KYC Norms, (AML) and (CFT)

1. INTRODUCTION

In order to prevent banks and other financial institutions from being used as a channel for Money Laundering (ML)/ Terrorist Financing (TF) and to ensure the integrity and stability of the financial system, efforts are continuously being made both internationally and nationally, by way of prescribing various rules and regulations. Internationally, the Financial Action Task Force (FATF) which is an inter-governmental body established in 1989 by the Ministers of its member jurisdictions, sets standards and promotes effective implementation of legal, regulatory and operational measures for combating money laundering, terrorist financing and other related threats to the integrity of the international financial system. India, being a member of FATF, is committed to upholding measures to protect the integrity of international financial system.

In India, the Prevention of Money-Laundering Act, 2002 and the Prevention of Money- Laundering (Maintenance of Records) Rules, 2005, form the legal framework on Anti- Money Laundering (AML) and Countering Financing of Terrorism (CFT). In terms of the provisions of the PML Act, 2002 and the PML Rules, 2005, as amended from time to time by the Government of India, Regulated Entities (REs) are required to follow certain customer identification procedures i.e., KYC Norms while undertaking a transaction either by establishing an account-based relationship or otherwise and monitor their transactions.

  1. Accordingly, the SGS Fintech Private Limited (Formerly known as SGS Udyog Private Limited). has put in place a comprehensive Policy on Know Your Customer (KYC) norms, Anti-Money Laundering (AML) measures and Combating the Financing of Terrorism (CFT) measures, framed in line with the RBI’s Master Direction – “Know Your Customer (KYC) Direction, 2016 (as updated from time to time)” and the Bank’s approach to KYC, AML and CFT issues.

2.  OBJECTIVE, SCOPE AND APPLICATION

  • The primary objective of the KYC, AML & CFT Policy of the Non Banking Financial Companies is to prevent the Company from being used, intentionally or unintentionally, by criminal elements for money laundering or financing of terrorism.
  • Where local applicable laws and regulations prohibit implementation of these guidelines, the same should be brought to the notice of RBI.
  • In case there is a variance in KYC/AML/CFT standards prescribed by RBI our Company will update the policies accordingly.

3.  KEY ELEMENTS OF THE POLICY

The KYC/AML/CFT Policy of the Company contains the following key elements:

  • Borrower Acceptance Policy (CAP)
  • Borrower Identification Procedures (CIP)
  • Risk Management
  • Transactions Monitoring

4.  BORROWER DUE DILIGENCE PROCEDURE IN CASE OF NON-INDIVIDUALS INCLUDING CORPORATES, SOLE PROPRIETORSHIP FIRM, PARTNERSHIP FIRM AND LIMITED LIABILITY PARTNERSHIP FIRM

For granting loans of non-individuals (entities), following identification information of individuals, who are Proprietor(s) / Partner(s) / Beneficial Owner(s) /Authorized Signatories shall be obtained:-

  1. the Permanent Account Number of the entity as well as their representatives such as Proprietor(s) / Partner(s) / Beneficial Owner(s) /Authorized Signatories or the equivalent e-document thereof or Form No. 60 as defined in Income-tax Rules, 1962 and
  2. Recent Photograph; and
  3. the Aadhaar number,

OR any valid documents including:-

  1. Passport,
    1. the Driving License,
    1. Proof of possession of Aadhaar Number,
    1. the Voter’s Identity Card issued by the Election Commission of India,
    1. Job Card issued by NREGA duly signed by an officer of the State Government and
    1. Letter issued by the National Population Register containing details of name and address.

Along with following documents of Non individuals such as:-

  1. GST Registration certificate, if any
  2. Pan card

Besides prescribed application forms and photographs of persons who will be operating the account, documents as per different Entity Types (i.e., Proprietorship, Partnership, Limited Liability Partnerships, Companies etc) are required for such accounts.

5.  PERIODIC UPDATION

Periodic updation of KYC documents (or Re-KYC) shall be carried out as per the risk-category wise periodicities prescribed by the RBI in Master Direction on KYC (as updated from time to time).

6.  SECRECY OBLIGATIONS AND SHARING OF INFORMATION

  • Our Company will maintain secrecy regarding the borrower information which arises out of the contractual relationship between the lender and borrower.
  • Information collected from borrower for the purpose of lending of loan shall be treated as confidential and details thereof shall not be divulged to anyone, for any other purpose without the express permission of the borrower.
  • The exceptions to the said rule shall be as under:
    • Where disclosure is under compulsion of law
    • Where there is a duty to the public to disclose,
    • Where the disclosure is made with the express or implied consent of the borrower.

7.BORROWER ACCEPTENCE POLICY

Our Company SGS Fintech Private Limited, has framed following Borrower acceptance policy:-  

  1. Proper KYC should be in place before lending or borrowing loan from/to any Borrower.
  2. KYC should be obtained from the explicit consent of customer.
  3. Where Permanent Account Number (PAN) is obtained, the same shall be verified from the verification facility of the issuing authority.
  4. Where an equivalent e-document is obtained from the customer, Our Company shall verify the digital signature as per the provisions of the Information Technology Act, 2000 (21 of 2000).

8.CUSTOMER IDENTIFICATION PROCEDURE (CIP)

Adequate steps are taken by our Company to satisfy themselves that copies of identification data and other relevant documentation relating to the customer due diligence requirements shall be made available from the third party upon request without delay.

9.RISK MANAGEMENT

Customers shall be categorised as low, medium and high-risk category, based on the assessment and risk perception of the RE Broad principles may be laid down by the REs for risk-categorisation of customers.

Risk categorisation shall be undertaken based on parameters such as customer’s identity, social/financial status, nature of business activity, and information about the customer’s business and their location, geographical risk covering customers as well as transactions.

10.  KYC/AML/CFT Policy of the SGS Fintech Private Limited covers various other aspects such as:

  1. Money Laundering and Terrorist Financing Risk Assessment
  2. Enhanced due diligence
  3. Simplified due diligence
  4. Identification of Beneficial Owner
  5. Central KYC information with Central KYC Records Registry (CKYCR)
  6. KYC non-compliant/ KYC discrepant accounts
  7. Identification of Politically Exposed Persons (PEPs)
  8. Furnishing information & maintenance of records of transactions
  9. Preservation of records
  10. Reporting requirements to Financial Intelligence Unit – India
  11. Monitoring of transactions
  12. Hiring of employees and employee training