IIBF AML KYC MODULE – B: KYC INTRODUCTION & OVERVIEW

IIBF AML KYC MODULE – B: KYC INTRODUCTION & OVERVIEW

In this article, we will be going through some definitions of the KYC i.e know your customer. 

The terms that define below will be as per RBI Master directions:

1. Terms that fall under the prevention of money laundering act 2002 and the prevention of money laundering rules 2005

AADHARR NUMBER: It is an identification number issued to an individual under sub-section (3) of section 3 of the Aadhaar (Targeted Delivery of Financial and Other Subsidies, Benefits and Services) Act, 2016

PROOF OF POSSESSION OF AADHAAR NUMBER: As per the amended rules, ‘proof of the procession’ list of officially valid documents that have been listed under rule 2(1)(d). 

DELIVERY OF AADHAAR NUMBER: The enrolment regulations stipulate that, “Aadhaar number may be communicated to residents in physical form (including letters or cards) and/or electronic form (available for download through the Authority’s website or through SMS).”

As per RBI regulation 35 of enrolment regulations, the delivery of Aadhar number means issuance of Aadhar number. 

Further, under 35 regulation the terms: 

AADHAAR LETTER: It is a letter that is issued by the authority which carries Aadhar Card holder’s the name, address, gender, photo and date of birth. 

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ACT & RULES: Act would be ‘Prevention of Money-Laundering Act, 2002’ while Rules would mean ‘The Prevention of Money-Laundering (Maintenance of Records) Rules, 2005, and amendments thereto.

AUTHENTICATION: It means exercise through which individual’s Aadhar number along with his or her demographic or biometric information get submitted to CIDR, which in turn verify the correctness of the information.

BENEFICIAL OWNER (BO): The definition of beneficial owner in respect of different entities is as below:

In case of company: It is natural person, who, together or alone, through one or more judicial persons have ownership or control through other means.

In case of partnership firm: It is natural person, who, together or alone, through one or more judicial persons have ownership or control > 15% of the partnership’s capital or profit.

In case of an incorporated Association or body of individuals: It is natural person, who, together or alone, through one or more judicial persons have ownership or control > 15% of the partnership’s capital or profit of such Association or BOI.

In case of trust: It would be the author of the trust, that trustee, beneficiaries who have > 15% or more in the trust or it could be any other natural person who you have effective control such trust.

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NOTE: If no natural person can be identified in the above cases, the beneficial owner who would be the natural person who the senior managing official.

CERTIFIED COPY: Getting a certified copy, where, offline verification cannot be carried out, will be done by comparing the copy of possession of Aadhaar number or the copy of officially valid document as produced.

NOTE: In case of NRIs and PIOs (as defined in FEMA), can be certified from the following officials: 

• Officials authorised in overseas branches of Scheduled commercial banks registered in India 
• Overseas Bank branches which have relationships with Indian banks 
• Notary public Abroad 
• Court or magistrate 
• Judge 
• Indian Embassy/ consulate general of the NRIs country

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CENTRAL KYC RECORDS REGISTRY: (CKYCR) It means an entity responsible to receive, store, safeguard & retrieve the KYC records of customers in digital form.

DESIGNATED DIRECTOR: It 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:

It is the person who has to ensure the overall compliance with the obligations under PML Act & the Rules. It shall include authorised MD or WTD of the bank.

DIGITAL KYC: To capture life photo of the customer and the official documents or proof of possession of Aadhaar along with the location of the place where such life photo is being taken, in cases where offline verification can’t be done.

DIGITAL SIGNATURE: The authentication of any electric report through an electric method or a procedure by a subscriber as per the section 3 of the IT Act 2000.

EQUIVALENT E-DOCUMENT: As per the IT rules, the document issued by issuing authority with its digital signature along with other documents that are issued to the digital locker account of the customer are known by ‘equivalent e document.

KNOW YOUR CLIENT (KYC) IDENTIFIER: The central KYC records registry assigns a unique number or code to a customer which is known as know your client identifier.

NON-PROFIT ORGANISATIONS (NPO): An entity or organisation which is registered as a trust all society under the societies Registration Act, 1860 or other similar state legislation company registered under Section 8 of the Companies Act 2013

OFFICIALLY VALID DOCUMENT (OVD): The documents that fall under the category of officially valid documents are as listed below:

• The passport,

• The driving licence,

• Proof of possession of Aadhaar number,

• Voter Identity Card,

• Job card by NREGA &
• National Population Register issued letter.

PERSON: It shall include:

• individual,

• HUF: Hindu undivided family,

• company,

• firm,

• an association of persons (AOP) or (BOI) body of individuals, irrespective of the fact whether they are incorporated or not,

• every artificial juridical person (AJP) who does not fall within the above-mentioned persons (a to e), and
• Any agency, office or branch which is owned or controlled by any of the above persons (a to f).

PRINCIPAL OFFICER: An officer who is responsible to furnish information as per rule 8 (nominated by bank).

SUSPICIOUS TRANSACTION: A transaction made to a person acting in good faith including an attempted one, whether made in cash or not, as per the following definition: 

• • Provides a reasonable ground of suspicion that may involve precedes from an offence as per the specified schedule or
  • Appear to be unusual or unjustifiably complex 
  • Do not have economic rationale 

• Provides a reasonable ground of suspicion that they might be financing the terrorism activities 

SMALL ACCOUNT: Savings account that is opened as per sub rule (5) of the PML 2005. 

TRANSACTION: means a purchase, sale, loan, pledge, gift, transfer, delivery or the arrangement thereof and includes:

Important Topic:- IIBF AML KYC STUDY MATERIAL 

Transaction could be a purchase, loan, sale, pledge, gift, delivery, transfer, or any arrangement and includes: 

• Account opening 
• Deposit, withdrawal, exchange or transfer of funds 
• Usage of safety deposit box 
• Entering into any fiduciary relationship 
• Payment for any contractual or other obligation made or received 
• Establishing a legal person or an arrangement

Thus, above are some of the definitions that fall under the KYC Norms & are usually used in the process of KYC. There are many other terms also that are popularly used in the KYC process. If you want to get a second part of this article, then you can tell us in the comment section and we will provide you with more terms.