used for payment for operations,
spending on luxury goods or investments in
businesses.
MONEY LAUNDERING
Year - 2005
•Riggs Bank - The Bank invited Augusto Pinochet - Former Dictator of Chile who was
widely accused of corruption, illegal arms, sales to open an account with them
US Senate reported that Riggs executives connived with Pinochet to disguise millions
of dollars that had been stolen from Chilean people
•Wire Transfers - Both Domestic and Cross Border Remittances are fraught with risks
from a point of Money Laundering
• Payment gateways thatfacilitate wire transfers for customers of banks located
anywhere in the world
• Ascertain whether it is regulated at the place of incorporation
• Insist on complete originator information with wire
• Electronic banking services which includes services offered through internet,
credit cards
• Correspondent banking relationships
• Private Banking Relationships
Instances of Money Laundering in Banks
PRODUCTS THAT REQUIRE EXTRA DUE DILIGENCE FROM
AN AML PERSPECTIVE
.
•Customer regularly depositing or withdrawing large amounts by wire transfer to or
from or through countries known for narcotics or where ML laws are lax.
•Sending or receiving frequent large volumes of wire transfers to and from offshore
institutions
•Loan proceeds are wired to offshore bank
•Receiving wire transfers and immediately purchasing monetary instruments
payable to third party.
•Customer pays for a large wire transfer using multiple instruments drawn on several
financial institutions
IBA CHECKLIST – Wire Transfers

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Compliance ontrack

  • 1. COMPLIANCE ONTRACK How we manage our business internally—and how we think and work with our customers, partners, vendors, communities, not to forget the Regulators—impacts our productivity and success. It is not enough to just do the right things; we have to do them the right way. The standards of business conduct and the Code of Commitment to Customers are an extension of Axis Bank’s core values and the foundation for our business tenets. They reflect our collective commitment to ethical business practices and regulatory compliance. At a higher level, they summarize, and are supported by, the principles and policies that govern our businesses both in India and at our overseas offices. This edition of Compliance on Track covers critical aspects of Regulatory compliance in the Branch Banking space from a Compliance risk perspective ACCOUNT OPENING AT BRANCHES ACTIVITY CONTROL CHECKING ACCOUNT OPENING FORMS FOR COMPLETENESS Checking of Documents towards fulfilment of KYC & AML norms as specified by bank at the time of Account Opening Sighting of Originals for verification of documents by sourcing channel during Account Opening based on Account Type & Constituent and in accordance to bank's internal guidelines BOH / BH to scrutinize all AOFs sourced for the day and check for gaps if any, so that the same can be rectified before sending the forms for account opening
  • 2. RBI GUIDELINE ON DEFINITION OF A CUSTOMER, CUSTOMER ACCEPTANCE POLICY AND RISK PARAMETERS FOR RISK CATEGORIZATION DEFINITION OF CUSTOMER FOR THE PURPOSE OF KYC AS PER RBI GUIDELINE 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 Beneficiaries of transactions conducted by professional intermediaries, such as Stock Brokers, Chartered Accountants, Solicitors etc. as permitted under the law 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 The list of acceptable documents for opening of accounts of individuals and entities is reviewed periodically and revised instructions disseminated to branches , in line with RBI guidelines issued from time to time BASIC TENETS OF KYC POLICY CUSTOMER ACCEPTANCE Acceptance of legitimate and bonafides customers CUSTOMER IDENTIFICATION Correct Identification of customers at the time of Account Opening for assigning a risk profile to the customer TRANSACTION MONITORING In Customer Accounts to prevent and detect undesirable activities RISK MANAGEMENT Identification of Risks posed by customers and their transactions
  • 3. RISK PARAMETERS ( FOR RISK CATEGORIZATION) Parameters of risk perception are clearly defined in terms of: a ) Nature of business activity b ) Location of customer and his clients c ) Mode of payments d ) Value and Volume of transaction e ) Social and financial status etc. to enable categorisation of customers into low, medium and high risk CUSTOMER IDENTIFICATION PROCEDURE a) Customer identification means identifying the customer and verifying his/her identity by using reliable, independent source documents, data or information. b) There are two aspects of Customer Identification. One is establishing identity and the other is establishing present residential address. c) To ensure that the latest details about the customer are available, banks have been advised to periodically update the customer identification data based upon the risk category of the customers Identification of Beneficial Owner as per RBI guidelines Customer Constitution Controlling Ownership Interact Companies Any individual shareholder who is entitled to an ownership of more than 25% of share or capital or profits Partnership Firms Any individual partner who is entitled to an ownership of more than 15% of the capital or profits Unincorporated association or Body of Individuals Any individual member who is entitled to an ownership of more than 15% of profit or capital or property Trusts Any settler of the Trust , Trustee , the protector , the beneficiaries with 15% and above interest in the trust and any other natural person exercising ultimate effective control over the trust CUSTOMER IDENTIFICATION PROCEDURE
  • 4. STAGES OF MONEY LAUNDERING Money Laundering Placement Depositing into Accounts Teller / ATM / Electronic Remittances Conversion of Currency Exchanging small denomination currency notes for larger denominations Cross Border Remittances Remittance of Money Overseas Layering The process of separating the proceeds of criminal activity from their origin.. Disguising the origin through the movement of funds through multiple accounts and through various banks / financial institutions Use of layers of complex financial transactions : Loans, Letter of Credits, Investments & Insurance Integration The process of using an apparent legitimate transaction to disguise the illicit proceeds allowing the laundering of funds to be disbursed back to the criminal Funds often are used for payment for operations, spending on luxury goods or investments in businesses. MONEY LAUNDERING
  • 5. Year - 2005 •Riggs Bank - The Bank invited Augusto Pinochet - Former Dictator of Chile who was widely accused of corruption, illegal arms, sales to open an account with them US Senate reported that Riggs executives connived with Pinochet to disguise millions of dollars that had been stolen from Chilean people •Wire Transfers - Both Domestic and Cross Border Remittances are fraught with risks from a point of Money Laundering • Payment gateways thatfacilitate wire transfers for customers of banks located anywhere in the world • Ascertain whether it is regulated at the place of incorporation • Insist on complete originator information with wire • Electronic banking services which includes services offered through internet, credit cards • Correspondent banking relationships • Private Banking Relationships Instances of Money Laundering in Banks PRODUCTS THAT REQUIRE EXTRA DUE DILIGENCE FROM AN AML PERSPECTIVE
  • 6. . •Customer regularly depositing or withdrawing large amounts by wire transfer to or from or through countries known for narcotics or where ML laws are lax. •Sending or receiving frequent large volumes of wire transfers to and from offshore institutions •Loan proceeds are wired to offshore bank •Receiving wire transfers and immediately purchasing monetary instruments payable to third party. •Customer pays for a large wire transfer using multiple instruments drawn on several financial institutions IBA CHECKLIST – Wire Transfers