The "Know Your Customer" (KYC) guidelines issued by the National Housing Bank aims at preventing the Housing Finance Companies (HFCs) from being used intentionally or unintentionally by criminal elements for committing financial frauds, transferring or deposits of funds derived from criminal activity or for financing terrorism. Accordingly, the Company has prepared the policy on 'Know Your Customer and Anti-Money Laundering Measures' which will be applicable to all the Branches and must be complied with by all the Branch Managers, frontline staff, compliance staff and the staff dealing with the customers. This policy document is in accordance with various guidelines issued by the National Housing Bank as also by our Company for proper identification of an account holder/ customer and for scrutiny/ monitoring of large value cash transaction or transaction of a suspicious nature.
- To lay down explicit criteria for acceptance of customers.
- To establish procedures to verify the bona-fide identification of individuals/ non individuals customers.
- To establish processes and procedures to monitor high value cash transactions and /or transactions of suspicious nature.
- To develop measures for conducting due diligence in respect of customers and reporting of such transactions.
- To manage the risk.
For the purpose of KYC policy, a "customer" will be defined as :
- A person or entity that maintains an account and/or has a business relationship with the Company.
- One on whose behalf the account is maintained (i.e. the beneficial owner);
- Beneficiaries of transactions conducted by professional intermediaries such as Stock Brokers, Company Secretaries, Chartered Accountants, Solicitors etc. as permitted under the law, and
- Any person or entity connected with a financial transaction which can pose significant reputation or other risks to the Company, say a wire transfer or issue of a high value demand draft as a single transaction.
The Company will have to ensure that elaborate standard procedures are in place on the following aspects of customer relationships in HFCs.
- No account is opened in anonymous or fictitious/benami name(s).
- Obtaining comprehensive information depending on the perceived risk and in accordance with the guidelines issued by the National Housing Bank regarding new customers at the initial stage.
- Ascertaining the volume of turnover, social and financial status, etc. to enable categorization of customers into low, medium and high risk.
- No account is to be opened unless the verification of the client is obtained.
- Collecting information and documents in respect of different categories of customers depending on perceived risk and keeping in mind the requirements of The Prevention of Money Laundering Act (PML Act), 2002 and guidelines issued from time to time. The customers that are likely to pose a higher than average risk to the Company must be categorised as medium or high risk depending on customers background, nature and location of activity, country of origin, sources of funds and client profile, etc.The Company may apply enhanced due diligence measures based on the risk assessment, thereby requiring intensive 'due diligence' for higher risk customers, especially those for whom the sources of funds are not clear. Examples of customers requiring higher due diligence may include :
- Non-resident customers
- High net worth individuals
- Trusts, charities, NGOs and organizations receiving donations
- Companies having close family shareholding or beneficial ownership
- Firms with 'sleeping partners'
- Politically exposed persons (PEPs) of foreign origin
- Non-face to face customers and
- Those with dubious reputation as per public information available etc.
- If the Company is unable to apply appropriate KYC measures due to non-furnishing of information and /or non-cooperation by the customer, the Company may consider closing the account or terminating the business relationship after issuing due notice to the customer explaining the reasons for taking such a decision. Such decisions need to be taken at a reasonably senior level after consulting the Principal Officer.
The Company must undertake adequate steps to ensure that the implementation of this policy must not become too restrictive and must not result in denial of the Company's services to general public, especially to those, who are financially or socially disadvantaged.
Customer identification means identifying the customer and verifying his/ her/ its identity by using reliable, independent source documents, data or information. The Company at the time of commencement of an account–based relationship, must obtain the necessary information to establish the identity of each new customer, whether regular or occasional and the purpose of the intended nature of relationship. The Company must carry out the identification procedure at different stages, i.e. while establishing a relationship; carrying out a financial transaction or when the Company has a doubt about the authenticity/veracity or the adequacy of the previously obtained customer identification data.
All customers will be evaluated on a set of pre-defined parameters and accordingly classified into any of the following categories:
- Low Risk
- Medium Risk
- High Risk – This category of customers will not be actively sourced by the Company. Any customer, identified as High Risk, and funded by the Company basis exceptional comfort and availability of justifying mitigants. The extent and nature of due diligence will be the highest for this Category.
- All salaried profiles
- Small proprietors, partners with clearly identifiable, related and relatively stable source of income since the last 2/3 years as the case maybe
- Standard of living that is consistent with income sources established through both documents and visits to business place
- Face to face customer (unless specifically identified as high or medium risk)
- Customer whose source of income can be easily identified and transactions in whose accounts by and large conform to the known profile (unless specifically identified as high or medium risk)
- All salaried profiles
- Government departments & Government owned companies, regulators and statutory bodies
- Customers belonging to the restricted profiles as defined in the policy manual from time to time
- Customers with inconsistent incomes year on year
- Bullion dealers (including sub dealers)
- High Net Worth customers (Customers that have relationship values across various banks/FIs in excess of Rs 10 crs)
- Trusts, Charities, NGOs and other organizations receiving donations – Healthcare Equipment finance provided to hospitals, clinics etc run by such organizations that have been in existence for a long time and are established, reputed set ups will be categorized as low risk. NGOs promoted by the United Nations will also be classified as low risk.
- Large Companies with close family shareholding or beneficial ownership
- Country of origin not established
- Stability of place of residence/office not established
- Firms with “sleeping partners”
- Politically Exposed Persons and related individuals/entities
- Non-Resident customers (Main applicant)
- High Net Worth customers (Customers that have relationship values across various banks/FIs in excess of Rs 20 crs)
- Non face to face customers
- Those with dubious reputation as per public information available
The periodicity of updation of KYC documents should be as follows:
- Low Risk customers: Once in every five years
- High Risk and medium risk customers: Once in every one year.
Identity cards from the customers for fulfilling the above should be collected as part of the updation exercise.
In all other cases excluding account-based relationship, the Company shall verify identity while carrying out transaction of an amount
Accounts of Natural Persons
The true identity and bonafides of the existing customers and new potential customers opening accounts with the Company and obtaining basic background information would be of paramount importance.
- The Company will obtain sufficient identification data to verify
- The identity of customer
- His / her address / location and
- His/ her recent photograph.
- The customer identification will be through an introductory reference from an existing customer with a satisfactorily conducted account or a person known to the Company and on the basis of documents provided by the customer or through staff members knowing the potential customer or any other document from the indicative lists given in Annexure 1 for identification and proof of residence.
- In addition to the above, the Company must also ask the applicants to give an additional document e.g. a letter from the employer giving the correct address, Bank Statement, credit card statement etc. In case of joint account, applicants who are not closely related to each other would be required to establish their identity and address independently.
- In respect of NRI accounts, introduction and authentication/ verification of signatures will be made by a bank/Indian embassy/ High Commissioner/ Consulate/ Notary Public/ Persons known to the Company.
- For establishing identity or proof of residence, Ration Card will normally not be used as document. However, in the event of non-availability of any other document, Ration Card may also be accepted as proof of residence from Minors/Illiterate persons or house wives etc. who are unable to produce other documents.
The Company shall follow the above Client Identification Programme to determine the true identity of the clients.
Accounts of Legal Persons or Entities
- The Company must verify the legal status of the legal person/ entity through proper and relevant documents as indicated in the Annexure 1.
- The Company must verify the identity of any person purporting to act on behalf of the legal person/entity and whether he/ she is so authorized and understand the ownership and control structure of the customer and determine who are the natural persons who ultimately control the legal person.
- In case of client accounts opened by a professional intermediary, the Company will not only identify the client / beneficial owner but also satisfy itself that the intermediary is regulated and supervised and has adequately system in place to comply with KYC norms.
- In the case of non-face-to-face customers, apart from applying the usual customer identification procedures, adequate care must be taken to mitigate the higher risk involved. Certification of all the documents presented must be insisted upon and, if necessary, additional documents may be called for.
- For various types of non individual, the documents stated against their names in Annexure 1 and any other documents/ introduction that the Company feels necessary to comply with KYC guidelines will be obtained for identification.
For the purpose of exercising due diligence on individual transactions in accounts, a 'Customer Profile' of individual customers will be included in the loan application. The customer profile will contain information relating to the customers identity, social/ financial status, nature of business activity, information about the customers clients' business and their location etc. Any other information from the customer should be sought separately with his/her consent and after opening the account.
The Company must take adequate measures to educate the customer on the objectives of the KYC programme, especially at the time of obtaining sensitive or personal information from the customers.
The Company must ensure that adequate measures are taken to cover proper management oversight, systems and controls, segregation of duties, training and other related matters. Responsibility should be explicitly allocated within the Company for ensuring that the housing finance companies' policies and procedures are implemented effectively. The Company must also devise procedures for creating Risk Profiles of their existing and new customers and apply various Anti Money Laundering measures keeping in view the risks involved in a transaction, account or business relationship.
The Company will categorize the customers according to the risk perceived to facilitate undertaking due diligence for the purpose of risk categorization.
Ongoing monitoring is an essential element of effective KYC procedure. Company can effectively control and reduce its risk only if it has an understanding of the normal and reasonable activity of the customer so that it has the means of identifying transactions that fall outside the regular pattern of activity.
An illustrative list of Suspicious Transactions are attached as an Annexure 2.
The Company must pay special attention to all complex, unusually large transactions and all unusual patterns which have no apparent economic or visible lawful purpose. The Company must also have understanding of the normal and reasonable activity of the customer so that they have the means of identifying transactions that fall outside the regular pattern of activity in order to effectively control and reduce the risk. Transactions that involve large amounts of cash inconsistent with the normal and expected activity of the customer should be noted and must be reported to the Corporate Office.
The Company must ensure that proper records of all cash transactions of Rs.10 Lakhs and above are maintained. The branches must report such transactions and other transactions of suspicious nature to the Corporate Office of the Company on a fortnightly basis.
The cash transactions will be monitored in the following manner :
The transactions involving cash withdrawals and/ or cash deposits for Rs.10 Lakhs and above or Rupees equivalent in Foreign Currency in deposit or loan accounts as well as all series of cash transactions integrally connected to each other which have been valued below Rs.10 Lakhs or its equivalent in Foreign Currency where such series of transactions have taken place within a month and the aggregate value of such transactions exceeds Rs.10 Lakhs; will be monitored closely by the branches and the record of details of such transactions will be kept in separate register and must be reported to the Principal Officer.
Suspicious Transactions means a transaction whether or not made in cash which, to a person acting in good faith
- gives rise to a reasonable ground of suspicion that it may involve the proceeds of crime; or
- appears to be made in circumstances of unusual or unjustified complexity; or
- appears to have no economic rationale or bonafide purpose.
All the transactions of suspicious nature, irrespective of any monetary ceiling (whether more than 10 Lakhs or not), whether or not made in cash should be reported to the Principal Officer of the Company. Further, the Principal Officer of the Company shall intimate such suspicious or cash transaction to FIU – India within the stipulated period. The reporting formats of suspicious transactions are attached to the Circular No. NHB (ND)/DRS/ POL-No-14 /2006 dated July 25, 2006.
The Company shall appoint Company Secretary or a senior management officer as the Principlal Officer of the Company. Such principal officer shall be located at the Head Office of the Company.
The Company must envisage having an ongoing employee training programme so that the members of the staff are adequately trained in KYC procedures. Training requirements will have different focuses for frontline staff, compliance staff and staff dealing with new customers. It is crucial that all those concerned fully understand the rationale behind the KYC policies and implement them consistently and effectively.
The Company must also take appropriate steps to evolve a system for proper maintenance and preservation of account information in a manner that allows data to be retrieved easily and quickly whenever required or when requested by the competent authorities. Further, the Company must also preserve and maintain all necessary records pertaining to the identification of the customer and his address (e.g. copies of documents like passports, identity cards, driving licenses, PAN, utility bills etc.) obtained while opening the account and during the course of business relationship for at least ten years from the date of cessation of transaction between the Company and the customer, so as to provide, if necessary, evidence for prosecution of persons involved in criminal activity.
The Company shall maintain proper record of the following transactions:
- Any transaction which is suspicious in the nature
- All cash transactions of the value of more than Rs.10 Lakhs or its equivalent in foreign currency
- All series of cash transactions integrally connected with each which has value less than Rs.10 Lakhs where series of transactions have taken place within a month and aggregate value of such transactions exceeds Rs. 10 Lakhs.
- All cash transactions where forged or counterfeit currency notes or bank notes are used.
- All transactions involving receipts by non-profit organizations of Rs.10 Lakhs or its equivalent in foreign currency.
All the Branch Managers are required to report the cash transactions and transactions of suspicious nature as defined earlier on a regular basis to the Principal Officer. The Branch Managers must furnish the details of the transactions in the prescribed forms on monthly basis within 10 days of the close of month.
Audit of KYC documents and system is carried out for all loan clients. Internal audit checklist is maintained for verification carried out. Monthly reports are issued for all key deficiencies noted and implementation verified by the internal auditor.
Salient internal audit observations with the implementation status are placed in the quarterly audit committee meetings.
This policy is made in accordance with the guidelines issued by the National Housing Bank. Considering the objectives and purpose of the KYC policy and AML measures, all the Branch Managers, frontline staff, compliance staff and the staff dealing with the customers are required to implement this policy effectively and with immediate effect.
For India Infoline Housing Finance Limited
|#||KYC Document||Individual||NRI||HUF||Sole Proprietorship||Partnership Firm||Pvt Ltd Co.||Public Ltd Co.|
|2||Valid Indian Driving License||Y||Y||Y|
|4||Voter's ID Card||Y|
|5||Valid Identity Card issued by Govt org., PSU's, Armed Forces, Statutory / Regulatory Auth, Recognized Professional bodies like ICAI, ICWAI, ICSI, Bar council, Indian Medical Association established under central or state statutes, members of trade bodies / councils||Y|
|6||Utility Bills not more than 3 months old with name & address (Telephone Bill or Electricity / Water Bill)||Y||Y||Y||Y||Y|
|7||Ration Card/PDS Photo Card||Y||Y|
|8||Valid pensioner Photo Card||Y|
|9||Valid CGHS/ECHS Photo Card||Y|
|10||Letter from a recognized public authority or public servant verifying the identity & residence of the customer (not more than 30days old)||Y|
|11||Registered sale/Lease Deed copy / Rent Agreement Copy in the name of the customer (not more than 1 year)||Y||Y||Y||Y||Y|
|12||Existing banker's attestation (not more than 30 days old)||Y||Y||Y||Y||Y||Y||Y|
|13||Valid Shops & Establishment License with latest renewal stamp /latest Municipal registration||Y||Y||Y||Y|
|14||Copy Registered / Deed duly signed by all partners||Y|
|15||Acknowledged Certified Copy of AOA & MOA||Y||Y|
|16||Certificate copy of incorporation||Y||Y|
|17||Certificate copy of commencement of business||Y|
|18||Acknowledged Form # 18 (change in address)||Y||Y|
|19||Bank Statement (printed on bank's letterhead)/ Passbook (not more than 3 months old)||Y||Y||Y||Y||Y||Y||Y|
|20||Registered Property title documents||Y||Y||Y||Y||Y||Y||Y|
|21||Property Tax receipt issued by State/Municipal Corporations (not more than 3 months old)||Y||Y||Y||Y||Y||Y||Y|
|22||Continuous Discharge certificate from Maritime Authority of a Govt for a ship farer with a photo||Y||Y|
|23||Sales Tax / VAT Registration / Service Tax Registration in the name of the customer / Import Export License||Y||Y||Y||Y||Y||Y||Y|
|24||Valid SEBI registration Certificate||Y||Y||Y||Y||Y||Y||Y|
|25||Valid Registration # issued by ROC||Y||Y||Y||Y||Y||Y||Y|
|26||Post office Account Statement/Pass book (not more than 3 months old)||Y||Y|
|27||Income Tax Assessment Order||Y||Y||Y||Y||Y||Y|
|28||Aadhar Card (UID)||Y|
- At least one document verifying identity, Signature & Address Proof should be collected.
- Valid Passport & Valid Driving License are generally accepted as Identity Proof, however, these documents can be accepted as address proof if the address mentioned thereon matches with the address of the applicant.
- Identity Card Issued by Govt Org, PSU, Armed Forces, ICAI etc can be accepted only if he is currently in service or in case of continuing membership (Not to be accepted as a valid document for Retired Army, Navy or Air Force Officer).
- KYC Norms mentioned above shall apply evenly to borrowers, co-borrowers & guarantors.
- In case of proprietorship, partnership, corporates & HUFs, copies of KYC documents need to be self certified by owners / partners/ directors / co-partners of the entity and originals need to be seen and verified by an authorized person.
- In case of non-individuals, people such as partners / directors / valid POA holders & authorized signatories purporting to act on behalf of legal person shall be subjected to KYC verification and KYC documents need to be collected shall be in line with individuals.
- Builder approaching the HFC for a small loan compared to the total cost of the project;
- Builder is unable to explain the sources of funding for the project;
- Approvals/sanctions from various authorities are proved to be fake.
- Customer is reluctant to provide information, data, documents;
- Submission of false documents, data, purpose of loan, details of accounts;
- Refuses to furnish details of source of funds by which initial contribution is made, sources of funds is doubtful etc;
- Reluctant to meet in person, represents through a third party/Power of Attorney holder without sufficient reasons;
- Approaches a branch/office of a HFC, which is away from the customer's residential or business address provided in the loan application, when there is HFC branch/office nearer to the given address;
- Unable to explain or satisfy the numerous transfers in the statement of account/ multiple accounts;
- Initial contribution made through unrelated third party accounts without proper justification;
- Availing a top-up loan and/or equity loan without proper justification of the end use of the loan amount;
- Suggesting dubious means for the sanction of loan;
- Where transactions do not make economic sense;
- There are reasonable doubts over the real beneficiary of the loan and the flat to be purchased;
- Encashment of loan amount by opening a fictitious bank account;
- Applying for a loan knowing fully well that the property/dwelling unit to be financed has been funded earlier and that the same is outstanding;
- Sale consideration stated in the agreement for sale is abnormally higher/lower than what is prevailing in the area of purchase;
- Multiple funding of the same property/dwelling unit;
- Request for payment made in favour of a third party who has no relation to the transaction;
- Usage of loan amount by the customer in connivance with the vendor/builder/developer/broker/agent etc. and using the same for a purpose other than what has been stipulated;
- Multiple funding / financing involving NGO / Charitable Organisation / Small / Medium Establishments (SMEs) / Self Help Groups (SHGs) / Micro Finance Groups (MFGs);
- Frequent requests for change of address;
- Overpayment of instalments with a request to refund the overpaid amount.