KNOW YOUR CUSTOMER [KYC] & ANTI MONEY LAUNDERING MEASURES POLICY
Pursuant to the notification issued by the National Housing Bank on Fair Practices Code guidelines vide its notifications/Circular No. NHB (ND)/DRS/Pol-No.13/2006 dated 10th April, 2006, the Board of Directors of the Company in its meeting held on 19th 2011 had approved and adopted the “Know Your Customer & Anti Money Laundering Measure Policy” (KYC & AML Policy) to know/understand their customers and their financial dealings better which in turn help them manage their risks prudently and prevent HFCs from being used, intentionally or unintentionally, by criminal elements for money laundering activities
As part of the best corporate practices and to be in lines with the amendment in the guidelines issued by the National Housing Bank from time to time Home First Finance Company India Limited (HomeFirst) revises the “KYC & AML Policy” from time to time.
As per NHB guidelines on KYC & AML policy HFC is required to have in place a KYC & AML Policy for its lending / credit operations / financial dealings in line with extant guidelines framed therein. Keeping this in view the Company has framed its KYC & AML Policy in accordance with NHB guidelines as issued from time to time. The policy has the following four key elements:
- Customer Acceptance Policy;
- Customer Identification Procedures;
- Monitoring of Transactions; and
- Risk management.
2. POLICY FUNDAMENTALS AND DEFINITION
- For the purpose of KYC Guidelines, a “customer” shall 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.
- “Central KYC Records Registry” (CKYCR) means an entity defined under Rule 2(1)(aa) of the Rules, to receive, store, safeguard and retrieve the KYC records in digital form of a customer.
- “Designated Director” means a person designated by the Company to ensure overall compliance with the obligations imposed under chapter IV of the PML Act and the Rules and shall include, the Managing Director or a whole-time Director, duly authorized by the Board of Directors.
Explanation. – For the purpose of this clause, the terms “Managing Director” and “Whole-time Director” shall have the meaning assigned to them in the Companies Act, 2013.
- “Officially valid document” (OVD) is defined to mean the passport, the driving license, the permanent account number card, the Voter’s Identity Card issued by the Election Commission of India or any other document as may be required by the Company.
- “Principal Officer” means an officer nominated by the Company, responsible for furnishing information as per rule 8 of the Rules.
- “Suspicious transaction”means a transaction including an attempted 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 proceeds of an offence specified in the Annexure II to this Policy and Schedule to the PMLA Act, regardless of the value involved; or
- appears to be made in circumstances of unusual or unjustified complexity; or
- appears to not have economic rationale or bona-fide purpose; or
- gives rise to a reasonable ground of suspicion that it may involve financing of the activities relating to terrorism.
3. Customer Acceptance Policy (CAP)
The Customer Acceptance Policy will ensure the following aspects of customer relationship
- No account is opened in anonymous or fictitious/benami name(s);
- Risk in terms of the location of customer and his clients and mode of payments are duly checked;
- volume of turnover, social and financial status, etc. will form the basis for categorization of customers into low, medium and high risk
- customers requiring very high level of monitoring, e.g. Politically Exposed Persons will be given due consideration
- Documentation requirements and other information will be collected in respect of different categories of customers depending on perceived risk and guidelines issued from time to time; Declaration will be taken from the customer that the proceedings/transactions are not in violation of the PML Act, 2002 and NHB regulations in this regard.
- Not to open an account or close an existing account where the Company is unable to apply appropriate customer due diligence measures, i.e. the Company is unable to verify the identity and /or obtain documents required as per the risk categorisation due to non co-operation of the customer or non reliability of the data/information furnished to the Company.
- Permanent Address proof from new applicants will be collected. The documents which can be accepted as proof of address are mentioned in Annexure.
- For existing customers who wish to preclose their loan account with HomeFirst following will be collected :
- Permanent Address proof (As per Annexure I)
- A declaration from the customer regarding source of funds being used for pre- closure of the loan account.
- Closure of the loan account authority will be restricted to authorized person at the branch.
- In the following circumstances, the account may be operated by a mandate holder or the account may be opened by an intermediary in a fiduciary capacity hence the customer is permitted to act on behalf of another person/entity, in conformity with the established law and practices:
- if applicant is NRI/PIO
- if applicant is a limited company.
- if applicant is a partnership firm
- Any other circumstance where it is not possible for the applicant to be present at the branch location physically available. Necessary checks before any loan disbursement will be carried out through FI agency so as to ensure that the identity of the customer does not match with any person with known criminal background or with banned entities such as individual terrorists or terrorist organizations, etc.
The Company will prepare a profile for each new customer during the credit appraisal based on risk categorization as mentioned in this policy and as per credit risk policy and operations manual. The customer profile will contain information relating to the customer’s identity, social/financial status, nature of business activity, information about his clients’ business and their location, etc. The nature and extent of due diligence will depend on the risk perceived by the Company. At the time of credit appraisal of the applicant the details are recorded along with his profile based on meeting with the applicant apart from collection of applicable documents; this will be as per our credit and product norms which are incorporated in the operation manual and are in practice. However, while preparing customer profile, the Company will seek only such information from the customer which is relevant to the risk category and is not intrusive.
As per KYC policy, for acceptance and identification, customers are categorized broadly into low risk, medium risk,
and high risk categories:-
Categorization of customers into various risk segments is done at the time of on – boarding the customer. We have
formulated a policy to monitor customers in these risk categories on an ongoing basis.
KYC Risk Categorization Policy
The Company shall devise a procedure for creating risk profiles of their new customers based on risk categorization. Company follows a practice of carrying out a detailed physical verification of the customer seeking information relating to the customer’s identity, residential status, social/financial status, nature of business activity, information about customer’s client and their location etc. The nature and extent of due diligence will depend on the risk perceived by HomeFirst. However, while doing the customer verification, HomeFirst will seek only such information from the customer which is relevant to the loan and is not intrusive. The customer information will be a confidential.
Given the nature of our business and its focus on the lower income section of the society, the Company shall categorize the customers according to the risk perceived and ticket size:
|Ticket Size||Risk Category|
|Loan Amount upto 15 Lakh||Low Risk Category|
|Loan Amount 15 Lakh to 25 Lakh||Medium Risk Category|
|Loan Amount above 25 Lakh / High net worth individuals /NRI profile||High Risk Category|
|Note: Increase/Decrease in loan amount will also result in change of customer’s risk profile|