Introduction and Purpose
Prevention of Money Laundering Act, enacted by the Parliament in 2002, makes it obligatory for all the financial intermediaries like banks, financial institutions, Non-Banking Financial Companies (NBFCs), etc. to follow ‘Know Your Customer’ norms which basically define the customer identification process. As per the KYC principles, intermediaries have to collect documents known as KYC documents before entering into any transaction with the customers. The KYC process includes making reasonable efforts to determine true identity and beneficial ownership of accounts, source of funds, nature of customer’s business, reasonableness of operations in the account visa-versa customer’s business/income profile etc.
The KYC requirement is applicable to all categories of customers transacting with any financial intermediary.
The objective of KYC process is to prevent financial intermediaries being used, intentionally or unintentionally by criminal elements for money laundering to fund various illegal activities including global terrorism. The KYC process has become the utmost need of the hour for all financial intermediaries in wake of fast spreading money-laundering menace across the globe.
In consonance with the applicable requirement of RBI vide Master Direction – Know Your Customer (KYC) Direction, 2016 dated February 25, 2016 (Master Direction DBR.AML.BC.No.81/14.01.001/2015-16), as updated from time to time, Rapid Investments Ltd. (herein referred as “Company”) has framed its KYC policy incorporating the following four key elements:
In the Master Directions on KYC, unless the context otherwise requires, the terms herein shall bear the meanings assigned to them below:
a) Terms bearing meaning assigned in terms of Prevention of Money-Laundering Act, 2002 and the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005:
1. “Aadhaar number” means an identification number as defined under sub section (a) of section 2 of the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016, henceforth the ‘Aadhaar Act’ as amended from time to time, including any statutory modification(s) or re-enactment(s) thereof, for the time being in force;
2. “Act” and “Rules” means the Prevention of Money-Laundering Act, 2002 and the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005,respectively and amendments thereto including any statutory modification(s) or re-enactment(s) thereof,for the time being in force;
3. “Authentication” in the context of Aadhaar authentication, means the process as defined under sub-section (c) of section 2 of the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016.;
4. “Beneficial Owner (BO)”:
|(a) Where the customer is a Company|
The BO is the natural person(s), who, whether acting alone or together, or through one or more juridical person, has/have a controlling ownership interest or who exercise control through other means.
For the purpose of this sub-clause:-
“Controlling ownership interest” means ownership of/entitlement to more than 10% of the shares or capital or profits of the Company.
“Control” shall include the right to appoint majority of the directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreements or voting agreements.
|b) Where the customer is a partnership firm||The BO is the natural person(s), who, whether acting alone or together, or through one or more juridical person, has/have ownership off entitlement to more than 15% of capital or profits of the partnership.|
c) Where the customer is an Unincorporated Association or Body of Individuals
(Term ‘Body of Individuals’ includes Societies)
|I. The BO is the natural person(s), who, whether acting alone or together, or through one or more juridical person, has/have ownership off entitlement to more than 15% of the property or capital or profits of the Unincorporated Association or Body of Individuals.|
|Where no natural person is identified under (a), (b) or (c) above, the BO is the relevant natural person who holds the position of Senior Managing Official.|
|d) Where the customer is a trust||The identification of BO shall include identification of the author of the trust, the trustee, the beneficiaries with 10% or more interest in the trust and any other natural person exercising ultimate effective control over the trust through a chain of control or ownership.|
5. “Certified Copy” – Obtaining a certified copy by the Company shall mean comparing the copy of the proof of possession of Aadhaar number where offline verification cannot be carried out or officially valid document so produced by the customer with the original and recording the same on the copy by the authorized officer of the Company as per the provisions contained in the Act. Provided that in case of Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs), as defined in Foreign Exchange Management (Deposit) Regulations, 2016 [FEMA 5(R)], alternatively, the original certified copy, certified by any one of the following, may be obtained:
6. Central KYC Records Registry” (CKYCR) means an entity defined under Rule 2(1) of the Rules, to receive, store, safeguard and retrieve the KYC records in digital form of a customer.
7. “Designated Director” means a person designated by the RE to ensure overall compliance with the obligations imposed under chapter IV of the PML Act and the Rules and shall include:
a. the Managing Director or a whole-time Director, duly authorized by the Board ofDirectors, if the RE is a Company.
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 (as amended from time to time, including any statutory modification(s) or re-enactment(s) thereof, for the time being in force).
8. “Digital KYC” means the capturing live photo of the customer and officially valid document or the proof of possession of Aadhaar, where offline verification cannot be carried out, along with the latitude and longitude of the location where such live photo is being takenby an authorised officer of COMPANY as per the provisions contained in the Act.
9. “Digital Signature” shall have the same meaning as assigned to it in clause (p) of subsection
(1) of section (2) of the Information Technology Act, 2000(as amended from time to time, including any statutory modification(s) or re-enactment(s) thereof, for the time being in force).
10. “Equivalent e-document” means an electronic equivalent of a document, issued by the issuing authority of such document with its valid digital signature including documents issued to the digital locker account of the customer as per rule 9 of the Information Technology (Preservation and Retention of Information by Intermediaries Providing Digital Locker Facilities) Rules, 2016 (as amended from time to time, including any statutorymodification(s) or re-enactment(s) thereof, for the time being in force).
11. Know Your Client (KYC) Identifier” means the unique number or code assigned to a customer by the Central KYC Records Registry.
12. Non-profit Organisations” (NPO) means any entity or organization constituted for religious or charitable purposes referred to in clause (15) of section 2 of the Income-tax Act, 1961 (43 of 1961), that is registered as a trust or a society under the Societies Registration Act, 1860 or any similar State legislation or a company registered under Section 8 of the Companies Act, 2013..
13. “Officially Valid Document” (OVD) means the passport, the driving license, proof of possession of Aadhaar number, the Voter’s Identity Card issued by the Election Commission of India, job card issued by NREGA duly signed by an officer of the State Government and letter issued by the National Population Register containing details of name and address. Provided that,
a. where the customer submits his proof of possession of Aadhaar number as an OVD, he may submit it in such form as are issued by the Unique Identification Authority of India (UIDAI).
where the OVD furnished by the customer does not have updated address, the following documents or the equivalent e-documents there of shall be deemed to be OVDs for the limited purpose of proof of address:-
b. the customer shall submit OVD with current address within a period of three months of
submitting the documents specified at ‘b’ above;
c. where the OVD presented by a foreign national does not contain the details of address, in such case the documents issued by the Government departments of foreign jurisdictions and letter issued by the Foreign Embassy or Mission in India shall be accepted as proof of address.
14. Explanation: For the purpose of this clause, a document shall be deemed to be an OVD even if there is a change in the name subsequent to its issuance provided it is supported by a marriage certificate issued by the State Government or Gazette notification, indicating such a change of name.
15. “Offline verification” shall have the same meaning as assigned to it in clause (pa) of section 2 of the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016 (18 of 2016).
16. “Person” has the same meaning as defined in the Act and includes:
17. “Principal Officer” means “Principal Officer” nominated by Company, responsible for furnishing information as per rule 8 of the Rules
18. “Suspicious Transaction” means defined below, 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 Schedule to the 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; ord. gives rise to a reasonable ground of suspicion that it may involve financing of the activities relating to terrorism.
Explanation: Transaction involving financing of the activities relating to terrorism includes transaction involving funds suspected to be linked or related to, or to be used for terrorism, terrorist acts or by a terrorist, terrorist organization or those who finance or are attempting to finance terrorism.
19. “Transaction” means a purchase, sale, loan, pledge, gift, transfer, delivery or the arrangement thereof and includes:
20. “Video based Customer Identification Process (V-CIP)”: an alternate method of customer identification with facial recognition and customer due diligence by an authorised official of the Company by undertaking seamless, secure, live, informed-consent based audio-visual interaction with the customer to obtain identification information required for CDD purpose, and to ascertain the veracity of the information furnished by the customer through independent verification and maintaining audit trail of the process. Such processes complying with prescribed standards and procedures shall be treated on par with face-to- face CIP for the purpose of this Master Direction.
21. “Common Reporting Standards” (CRS) means reporting standards set for implementation of multilateral agreement signed to automatically exchange information based on Article 6 of the Convention on Mutual Administrative Assistance in Tax Matters.
22. “Customer” means a person who is engaged in a financial transaction or activity with a Regulated Entity (RE) and includes a person on whose behalf the person who is engaged in the transaction or activity, is acting.
23. “Walk-in Customer” means a person who does not have an account-based relationship with the Company, but undertakes transactions with the Company.
Customer Due Diligence (CDD)” means identifying and verifying the customer and the beneficial owner.
24. “Customer identification” means undertaking the process of CDD.
25. “FATCA” means Foreign Account Tax Compliance Act of the United States of America (USA) which, inter alia, requires foreign financial institutions to report about financial accounts held by U.S. taxpayers or foreign entities in which U.S. taxpayers hold a substantial ownership interest.
26. “IGA” means Inter Governmental Agreement between the Governments of India and the USA to improve international tax compliance and to implement FATCA of the USA.
27. “KYC Templates” means templates prepared to facilitate collating and reporting the KYC data to the CKYCR, for individuals and legal entities.
28. “Non-face-to-face customers” means customers who open accounts without visiting the branch/offices of the REs or meeting the officials of REs.
29. “On-going Due Diligence” means regular monitoring of transactions in accounts to ensure that they are consistent with the customers’ profile and source of funds.
30. “Periodic Updation” means steps taken to ensure that documents, data or information collected under the CDD process is kept up-to-date and relevant by undertaking reviews of existing records at periodicity prescribed by the Reserve Bank.
31. “Politically Exposed Persons” (PEPs) are individuals who are or have been entrusted with prominent public functions by a foreign country, including Heads of States/Governments, senior politicians, senior government/judicial/military officers, senior executives of state- owned corporations, important political party officials.
32. “Shell bank” means a bank that has no physical presence in the country in which it is incorporated and licensed, and which is unaffiliated with a regulated financial group that is subject to effective consolidated supervision. Physical presence means meaningful mind and management located within a country. The existence simply of a local agent or low-level staff does not constitute physical presence.
33. “Wire transfer” means a transaction carried out, directly or through a chain of transfers, on behalf of an originator person (both natural and legal) through a bank by electronic means with a view to making an amount of money available to a beneficiary person at a bank.
34. “Domestic and cross-border wire transfer”: When the originator bank and the beneficiary bank is the same person or different person located in the same country, such a transaction is a domestic wire transfer, and if the ‘originator bank’ or ‘beneficiary bank’ is located in different countries such a transaction is cross-border wire transfer All other expressions unless defined herein shall have the same meaning as have been assigned to them under the Reserve Bank of India Act, 1935, the Prevention of Money Laundering Act, 2002, the Prevention of Money Laundering (Maintenance of Records) Rules, 2005, the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016 and regulations made thereunder, any statutory modification or re-enactment thereto or as used in commercial parlance, as the case may be.