1: The objective of KYC guidelines is to prevent HFCs from being used, intentionally or unintentionally, by criminal elements for money laundering activities. KYC procedures also enable HFCs to know/understand their customers and their financial dealings better that in turn help them manage their risks prudently. Baid Housing framed its KYC policy incorporating the following four key elements:
a) Customer Acceptance Policy
b) Customer Identification Procedures
c) Monitoring of Transactions
d) Risk management
2: For the purpose of the KYC policy, a ‘Customer’ is defined as:
- A person or entity that maintains an account and/or has a business relationship with Baid Housing
- One on whose behalf the account is maintained (i.e. the beneficial owner)
- Beneficiaries of transactions conducted by professional intermediaries, such as Stock Brokers, Chartered Accountants, Solicitors, etc. as permitted under the law, and
- Any person or entity connected with a financial transaction, which can pose significant reputational or other risks to Baid Housing, say, a wire transfer or issue of a high value demand draft as a single transaction.
Customer Acceptance Policy (CAP)
3: Baid Housing’s Customer Acceptance Policy, which lays down explicit criteria for acceptance of customers, ensures the following aspects of the customer relationship:
(i) No loan is given to any anonymous or fictitious/benami name(s)
(ii) Customers are all assessed for location of residence, business if any including type of clients and also the mode of transactions and payments
(iii) Volume of turnover, social and financial status, etc. to enable categorization of customers into low, medium and high risk (these customers will require very high level of monitoring). Currently given the size of our loans and type of clients we deal with, all our customers are considered low risk
(iv) Documentation requirements and other information collected in respect of different categories of customers depending on perceived risk and keeping in mind the requirements of PML Act, 2002 and guidelines issued from time to time
(v) Baid Housing will not sanction/disburse any loan where it is unable to apply appropriate customer due diligence measures, i.e. where Baid Housing is unable to verify the identity and /or obtain documents required as per the risk categorization due to non co-operation of the customer or non reliability of the data/information furnished. However, Baid Housing will have suitable built-in safeguards to avoid harassment of the customer.
(vi) Circumstances, in which a customer is permitted to act on behalf of another person/entity, will be clearly spelt out in conformity with the established law and practices, as there could be occasions when an account is operated by a mandate holder or where an account may be opened by an intermediary in a fiduciary capacity, and
(vii) Checks against any notified list of the NHB or the RBI any other regulator, before accepting a customer, to ensure that the identity of the customer does not match with any person with known criminal background or with banned entities such as individual terrorists or terrorist organizations, etc.
4: Baid Housing will prepare a profile for each new customer, which may 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 Baid Housing. However, while preparing the customer profile, Baid Housing will seek only such information from the customer, which is relevant and is not intrusive. The customer profile will be a confidential document.
5: Given the nature of our business – small ticket loans to low income financially excluded families – we have categorized our customers as low and medium risk. It is highly unlikely that Baid Housing will have any high risk clients given its focus on the lower income section of society, but for information we have categorized the same as follow: