Know Your Customer and Anti-Money Laundering/Combating Financing in Terrorism Policy of Nabil Bank Limited

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1 Know Your Customer and Anti-Money Laundering/Combating Financing in Terrorism Policy of Nabil Bank Limited 2015

2 Background Banks and financial institutions are an essential part of any financial system. Along with the growth in scope and business of banks, there lies a serious threat of the industry being misused for illegitimate objectives like money laundering and financing in terrorism. The Know Your Customer and Anti-Money Laundering / Combating Financing in Terrorism Policy of Nabil Bank Limited (Policy) intends to protect Nabil Bank (the Bank) from being used for Money Laundering and Financing in Terrorism. It intends to enable the Bank in maintaining a proper profile of clients, monitoring their accounts/transactions, and reporting threshold and suspicious transactions as per the regulatory requirements and, to the extent possible, global practices. Know Your Customer (KYC) and Anti-Money Laundering (AML) / Combating Financing in Terrorism (CFT) Policy The policy incorporates the requirements of Assets (Money) Laundering Prevention Act, 2008, Assets (Money) Laundering Prevention Rule, 2009 and Directives on Anti-Money Laundering and Combating Financing in Terrorism, Guidelines for Threshold Transaction Reporting (TTR) and Guidelines for Detecting Suspicious Transactions issued by Nepal Rastra Bank (NRB) and Financial Information Unit (FIU). In addition, it is guided by the international practices, regulations and recommendations on KYC, AML and CFT. This Policy is applicable to all branches/units and subsidiaries of the Bank and is to be read in conjunction with the related guidelines and circulars issued by the Bank in due course of time. This Policy is intended to supplement the Acts, Rules, Regulations, Guidelines and Directives on Prevention of Money Laundering issued/to be issued from time to time. However, provisions under the said Acts, Rules, Regulations, Guidelines and Directives shall prevail in case of any contradictions. Similarly, the Directives or Guidelines of NRB/FIU issued from time to time with regard to KYC and AML/CFT shall also prevail over and be integral part of this document. Therefore, this policy should be implemented in conjunction with prevailing Acts, Rules, Regulations, Guidelines and Directives. Key Elements of the Policy The policy provides space for ample controls and procedures so that the entities with whom the Bank is dealing are properly known and their transactions are monitored. Customer Due Diligence (CDD) is carried out to satisfy the Bank, its regulating authorities and correspondent banks regarding the compliance of KYC and AML/CFT measures taken by the banks. The policy incorporates the following broad key elements: Nabil Bank Limited Page 1

3 A. Customer Identification Procedures (CIP) Customer Acceptance Policy (CAP) Customer Transaction Monitoring Procedures (CTMP) Risk Management (RM) B. Miscellaneous A. CIP, CAP, CTMP and RM 1. Customer Identification Procedures The essence of Customer Identification is to ensure and keep in records the proper identities of the prospective customers/customers and verify the purpose of their intended relationship with the Bank. CIP assists in risk categorization of the accounts and analyzing the deviations in the actual and expected volume and nature of transactions in the accounts to consider if it is suspicious. 1.1 Customer s identity shall be verified through reliable documents, i.e. documents issued by competent authorities. The identification documents include all documents deemed necessary by the Directives of NRB/FIU and the KYC and AML/CFT framework of the country. For a customer that is not a natural person, it has to be ensured that it is a legal entity and is engaged in legitimate activities. 1.2 Basic information regarding the customer s addresses, relationships, occupations and sources of income/fund, expected income, expected turnovers/transactions and purpose of establishing a relationship with the Bank needs to be acquired. 1.3 The ownership and control structure of the customer (in case of a legal entity) and the natural person(s) who have ultimate control over the management and decision making shall be identified. Identifications and other documents and information deemed necessary by Directives of NRB/FIU and the KYC and AML/CFT framework of the country needs be obtained and verified for joint applicants, beneficial owners, power of attorney holders and nominees, wherever applicable. 1.4 The customer or its agent should be physically present at the Bank and have a face-to-face communication with the designated staff at the branch/unit of the Bank while establishing a banking relationship. The original documents required should be verified and self attestation should be sought. Any exception in the process should be approved by the branch manager Nabil Bank Limited Page 2

4 or unit head or authorized official with adequate precautions/provisions and the case should be reported to Head Office (HO) Compliance Officer/Implementation Officer. 1.5 Non-face-to-face account may be opened with a clear procedural guideline ensuring appropriate measures to protect the Bank from being used as a medium for money laundering or financing of terrorism. 1.6 Customer s information shall be updated periodically or as and when required and the risk grading shall be done/updated as per the supporting documents. The information disclosed by the customer or based upon the transactions/activities in the account. The nature and volume of transactions on the accounts of a customer shall be monitored for consistency with the information obtained from the customers 1.7 Deviation to the CIP or cases not explicitly provided for shall be forwarded for approval, if found appropriate, by the branch manager/unit head/designated official with the recommendation of Branch Implementation Officer (BIO)/Alternate Branch Implementation Officer (ABIO) of the respective branch/unit to HO Operations and the same shall be intimated to at HO Implementation Officer by HO Operation. 1.8 Beneficial owners and those who have control over funds including for legal persons as trusts, nominees etc. shall be identified. If the names of third persons are being used to conceal the identity of beneficial owners, all endeavors shall be made to understand the same and reported as appropriate. 1.9 HO Implementation Officer shall be provided with sufficient information of the respondent/correspondent banks and financial institutions to understand their identification details, nature of business and to further ensure that they are fully compliant with the required KYC and AML/CFT standards. AML/KYC related queries from such respondent/correspondent banks can be responded by the HO Implementation Officer or as per delegation by him Prior to opening accounts, the names of the applicants shall be searched in the lists of Politically Exposed Persons (PEPs) and sanctions list as advised by HO Implementation Officer. A database containing High Risk Persons including PEPs and High Ranking Officials (HROs) and sanctioned entities/individuals shall be made available to search before opening and during maintenance of accounts. Nabil Bank Limited Page 3

5 2. Customer Acceptance Policy The Customer Acceptance Policy ensures that only those clients whose identity and purpose of opening accounts or performing transactions can be duly established and verified as legitimate by conducting due diligence appropriate to their risk profile/services required would be accepted. 2.1 No account shall be opened by an intermediary for a third person except by the Bank s appointed agents/sub-agents/bank correspondents/representatives. Applications failing to provide required information on beneficial owners/customers and those for which risk profile cannot be determined shall not be entertained. 2.2 Accounts shall be opened only in the name of natural or legal person/organization, the name being the same as in the identity documents of the person. No account shall be opened in the name altering from the identification documents, anonymous/fictitious names, blank names or numeric/alphanumeric characters. Sub-accounts may however be opened with different account titles identifying the nature/use/purpose/type of sub-account at the request of legal persons/organizations with appropriate control parameters. Opening of limited transaction accounts for the purpose of mobile wallets under simplified KYC as may be permitted under regulations from time to time. 2.3 Whereas the bank may fix its own documentary requirements, however, at least the minimum required information and documents shall be obtained from the applicant/customer for opening accounts or performing any transaction as required by NRB regulations/directives and as per the product paper/policy/guidelines of the Bank. 2.4 Wire transfers shall be monitored properly. Whereas the bank may reject remitting/receiving money to/from high risk countries, unless rejected in this way, the staffs involved in remitting/receiving money to/from high risk countries or that appear prima facie suspicious due to place of origination or name of beneficiary or that are of unusual amounts or have unusual purpose shall seek approval from HO Operations prior to sending/receiving funds from high risk countries to confirm that the related entities in the transaction are not sanctioned by any agencies that the Bank refers to. The matter can be escalated to HO Implementation Officer by HO Operations. Appropriate software in this regard may be developed/procured. 2.5 When staffs designated to open new accounts find sufficient grounds that the prospective customer is not disclosing the required identity, the reason for opening account, transaction frequency and volume etc. the account opening request may be denied with the consent of BIO/ABIO and the Branch Manager (BM). The refusal shall be properly documented and Nabil Bank Limited Page 4

6 communicated to the HO Implementation Officer. STR shall be raised in the instances as required by NRB/FIU Directives in this regard. 2.6 The Bank shall not establish any relationship with shell companies. The Bank shall not be associated with entities located in non-cooperating countries or those sanctioned by agencies that the Bank refers to. Neither shall the Bank establish relationship with institutions that deal with shell companies and sanctioned entities. The Bank would refrain from sending/receiving any fund to/from sanctioned entities/countries. 2.7 For online account opening, any transaction or service shall be permitted only after the customer reports in person (face-to-face) at the respective branch/unit or to the authorized agent/sub-agent/bank correspondent/representative of the bank and the required documents are duly acquired and verified by the designated staff/agent/sub-agent/bank correspondent/representative of the Bank within prescribed time frame. Notarization/attestation of required documents/information from competent authorities/notary Public and/or diplomatic missions abroad can also be accepted. If the customer fails to do so, the account shall be closed. An STR shall be raised in the instances required by NRB/FIU Directives. 2.8 The Bank shall have the option to close any account, if it is not satisfied with the documentation/information/transaction of any customer. 3. Customer Transaction Monitoring Procedure The Customer Transaction Monitoring Procedure (CTMP) is an account/transactions screening mechanism to ensure that the accounts or transactions do have a valid legitimate purpose and by no means are used in money laundering and terrorist financing or any other illegitimate activities. The extent of monitoring of accounts and transactions shall be guided by the degree of risk associated with the accounts/transactions and the anomaly in the transactions with respect to the information disclosed by the customers. 3.1 The designated staffs shall monitor accounts and/or transactions to ensure that they are legitimate and are consistent with the KYC declarations of the customers. The transactions shall be performed only after acquiring and verifying all the necessary supporting documents, wherever applicable. 3.2 For accounts/transactions that are in higher risk category or appear to be suspicious, reporting and a close monitoring shall be done. Nabil Bank Limited Page 5

7 3.3 If need be, threshold limits in volume, frequency and type of transactions for accounts may be prescribed with clear parameters. 3.4 The Bank may have threshold transaction limits for transactions including deposit, withdrawal, currency exchange, payments, transfers etc. conducted through the Bank. Threshold Transaction Reporting (TTR) shall incorporate all transactions done at or above threshold limits within one working day or as per Guideline/Directive issued from NRB/FIU. Threshold transaction may be a single transaction or a sum of multiple transactions that is at or exceeds the threshold limit. TTR shall be done in the prescribed format and manner. Source of funds shall be obtained for transactions that are at or exceeds threshold. 3.5 Any transaction that has a reasonable ground to arouse suspicion that the proceeds may be of illegitimate activity, may be used in illegitimate activities or do not seem to have any rational and lawful purpose can be taken as suspicious transaction. For such accounts/transactions, STR shall be raised at the earliest as per the requirement of prevailing laws/regulations/directives in the prescribed manner. Suspicion on the account can also be aroused by the behavior or identity of the customer. Even if a transaction/account is analyzed and found satisfactory, thus not requiring raising STR, the same shall be recorded in appropriate format. The situations for raising STR shall be as per the NRB/FIU Guidelines/Directives. 4. Risk Management The essence of risk management is to be compliant with the KYC and AML/CFT related Policies, Guidelines and practices. The threats of identity disguise, money laundering and terrorist financing shall be eliminated to the possible extent through effective CDD programs and procedures. 4.1 The risk categorization is a structured approach of assigning risk categories to accounts on the basis of various attributes of the accounts and the customers. The classification of accounts on the basis of risk associated with it shall be broadly based on the directions of NRB/FIU. The extent of CDD, monitoring and management of accounts can be different as per the risk profile of accounts. The accounts in the lower risk category can be justified by Simplified CDD (SCDD) while those in the higher risk category shall attract Enhanced CDD (ECDD) and higher degree of monitoring. The risk category is dynamic as it shall be updated as per the changed profile of the customers and activities in their accounts. 4.2 Periodic update of customer and beneficiary profile/information/document shall be done as per the regulations of NRB/FIU or whenever required. A public notice shall be published at Nabil Bank Limited Page 6

8 periodic intervals requesting customers to update their account details. Transactions in accounts of customers, whose KYC/updated information, are not maintained due to unavailability of required information within the required time period shall be suspended. STR shall be raised if there arises any suspicion related to unusually high cash transactions money laundering, financing in terrorism or any other unlawful activities in cases of such accounts. 4.3 In cases of any forged documents as account statements, balance certificates, identity documents, financial instruments, signatures, applications etc. the same shall be further investigated and STR of the same shall be raised, if the required information is available with the bank. 4.4 While launching new products or modifying existing products, procedures and Standard Instruction Manuals (SIM), consent from HO Implementation Officer must be taken to ensure their compliance with KYC and AML/CFT issues to mitigate the related risks. 4.5 In addition to above, risk profiling shall be done on different grounds/basis such as geographical area, business/profession, workstation, customer, service or production, products and distribution channel etc or as required by related Acts and NRB/FIU Directives. B. Miscellaneous 1. Proper Record Keeping Records of customers KYC documents, account transactions and communications including the STRs and TTRs shall be retained in an appropriate manner upto the time period prescribed by NRB/FIU, prevailing laws and the Bank s Guidelines/Bylaw. 2. Agents/ Sub-Agents The Bank may use agents/ sub-agents for its business purposes. However, they should be adequately trained/counseled/communicated for the following. i. Conducting due diligence of customers ii. Conducting regular audits iii. Monitoring the transactions and raising STRs, whenever required 3. Confidentiality of Account Information No staff, under any circumstance, shall violate the confidentiality of customer profile and account transactions, unless required by the prevailing laws or unless there is customer consent. Nabil Bank Limited Page 7

9 4. Tipping Off Tipping off is giving an idea of or disclosing information to the customer or any other unauthorized persons that his/her/someone s account is being monitored or considered suspicious. The concerned staffs shall take utmost precautions that they do not leak such confidential information. Tipping off is a punishable offence. 5. Awareness and Training 5.1 All staffs of the Bank are expected to be adequately aware of the statutory and regulatory requirements and internal policies and procedures regarding KYC and AML/CFT. The Human Resource Department of the Bank shall ensure proper dissemination of knowledge on the related issues to the staffs. 5.2 Relevant policies, procedures, issues and any amendments in them shall be communicated to staffs. Informative and educative materials on KYC and AML/CFT shall be forwarded to concerned staffs. 5.3 Regular trainings shall be conducted by designing annual training calendar. All the information regarding the training shall be recorded appropriately. 6. Responsibility of Head Office Operations The overall implementation responsibility of KYC and AML/CFT framework (Act, Rules, Regulations, Policies, Guidelines, Directives etc) shall rest with the HO Operations under advise to HO Implementation Officer. 7. Responsibilities of BIO/ABIO BIO/ABIO shall be assigned at branch/unit/strategic Business Unit (SBU) levels for the proper implementation of the Policy as well as the related Act, Rules, Regulations, Policies, Guidelines, Directives etc. While providing job description to a staff who is an BIO/ABIO, the duties and responsibilities of BIO/ABIO shall also be included in the description. BIO/ABIO of the branch/unit shall be ensuring that the respective branch/unit is fully compliant with the Acts, Rules, Regulations, Policies, Guidelines, Directives, Circulars and other instructions related with KYC and AML/CFT. The BIO/ABIO shall have direct access to the HO Implementation Officer in matters related with AML/KYC. Nabil Bank Limited Page 8

10 8. Responsibilities of HO Compliance Officer / Implementation Officer The HO Implementation officer shall be responsible for reviewing and ensuring overall implementation of the Acts, Policy, Guidelines and practices related to KYC and AML/CFT. The Officer should be vigilant in compliance of related issues by all the related staffs and branches/units. Whether to report suspicious transaction or not shall be decided by HO Implementation Officer of the Bank. Apart from reporting TTR and STR, the HO Implementation Officer shall be responsible for handling queries from FIU, Department of Money Laundering Investigation (DMLI), and other related entities pertaining to AML/CFT. 9. Authorities Everyone who is made responsible by virtue of this Policy shall have authority to perform their responsibilities. 10. KYC and AML/CFT Guidelines/Procedures The Bank s management is authorized to make working Guidelines/Procedures to implement this Policy. The Bank's policy is to take the KYC and AML/CFT related implementation into automation as far as practicable/possible. 11. Policy Review and Implementation Assessment 11.1 The Internal Audit Department of the Bank shall conduct audit at least annually to ensure that the Bank is compliant with the AML framework, KYC and AML/CFT Policy and guidelines of the Bank including the legal and regulatory requirements The Board of Directors (BOD) of the Bank shall, periodically as required by Acts, Directives of NRB/FIU, conduct an assessment of the implementation status of the policy to ensure its compliance. The same shall be reported to NRB/FIU as required Review and amendments of the policy as per the regulatory requirements and international practices shall be assessed and approved by the BOD. The Policy shall be reviewed at least annually. Nabil Bank Limited Page 9

11 12. Deviation Approval Any deviation in the Policy, except specifically mentioned under this Policy, can be approved by the BOD of the Bank only after considering the money laundering and terrorist financing risks associated with it. 13. Commencement, Repeal and Saving This Policy shall come into effect from the date of approval from BOD of the Bank. After approval from the BOD, this Policy repeals the KYC and AML/CFT Policy of Nabil Bank Limited, However, any commission or omission under the repealed Policy shall be considered to be committed or omitted under this policy. Nabil Bank Limited Page 10