KNOW YOUR CUSTOMER (KYC) POLICY & ANTI MONEY LAUNDERING (AML) MEASURES

“KNOW YOUR CUSTOMER’ AND “ANTI MONEY LAUNDERING MEASURES” POLICY OF SHUBHAM HOUSING DEVELOPMENT FINANCE COMPANY LIMITED (SHDFC)


This document details the Know Your Customer (KYC) guidelines and Anti-Money Laundering measures to be followed by the company effective April 1, 2011 and is framed in terms of the NHB policy circular no. 33 dated October 11, 2010 and the subsequent circulars issued thereafter.This policy will be reviewed annually or on the basis of any material change in the regulatory requirements or business operations of the Company.


This policy is reviewed and amended in the light of the recent policy circular (circular no. 94) issued by NHB on dated March 11, 2019.


The saidPolicy & Measures will enable the SHDFCto knowand understand its customers and their financial dealings better which in turn will help it manage risks prudently. The policy and measures will further help in preventing the company being used, intentionally or unintentionally by unscrupulous and criminal elements for money laundering activities.


Following are the four key elements of the policy:
  1. Customer Acceptance Policy;
  2. Risk Management;
  3. Customer Identification Procedures(CIP); and
  4. Monitoring of Transactions.
  5. Compliance of KYC Policy
  6. Sharing KYC Information with Central KYC Records Registry (CKYCR)
  7. Miscellaneous
For the purpose of KYC policy, a 'Customer' is defined as:
  1. a person or entity (having the same meaning as defined in the Act) that has a loan and/or has a business/financial transaction/ relationship with the Company and includes a person on whose behalf the person who is engaged in the transaction or activity, is acting;
  2. beneficiaries of transactions conducted by professional intermediaries, such as Stock Brokers, Chartered Accountants, Solicitors, etc. as permitted under the law, and
  3. any person or entity connected with a financial transaction which can pose significant reputational or other risks to the Company.

Customer Acceptance Policy


The Company will follow the guidelines as mentioned below while granting any loan to the customers:
  1. A loan will be sanctioned only to those customers who have appliedto the Company through a formal application which is provided to them by the Company.
  2. No loan shall be given to any fictitious/benami customer.
  3. Not to give a loan to any applicant or close any existing loan (only credits allowed) 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 the non-cooperation of the applicant/customer or non-reliability of the data/information furnished by such applicant/customer. Company shall apply CDD measures for all co-applicants/co-borrowers.
  4. Address proof will be obtained from all applicants prior to granting a loan. The documents which can be accepted as proof of residence are mentioned in Annexure I.
  5. Documentation requirements and other information will be collected in respect of different categories of customers depending on perceived risk and requirements of Prevention of Money Laundering Act, 2002 & National Housing Bank Act, rules framed thereunder and guidelines issued from time to time;
  6. Necessary checks will be applied before granting a new loan so as to ensure that the identity of the customer does not match with any person with a known criminal background or with banned entities or whose names appear in the sanctions lists issued by UN Security Council circulated by National Housing Bank and the sanctions lists circulated by Reserve Bank of India from time to time, such as individual terrorists or terrorist organizations, etc. This will be done through de-duplication with publicly available lists of such individuals such as the SDN list etc.
  7. The customer profile prepared by company 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. However, while preparing customer profile only such information will be taken from the customer which is relevant to the risk category and is not intrusive. The customer profile will be a confidential document and details contained therein shall not be divulged for cross selling or any other similar purposes without express permission of the Customer. However the customer profile may be shared with a Credit Bureau, empanelled vendors subject to the confidentiality clause and/or other agenciesas required by law.
  8. In case the customer is unable to be present at the branch location physically, necessary checks will be done prior to disbursement of the loan through the company’s designated officers or an agency appointed by the Company to ensure the identity and contact details of the customer.
  9. In the event the applicant is either of the following, the loan may be operated by the designated officer of such applicants subject to necessary documents being made available allowing such persons to operate the loan account and which are in conformity with the laws and practices of the land.
    1. Private Limited/Limited Company;
    2. Partnership firm.
  10. At the time of any part or full prepayment of the loan by customers, a declaration will be obtained from such customers as to the source of the funds (as per NHB Directions issued from time to time) which are being paid to the Company.
  11. No transaction or account based relationship will be undertaken without following the customer due diligence.
  12. Mandatory Information shall be sought from Customer for KYC purpose while opening an account and during the periodic updation
  13. Optional/additional information, if required, will be obtained by the Company with consent of the customer after the loan has been given.
  14. In case the existing KYC compliant customer of the company desirous of availing another loan, the company will not undertake fresh customer due diligence exercise.

RISK MANAGEMENT


Categorisation of Customer(s)

For the purpose of applying the guidelines for identification and underwriting of customers, they will be broadly divided into low, medium and high risk categories as follows:

  1. Low Risk: For the purpose of risk categorization, individuals and entities whose identities and sources of wealth can be easily identified and transactions in whose accounts by and large conform to the known profile, shall be categorized as low risk. Illustrative examples of low risk customers are -
    1. Salaried employees whose salary structures are well defined and salary is paid by cheque;
    2. People belonging to government departments, Public Sector Units, Public Limited Companies, Multinational Companies etc;
    3. Self-employed customers with proper income documents such as ITR, P&L and Balance sheets etc.

  2. Medium Risk: Individuals or entities whose source of wealth can be established through reference checks and verification shall be categorised as medium risk. Illustrative examples of medium risk customers are:
    1. Salaried applicants working with Private Companies or small enterprises where the income is verified with the employer
    2. Contractually employed applicants with variable income/unstructured income where the income is verified with the principal / primary source of income;
    3. Self-employed customers with a sound business where we can verify with suppliers/customers as to nature and volume of transactions as well as credibility in business dealings.

  3. High Risk: Individuals or entities that pose a higher than average risk to the Company will be categorised as high risk customers. This will be ascertained at the time of credit underwriting after looking at the customers background, nature of business/employment, predictability of cash flows etc. Illustrative examples of high risk customers will be -
    1. Politically Exposed persons;
    2. Daily wage earners/persons without a permanent place of work;
    3. Seasonal wage earners.

Monitoring Risk Categorisation


An annual review will be carried out of all the loans to determine the changes in behaviour of any loan vis-à-vis the initial risk categorization. This will be done in the month of April each year for all loans disbursed during the preceding twelve months. Accounts will be updated with the revised risk categorization based on a senior management review and approval from the COO/CEO. Whenever there is a change in the risk category of any client, the same will be communicated to him/her in writing/SMS within 30 days of making such a change.


Since the loans given by the Company are long term in nature going up to 15 years, the Company will monitor the account performance for a minimum of three years prior to making any change in the risk category. This is to ensure that periodic cash flow issues which many a customer may face do not impact his category since they affect performance of the loan only for a brief period. However, if the Credit Head does feel that a particular customer should be re-categorised due to some extremely adverse circumstances, then he/she can recommend change in the risk categorization even before 3 years.


Without prejudice to the generality of aforesaid provisions, the company shall ensure that periodic verification of PAN, Aadhar and OVD of its customers atleast once in two years for high risk customers, once in eight years for medium risk customers and once in every ten years for low risk customers is carried out.a) The Company shall carry out:-


  1. PAN verification from the verification facility available with the issuingauthority and
  2. Authentication, of Aadhaar Number already available with the Company withthe explicit consent of the customer in applicable cases.
  3. In case identification information available with Aadhaar does not containcurrent address an OVD containing current address may be obtained.
  4. Certified copy ofOVDcontaining identity and address shall be obtained atthe time of periodic updation from individuals. In case of low risk customers when there is nochange in status with respect to their identities and addresses, a self -certification to that effect shall be obtained.
  5. In case of Legal entities, the Company shall review the documents sought at the time of opening of account and obtain fresh certified copies.

Company may not insist on the physical presence of the customer for the purpose of furnishing OVD or furnishing consent for Aadhaar authentication unlessthere are sufficient reasons that physical presence of the accountholder/holders is required to establish their bona-fides. Normally,OVD / Consent forwarded by the customer through mail/ post, etc., shall beacceptable.


Company shall ensure to provide acknowledgment with date of having performed KYCupdation.


The time limits prescribed above would apply from the date of opening of the account/ last verification of KYC


Measures for risk management


The following guidelines shall be followed by the company regarding the risk management of the company:


  1. The Company’s internal audit department/internal auditors will evaluate and ensure adherence to the KYC policies and procedures. They will check and verify the application of KYC procedures at the branches and comment on the lapses observed in this regard. The compliance in this regard will also be put up before the Audit Committee of the Board as and when they meet. In addition to this, the Audit Committee will also ensure that the periodic evaluation of the Company’s policies and procedures are done to ensure legal and regulatory compliance. The Company shall have an on-going employee training programme so that the members of the staff are adequately trained in KYC procedures. Training requirements shall have different focus for frontline staff, compliance staff and staff dealing with new customers in order to make sure that the relevance and importance of this activity is understood by all employees irrespective of their functional roles.
  2. The Company will educate the customer on the objectives of the KYC programme so that customer understands and appreciates the motive and purpose of collecting such information.
  3. The Company will have adequate controls in place while deploying new technology / modifying existing technology to all threats that may arise due to loss of data/access to data which is critical.
  4. The Company will apply KYC norms for all existing loan customers on the basis of materiality and risk envisaged by it for such loan accounts.
  5. Where the Company is unable to apply appropriate KYC measures due to non-furnishing of information and /or non-cooperation by the customer, the Company will follow up with customers for KYC compliance. Closure decision if at all is required will depend upon our internal assessment and will be taken at a Senior Level of Credit Head/ Operations Head and above only after issuing due notice to the customer explaining the reasons for taking such a decision.
  6. The Company has designated Director and CEO, as “Designated Director” and Manjari Jhingran, Head & Service as ‘Principal Officer' located at our Corporate Office. Designated Director shall be responsible to ensure overall compliance with obligations imposed under Chapter IV of the Prevention of Money Laundering Act, 2002 and Principal Officer shall be responsible for; ensuring compliance, monitoring transactions, sharing and reporting information as required under the Law/Regulations respectively. They will maintain close liaison with enforcement agencies with the help of the other staff members, other Companies and other institutions which are involved in the fight against money laundering and combating financing of terrorism. They will also ensure that there is a proper system of fixing accountability for serious lapses and intentional circumvention of prescribed procedures and guidelines. However, any such action has to be documented and placed before the management committee of the company. Principal Officer will also report any unusual matter/information to the Designated Director and management committee of the company as and when it occurs.
  7. Maintenance of Records of Transactions ( As per Rule 3 of the Prevention of Money Laundering Rules 2005):
    The Company will maintain proper record of the under mentioned transactions:
    1. All cash transactions of the value of more than rupees one million or its equivalent in foreign currency,
    2. All series of cash transactions integrally connected to each other which have been valued below rupees one million or its equivalent in foreign currency where such series of transactions have taken place, within a month.
    3. All transactions involving receipts by NGOs of Rs. One million or its equivalent in foreign currency
    4. All cash transactions where forged or counterfeit currency notes or bank notes have been used as genuine and where any forgery of a valuable security has taken place; any such transactions.
    5. All suspicious transactions as mentioned in Annexure II
  8. Records to contain the specified information: The records maintained shall contain the following:-
    1. the nature of the transactions;
    2. the amount of the transaction and the currency in which it was denominated;
    3. the date on which the transaction was conducted.
  9. The Company maintains sanctions and disburses files on the system; hence it has a system for proper maintenance and preservation of account information in a manner that allows data to be retrieved easily and quickly whenever required.
  10. The Company will ensure that 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, are properly preserved for at least ten years after the business relationship is ended. Apart from this, the application form, copy of loan agreement, NOC, other document either photocopy or cancelled original copy will be kept for ten years after the full closure of the account. Preservation and maintenance of the documents will be in paper form and a soft copy.
  11. The identification of records and transaction data will be made available to the competent authorities upon request only through the principal officer under this policy with his approval.
  12. Reporting to Financial Intelligence Unit-India: The Principal officer will report information relating to cash and suspicious transactions if detected to the Director, Financial Intelligence Unit-India (FIU-IND) as advised in terms of the PMLA rules, in the prescribed formats as designed and circulated by NHB at the following address:

    Director, FIU-IND,
    Financial Intelligence Unit-India,
    6th Floor, Hotel Samrat,
    Chanakyapuri,
    New Delhi-110021.


A copy of information furnished shall be retained by the Principal Officer for the purposes of official record.

CUSTOMER IDENTIFICATION PROCEDURE:


Customer identification means identifying the customer and verifying his/ her identity by using reliable, independent source documents, data or information while establishing a relationship. The Company will obtain relevant documents to prove the applicants identity, place of residence, age etc. which are necessary to establish identity and contactibility of each new customer.


The company will ensure that all/any documents as listed in Annexure – I are obtained from prospective customers in order to carry out the necessary due diligence for granting a loan.


As per the internal classification, for low and medium risk customers, the company will, either through its own officers or appointed agencies carry out verification of originals, place of residence etc. as well as take signature verification wherever necessary. For loans to partnership firms/limited companies, the company will obtain and verify the necessary documents to prove empowerment of the individual who is the designated authority for such applicant. In addition to this, the company’s officers will do a personal discussion with the customer at his residence/office in order to interact with other family / workplace members which will also help ascertain the genuineness of the prospective customer.


Company will undertake identification of customers in the following cases:-


  1. Commencement of an account-based relationship with customer.
  2. When there is doubt about the authenticity or adequacy of the customer identification data it has obtained.

For the purpose of verifying the identity of customers at the time of commencement of an account-based relationship, the Company shall at its option, rely on CDD done by a third party, subject to the following conditions:-

  1. Records or the information of the customer due diligence carried out by thethird party is obtained within two days from the third party or from theCentral KYCRecords Registry.
  2. Where the Company is satisfied that copies ofidentification data and other relevant documentation relating to thecustomer due diligence requirements shall be made available from the thirdparty upon request without delay.
  3. The third party is regulated, supervised or monitored for, and has measuresin place for, compliance with customer due diligence and record-keepingrequirements in line with the requirements and obligations under thePrevention of Money-Laundering Act
  4. The third party shall not be based in a country or jurisdiction assessed ashigh risk.

However, the ultimate responsibility for CDD, including done by a third party andundertaking enhanced due diligence measures, as applicable, shall rest withthe Company.


Apart from this, the following guidelines will be followed while dealing with specific clients:


Trust/Nominee or Fiduciary Accounts

Company shall attempt to determine whether the customer is acting on behalf of another person as trustee/nominee or any other intermediary. If so, Company will insist on receipt of satisfactory evidence of the identity of the intermediaries and of the persons on whose behalf they are acting,


Accounts of companies and firms

Company shall attempt to verify the legal status of the legal person/ entity through proper and relevant documents. Company shall attempt to verify that any person, who purports to act on behalf of the legal / juridical person/entity, is so authorized and in what capacity that person is authorized and further verify the identity of that person.


Client accounts opened by professional intermediaries

When the Company has knowledge or reason to believe that the client account opened by a professional intermediary, is on behalf of a single client, that client shall be identified. Where the Company rely on the 'customer due diligence' (CDD) done by an intermediary, it will be ensured that the intermediary has adequate systems in place to comply with the KYC requirements in line and obligations under the Prevention of Money Laundering Act.Provided that Company shall not open accounts of such professional intermediaries who arebound by any client confidentiality that prohibits disclosure of the client detailsto the HFC.


Customer Due Diligence (CDD)

The company will obtain following information from an individual customer while establishing relationship with an individual or dealing with the individual who is beneficial owner, authorised signatory, or the power of attorney holder related to any legal entity.

  1. the Aadhar Number (copy to be certified by the company’s official and recorded) where he is desirous of receiving any benefit or subsidy under any Scheme notified under Section 7 of the Aaadhar Act or certified copy of the Officially Valid Document (OVD), set out in list enumerated in Annexure-I, containing details of the identity and address, and one recent photograph.
  2. the Permanent Account Number (PAN) or Form 60 as defined in I.T.Rules 1962, as amended from time to time. The company will inform the customer about this provision while opening the account.
  3. In case of the existing customer, the company will obtain PAN or Form No. 60 as the case may be, on such date as may be notified by the Central Govt.
  4. In case, the OVD furnished by the Customer does not contain the updated address, the company will obtain the following documents for limited purpose of proof of address.
    1. Utility bill (electricity, telephone, piped gap, water bill, post paid mobile phone) which is not more than Two Months old of any service provider.
    2. Property or municipal tax receipt.
    3. Pension or family pension payment order issued by Govt departments or Public Sector Undertaking, if they contain the address.
    4. Letter of allotment of accommodation from employer issued by Central/state Governments, stator or regulatory bodies, PSUs, SCBs, FIs and listed companies and leave and license agreements with such employers allocating official accommodation.

    However, the customer after submitting the above said OVD, has to submit the updated OVD within 3 months with current address.
  5. A customer already having an account based relationship with the Company, shall submit his Permanent Account Number or Form No.60, on such date as may be notified by the Central Government, failing which the account shall temporarily cease to be operational till the time the Permanent Account Number or Form No. 60 is submitted by the customer:
    1. Provided that before temporarily ceasing operations for an account, the Company shall give the customer an accessible notice and a reasonable opportunity to be heard.
    2. Provided further that the Company shall provide appropriate relaxation for continued operation of accounts of customers who are unable to provide Permanent Account Number of Form No. 60 owing to injury, illness or infirmity on account of old age or otherwise and such like causes.
    3. Explanation: - For the purpose of this clause, "temporary ceasing of operations" in relation an account means the temporary suspension of all transactions or activities in relation to that account by the Company till such time the customer complies with the provisions of this clause;
    4. In case of asset accounts such as loan accounts, for the purpose of ceasing the operation in the account, only credits shall be allowed.
  6. If a customer having an existing account based relationship with the Company gives in writing to the company that he/ she does not want to submit his/her Permanent Account Number or Form No.60, as the case may be, the customer's account with the Company shall be closed and all obligations due in relation to the account shall be appropriately settled after establishing the identity of the customer
  7. In case of non-face-to-face customer’s account, the company will ensure that the first payment is effected through the customer’s KYS complied account.
  8. The company while establishing a relationship with Politically Exposed Person (PEP) will ensure identity of PEP, gather sufficient information about his/her sources of funds including his close relatives, undertake enhanced monitoring on an on-going basis, permission taken at senior level in accordance with company’s customer acceptance policy. In case the existing account subsequently becoming PEP, senior management’s approval shall be obtained to continue his account and his account shall be put on enhanced monitoring.


CDD Procedure in case of Individuals

Company shall apply the following procedure while establishing an account based relationship with an individual:

  1. Obtain information as mentioned under para D above; and
  2. such other documents pertaining to the nature of business or financial status as may be deemed fit.


CDD Measures for Sole Proprietary Firms

For opening an account in the name of a sole proprietary firm, identificationinformation as mentioned under Para D above in respect of the individual (proprietor) shall be obtained.


In addition to the above, any two of the following documents as a proof of business/ activity in the name of the proprietary firm shall also be obtained:


  1. Registration certificate.
  2. Certificate/licence issued by the municipal authorities under Shop and Establishment Act.
  3. Sales and income tax returns.
  4. CST/V AT/CST certificate (provisional/ final).
  5. Certificate/registration document issued by Sales Tax/Service Tax/Professional Tax authorities.
  6. lEC (Importer Exporter Code) issued to the proprietary concern by the office of DCFT/Licence/ certificate of practice issued in the name of theproprietary concern by any professional body incorporated under a statute.
  7. Complete Income Tax Return (not just the acknowledgement) in the name of the sole proprietor where the firm's income is reflected, duly authenticated/acknowledged by the Income Tax authorities.
  8. Utility bills such as electricity, water, and landline telephone bills.

In cases where it is satisfied that it is not possible to furnish two such documents, any one of the aforesaid documents as proof of business/activity may be accepted.


Provided Company shall undertake contact point verification and collect such otherinformation and clarification as would be required to establish the existence of suchfirm, and shall confirm and satisfy itself that the business activity has been verifiedfrom the address of the proprietary concern.


CDD Measures for Legal Entities
  1. For opening an account of a company, one certified copy of each of the following documents shall be obtained:
    1. Certificate of incorporation;
    2. Memorandum and Articles of Association;
    3. Permanent Account Number of the company;
    4. A resolution from the Board of Directors and power of attorney granted to its managers, officers or employees to transact on its behalf;
    5. one copy of an OVD containing details of identity and address, one recent photograph and Permanent Account Numbers of Form 60 of the managers, officers or employees, as the case may be, holding an attorney to transact on its behalf.

  2. For opening an account of a partnership firm, one certified copy of each of the following documents shall be obtained:
    1. Registration certificate;
    2. Partnership deed;
    3. Permanent Account Number of the partnership firm;
    4. one copy of an OVD containing details of identity and address, one recent photograph and Permanent Account Numbers of Form 60 of the managers, officers or employees, as the case may be, holding an attorney to transact on its behalf.

  3. For opening an account of a trust, one certified copy of each of the following documents shall be obtained:
    1. Registration certificate;
    2. Trust deed;
    3. Permanent Account Number or Form No.60 of the trust;
    4. one copy of an OVD containing details of identity and address, one recent photograph and Permanent Account Numbers of Form 60 of the managers, officers or employees, as the case may be, holding an attorney to transact on its behalf-

  4. For opening an account of an unincorporated association or a body of individuals, one certified copy of each of the following documents shall be obtained:
    1. resolution of the managing body of such association or body of individuals;
    2. Permanent Account Number or Form No.60 of the unincorporated association or a body of individuals;
    3. power of attorney granted to transact on its behalf;
    4. one copy of an OVD containing details of identity and address, one recent photograph and Permanent Account Numbers of Form 60 of the managers, officers or employees, as the case may be, holding an attorney to transact on its behalf identification information as mentioned under
    5. Such information as may be required to collectively establish the legal existence of such an association or body of individuals.


    Explanation - Unregistered trusts/partnership firms shall be included under the term 'unincorporated association' and the term 'body of individuals, includes societies.

  5. For opening accounts of juridical persons not specifically covered in the earlier part, such as Government or its Departments, societies, universities and local bodies like village panchayats, one certified copy of the following documents shall be obtained:
    1. Document showing name of the person authorised to act on behalf of the entity;
    2. Aadhaar/PAN/ OVD for proof of identity and address in respect of the person holding an attorney to transact on its behalf and
    3. Such documents as may be required to establish the legal existence of such an entity/juridical person.


CDD Measures for Identification of Beneficial Owner

For opening an account of a Legal Person who is not a natural person, thebeneficial owner(s) shall be identified and all reasonable steps in terms of Rule 9(3) ofthe Rules to verify his/her identity shall be undertaken keeping in view the following:


  1. Where the customer or the owner of the controlling interest is a companylisted on a stock exchange, or is a subsidiary of such a company, it is notnecessary to identify and verify the identity of any shareholder or beneficialowner of such companies.
  2. In cases of trust/nominee or fiduciary accounts whether the customer isacting on behalf of another person as trustee/nominee or any otherintermediary is determined. In such cases, satisfactory evidence of theidentity of the intermediaries and of the persons on whose behalf they areacting, as also details of the nature of the trust or other arrangements in placeshall be obtained.

Monitoring of Transactions

On-going monitoring is an essential element of effective KYC procedures. Since,the Company is a housing finance company and all our loans are tenure based with a fixed/variable instalment paid through electronic clearing system (ECS/NACH) mandate or post-dated cheques, our monitoring structure will be relevant to our nature of operations. While unusually large cash transactions will be rare given that the maximum loan the company currently offers is Rs 50,00,000/-, the company will still pay special attention to all unusually large cash transactions relevant to its size of loans. Reporting for cash transactions especially for loan closures will be done and reviewed by the Management team periodically for identifying anomalies and to carry out due diligence if required as to source of funds or re-verifying identity of the borrower. Apart from this the Company will also carry out the following activities:

  1. Risk categorization as is mentioned in this policy may be updated as and when required by the management.
  2. In case of overdue/default accounts where there is scope for meeting or vetting the profile of this customer again, due diligence if found necessary will be carried out.
  3. Subsequent to our sanction, during the period of part disbursement till full disbursement if any unusual transaction/development comes to our knowledge relating to money laundering the same will be verified and notified as required.
  4. The Company will ensure that a record of transactions in the accounts is preserved and maintained as required in terms of Rule 3 of the PML (maintenance of records) Rules 2005. In terms of the provisions of Rule 8 of PML (maintenance of records) Rules 2005, the Company will ensure that transactions of suspicious nature as defined in Annexure II and/or any other type of transaction notified under section 12 of the PML Act, 2002 and sub-rule (1) of Rule 3 of the said Rules, is reported to the appropriate law enforcement authority (Director FIU-IND) within the prescribed time and such Form, as and when detected by our officials through the Principal Officer. The company however, will not be needing to submit “Nil” reports where there are no cash/suspicious transactions, during a particular period.

COMPLIANCE OF KYC POLICY

To ensure compliance with company’s KYC policy, the company will undertaker the following steps:

  1. CEO/Executive Director/Head-Credit and Service/Chief Business Officer will be the Senior Management for the purpose of KYC compliances.
  2. The scope of Internal Audit will also cover to verify the compliance with KYC/ALM policies and procedure.
  3. Quarterly audit reports /notes about the compliance of KYC guidelines will be submitted to Audit Committee for their information and decisions in the matter.


SHARING KYC INFORMATION WITH CENTRAL KYC RECORDS REGISTRY (CKYCR)

Company shall capture the KYCinformation for sharing with the CKYCR. Government of India hasauthorised the Central Registry of Securitisation Asset Reconstruction and SecurityInterest of India (CERSAI),to act as, and to perform the functions of the CKYCR. The Company is required to upload the Know Your Customer (KYC)data with CERSAIin respect ofnew individual accounts opened on or after November 01, 2016. Going forward, Company shall upload KYC with CERSAI within 3 days as and when new account is opened by the Company.


Miscellaneous

The Company shall ensure that the provisions of PML, Rules framed thereunder and the Foreign Contribution and Regulation Act, 1976, wherever applicable, are adhered to strictly.FCRA regulate the acceptance and utilization of foreign contribution or foreign hospitality received by certain specified persons or associations such as candidates for election, journalist, Judges/Government servants, political party, etc.

However, law permits certain persons or associations to accept the foreign contribution with the approval of the Central Government, as per the provisions of FCRA. In those cases, copy of approval or letter of intimation shall be taken from the customer.


Annexure-I


LIST OF OFFICIALLY VALID DOCUMENTS (OVDs) THAT WILL BE OBTAINED FROM CUSTOMERS

Particulars & Features

Documents (Certified copy)

Individuals

Officially Valid Documents (OVDs)

  • Passport
  • PAN card
  • Voter's Identity Card
  • Driving license
  • Aadhar card
  • Job Card issued by NREGA duly signed by an officer of the State Govt.
  • Letter issued by the National Population Register containing details of name & address.
  • Identity card with customer’s Photograph issued by Central/State Govt. Depts, Statutory/Regulatory Authorities, Public Sector Undertakings, Schedule Commercial Banks, and Public Financial Institutions.
  • Letter issued by a gazetted officer, with a duly attested photograph of the person.
  • Rent Agreement
  • E- Ration Card
  • A notarised affidavit in case the customer does not have any of the above documents.

OVDs under ‘simplified measure’ for the limited purpose of proof of address where customers are unable to produce any of the abovementioned OVD.

  • Utility bill not older than 2 months (electricity, telephone, post-paid mobile phone, piped gas, water bill)
  • Bank Account statement or Post Office Savings Bank Account Statement not older than 2 months
  • Letter of allotment of accommodation from employer issued by State or Central Govt. Depts. or Public Sector Undertakings, schedule commercial banks, financial institutions and listed companies. Similarly, leave and license Agreements with such employers allotting official accommodation
  • Propertyor Municipal tax receipt
  • Rent Agreement
  • E- Ration Card
  • A notarised affidavit in case the customer does not have any of the above documents.

Notes:-


  • Obtaining certified copy by the Company shall mean comparing the copy of OVD so produced by the customer with the original and recording the same on the copy by the authorised officer of the Company.
  • Submission of Aadhaar by an individual as a KYC document cannot be insisted upon by the Company unless the customer intends to avail the benefit or subsidy under any scheme notified under Section 7 of the Aadhaar Act.
  • Where the customer is submitting his Aadhaar, the Company shall by guided by directions issued by UIAI from time to time.
  • A document shall be deemed to an “officially valid document” 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 Govt. or Gazette notification indicating such a change of name.

Annexure-II


List of Suspicious Transactions Pertaining to House Loans:

  • 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 the company, which is away from the customer's residential or business address provided in the loan application, when there is Company branch/office nearer to the given address;
  • 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;
  • 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 Organization / 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.
  • The specific activities and reporting responsibilities thereof has been given in the table below:

Responsibility matrix team wise for CTRs as follow:


Sub-Process

Activity

TAT

Responsibility

CTR Reporting

It may be noted that whenever, within a month, total credit transactions in cash or total debit transactions in cash in an account exceeds Rs.10 lacs.

By the fifteenth (15th) day of the succeeding month for the previous month

Central Operations/Collection Team


Responsibility matrix team wise for STRs as follow:


Sub-Process

Activity

TAT

Responsibility

Identity of Customer

The customer approaches a branch/office of the Company, 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

Within the 3rd day of as and when observed.

Branch Team

Background of a customer

Customer shows income from “foreign sources” on loan application without providing proper documentation

Within the 3rd day of as and when observed.

Branch Team

Credit bureau Information

Multiple addresses reflecting against the name of the customer which has not been shared / or does not match with the employment history / residence details provided.-

Within the 3rd day of as and when observed.

Branch Team

Nature of Activity in an Account

Unusual activity compared with past transactions. Encashment of loan amount by opening a fictitious bank account. Activity inconsistent with what would be expected from declared business/profile of the customer.-

Within the 3rd day of as and when observed.

Branch Team

Nature of Activity in an Account

Customer presents confusing details about the transaction or knows only few details about its purpose.-

Within the 3rd day of as and when observed.

Branch Team

Nature of transactions

Unusual or unjustified complexity shown in a Transaction that may normally be done in simpler manner

Within the 3rd day of as and when observed.

Branch Team

Nature of transactions

No economic rationale or bonafide purpose behind the transaction.-

Within the 3rd day of as and when observed.

Branch Team

Nature of transactions

Suggesting dubious means for the sanction of loan or placing a deposit

Within the 3rd day of as and when observed.

Branch Team

Transaction amongst family members

Transaction between members of the same family to avail a loan wherein there is no genuine transaction / rationale

Within the 3rd day of as and when observed.

Branch Team

Property repurchased

Customer buys back a property that he or she recently sold without justification

Within the 3rd day of as and when observed.

Branch Team

Background of a customer

Notice/Letter from a law enforcement agencies / Regulators/ Other Government Agencies: In case of such notices received, Principal Officer should be informed for further action /advice on the matter. This notice shall be treated as an alert to analyse the transactions in such accounts and if the transactions appear to be suspicious the same should be included in the STR along with the details mentioned in the “Ground of Suspicion”. These Accounts are to be reported even if they are closed

Within the 3rd day of as and when observed.

Branch Team/Customer services

Background of a customer

Adverse Media / Public News: Branches / offices should check for adverse media coverage with the names of the customer. The names of customers that are pointed as suspects or accused in such reports shall be searched and in case of matches the same may be further internally analysed for reporting purposes

Within the 3rd day of as and when observed.

Branch Team/Customer services

Nature of Activity in an Account

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

Within the 3rd day of as and when observed.

BRANCH TRAINING/SANJEEV MITTAL/SALES TEAM

Transaction more than specified percentage of the EMI, paid in cash by a Delinquent Borrower.

Delinquent borrower for more than 6 months repays the loan in cash beyond Four times the original EMI

Within the 3rd day of as and when observed.

Central Operations/Collections

Identity of Customer

Changes in mailing address of the Customer more than [twice]* in last 6 months

Within the 3rd day of as and when observed.

Central Operations

Background of a customer

The customer details matched with watch lists (e.g. UN list, Interpol list etc.) -

Within the 3rd day of as and when observed.

Central Operations

Multiple Accounts

  1. Use of Bank A/c’s of Third Parties for payment of EMIs at more than -three occasions.
  2. Change in the bank account from which PDC/ ECS are issued more than Twice in last 6 months
  3. Total amount of payments through DD, Cash and 3rd party Cheques valued at Rs. 200000/- EMIs / part payments in last 30 days
  4. Customer appears to have recently established a series of new relationships with different financial entities.

Within the 3rd day of as and when observed.

Central Operations

Nature of Activity in an Account

  1. Part closure to the extent of 50% or more of the loan amount in one or more occasions within 6 months.
  2. Loan Accounts with original tenor of more than 1 year are foreclosed within 6 months after disbursal of loan.

Within the 3rd day of as and when observed.

Central Operations

Nature of Activity in an Account

Overpayment of instalments in cash with a request to refund the excess amount

Within the 3rd day of as and when observed.

Central Operations

Nature of Activity in an Account

Customer conducts transactions at different physical locations in an apparent attempt to avoid detection.

Within the 3rd day of as and when observed.

Central Operations

Nature of Activity in an Account

Customer's home or business telephone number has been disconnected or there is no such number when an attempt is made to contact customer shortly after opening account/LOAN DISBURSAL WITHIN 1 MONTH OF DISBURSAL

Within the 3rd day of as and when observed.

Central Operations

Nature of transactions

Availing a top-up loan and/or equity loan, without proper justification of the end use of the loan amount

Within the 3rd day of as and when observed.

Central Operations

Value of transactions

Deposits made in cash amounting to Rs. 200000/- and above and without details of source

Within the 3rd day of as and when observed.

Central Operations

Nature of transactions

PAN not disclosed but multiple deposits raised (across branches to avoid TDS).

Within the 3rd day of as and when observed.

Central Operations/ Branch Team

Value of transactions

a. Value just under the reporting threshold amount in an apparent attempt to avoid reporting

Within the 3rd day of as and when observed.

Central Operations/ Branch Team

Value of transactions

b. Multiple related cash transactions which are broken to just below the following thresholds:- COLLECTION
i) Rs.50,000/- in a day ii) Rs.10,00,000/- in a month

Within the 3rd day of as and when observed.

Central Operations/ Branch Team

Nature of transactions

Initial contribution made through unrelated third party accounts without proper justification;-

Within the 3rd day of as and when observed.

Collection Legal

Valuation of property

Valuation of property shown considerably lower in the sale deed than the government approved rate / RESIDEX, especially on sale deeds executed within a period of 12 months

Within the 3rd day of as and when observed.

Technical Team

Identity of Customer

a. Submission of false Identification Documents.
b. Customer holding multiple PAN.
c. Identification documents which could not be verified within reasonable time or replaced with another set of Identification documents.
d. Accounts opened with names very close to other reputed business entities.
e. Customer uses aliases and a variety of similar but different addresses.
f. Customer spells his or her name differently from one transaction to another, without justification.
g. Name of customer indicated differently in different KYC documents enabling creation of multiple customer identities.
h. A customer/company who is reluctant or refuses to provide complete information, data, documents and to reveal details about its activities or to provide financial statements /Employment related documents / KYC documents.
i. Doubt over the real beneficiary of the loan account
j. The customer is reluctant to meet in person, represents through a third party/Power of Attorney holder without sufficient reasons.

Within the 3rd day of as and when observed.

RCU & Branch Team

NA

a) Builder approaching the HFC for a small loan compared to the total cost of the project-;
b) Builder is unable to explain the sources of funding for the project;
c) Approvals/sanctions from various authorities are proved to be fake;
d) Builder retains substantial number of the Units in the Project in his or his family members names
e) Builder has known political connections / shareholders or directors of his company are individuals with suspicious background
f) Frequent Reconstitution of partnership/ proprietorship without justification.
g) Allotting different numbers to the same flat in different style/order

Within the 3rd day of as and when observed.

Business Head


(with effect from 23/05/2019)