policy and procedural guidelines-2011 · asset (money) laundering prevention act, 2064 (alpa) and...

Policy and Procedural Guidelines-2011

on

Know Your Customer (KYC)

Anti Money Laundering (AML) &

Combating of Financing of Terrorism (CFT)

Reviewed on 15.11.2019

Table of Contents

Preamble 1

1. Objectives of the Policy 2

2. Scope and Application of the Policy 3

3. Definitions and Explanations of Terms used in the Policy 3

4. Definition of Know Your Customer(KYC), Money Laundering and Financing of Terrorism 8

4.1 Know Your Customer (KYC) 8

4.2 Money laundering 8

4.3 Financing of Terrorism 9

4.4 Money Laundering Process 11

4.5 Money Laundering Area 11

5. Policy Framework 12

5.1 International Framework 12

5.2 Domestic Framework 12

6. Risk Management 15

6.1 Flow Chart for AML/CFT Reporting 15

6.2 Role & responsibilities 17

6.3 Control Function: 25

7. Risk Perception 26

8. Key Elements of the Policy 27

9. Customer Acceptance Policy (CAP) 27

9.1 Guidelines in regard to acceptance of customer 27

9.2 Guidelines in relation to Transaction 29

10. Customer Identification Procedure (CIP) 30

10.1 Unique Customer Identification Code 32

10.2 Customer Identification Requirements 32

10.3 Customer identification requirements for specific type of customers 34

10.4 Care to be exercised in regard to customer identification 38

10.5 Customer Profile 38

10.6 Identification of Beneficial Owner 39

10.7 Customer Identification Stages and measures 41

10.8 Enhanced Customer due diligence 42

10.9 Simplified Customer Due Diligence (SCDD) 44

10.10 Reliance on third party customer identification 45

10.11 Periodic Updating of KYC information 46

10.12 Authority Structure for KYC Compliance 47

10.13 KYC Compliance for existing accounts 47

10.14 Suspension of KYC non-compliant accounts 48

11. Risk Categorization 48

11.1 Low Risk 49

11.2 Medium risk 49

11.3 High Risk 50

11.4 Risk Assessment of remittance transactions 51

11.5 Risk assessment of Locker holders 51

12. Monitoring of Transactions 52

12.1 Ongoing Monitoring 53

12.2 Transactions Requiring Special Attention 53

13. Reporting Requirements 54

13.1 Reporting to Financial Information Unit (FIU) 54

13.2 Reporting to Nepal Rastra Bank 58

13.3 Counterfeit Currency Reporting 58

13.4 Reporting of information to various agencies/authorities 59

13.5 Reporting to Management/ Board level committees 59

14. Reporting arrangement 60

14.1 Regarding Threshold Transaction Report 60

14.2 Regarding Suspicious Transaction Report 60

15. Maintenance and Preservation of Records 63

16. Combating of Financing of Terrorism 63

16.1 Execution of freezing order 64

16.2 Unfreezing of funds, Financial Assets or economic resources 65

16.3 Prohibiting transactions with sanctioned jurisdictions and sanction screening 65

17. Correspondent Banking 67

18. Wire Transfers 68

18.1 Salient features of Wire Transfer 68

18.2 Information and details to be obtained for Wire transfer 68

18.3 Exemptions 70

18.4 Role of Ordering, Intermediary and Beneficiary 70

19. Relationship with vendors, service providers and other parties 71

20. Downward Correspondent Banking (Nested Account) 71

21. Payable-through Accounts (PTA) 71

22. Introduction of New Technology 71

23. Resubmission Policy 71

24. Importance of KYC for Employees 72

24.1 Recruitment/Hiring of Employees 72

24.2 Employee Training 72

24.3 Employee Protection 72

25. Tipping off & Confidentiality 73

26. Capacity Enhancement programmes for Board Members & Top Management 73

27. Customer Education 73

28. Miscellaneous 73

29. Review of the Policy 74

Annexure A

Annexure B

Annexure C

Annexure D

Annexure E

Annexure F

Annexure G

Policy & Procedural Guidelines on KYC, AML, CFT Page 1 of 74

Preamble Asset (Money) Laundering Prevention Act, 2064 (ALPA) and Asset (Money) Laundering Prevention Rules, 2073 (ALPR) formulated by Government of Nepal are in force in the country for the purpose of preventing the country from the risk of asset (money) laundering and terrorist financing. Moreover, Nepal Rastra Bank (NRB) has issued its directives in relation to prevention of asset (money) laundering and combating of financing of terrorist activities to be followed by Banks and Financial Intuitions (BFIs). Financial Information Unit of Nepal (FIU-Nepal), the financial intelligence unit of the country, responsible for receiving, processing, analyzing and disseminating financial information and intelligence on money laundering and terrorist financing activities, also prescribes the guidelines and standards to be followed BFIs. Being a joint venture partner as well as foreign subsidiary of State Bank of India (SBI), Nepal SBI Bank Ltd. (NSBL) has also taken into cognizance AML/CFT Policy of State Bank of India (SBI) to the extent of applicability. Therefore, with a view to address and comply with the provisions of ALPA, ALPR, Directives of Nepal Rastra Bank and FIU-Nepal in respect of AML/CFT and to formulate necessary policy, procedural guidelines to combat Assets (Money) Laundering and Combating of Financing of Terrorism, the Bank’s Board of Directors has revised this Policy and Procedural Guidelines on Know Your Customer (KYC), Anti Money laundering (AML) and Combating of Financing of Terrorism (CFT) of the Bank in line with the stipulations of ALPA, ALPR and Directives of Nepal Rastra Bank and FIU-Nepal. Policy and Procedural Guidelines on KYC, AML,CFT, hence, encompasses, inter alia, provisions stipulated under recommendations of Financial Action Task Force (FATF), which serve as the international standard for combating of money laundering and financing of terrorism and proliferation of weapons of mass destruction and relevant provisions prescribed by State Bank of India (SBI) through its Policy and Procedural Guidelines on KYC, AML & CFT to the extent of their applicability.


1. Objectives of the Policy

The Primary objective of this policy and procedures is to prevent the Bank from being used, intentionally or unintentionally for money laundering or terrorist financing activities. The Policy and procedures further enables the Bank to know/understand the customers and their financial dealings better and manage the risks prudently. Objectives proposed to be served by the Policy and procedures in relation to compliance of KYC/AML/CFT provisions are:

i) To lay down policy framework of the Bank for abiding by the KYC Norms, AML and CFT measures as set out by NRB, based on the provisions under ALPA, ALPR and FATF guidelines.

ii) To enable the Bank to verify the bona-fide identification of customers and beneficial owners and their financial dealings, which in turn would help the Bank to get information of transactions, monitor and manage risk prudently.

iii) To arrange for Customer Due Diligence measures.

iv) To arrange system for identification of politically exposed persons (PEPs) and applying enhanced customer due diligence for them.

v) To have an arrangement for ongoing customer due diligence.

vi) To set up adequate arrangement for maintaining higher morale of employees, inter alia, during their selection and appointment.

vii) To prescribe appropriate mechanisms for training and refreshment to officials and employees on AML/CFT laws, policies and procedures.

viii) To arrange for effective mechanism for independent monitoring, supervision, control, audit and updating records thereof.

ix) To arrange for adequate mechanism for identification and reporting of unusual and suspicious activities/transactions.

x) To put in place required arrangement for accomplishing the responsibilities as per ALPA, rules framed thereunder, NRB Directives and assessing effectiveness of the same.

xi) To specify internal role and responsibilities.

xii) To establish basis and system of risk assessment.

xiii) To establish system for risk based customer identification, updating identification details and ongoing monitoring.

xiv) To set up the system for dissemination of information related to terrorist individual, group or organization and confiscation of asset or fund of such terrorist individual, group or organization and reporting.

xv) To establish the system for maintenance of records as per the requirement of the prevailing Act, rules and norms.

xvi) To establish the mechanism for filing required reports including threshold transactions.

xvii) To comply with the provisions of the ALPA, rules framed thereunder and NRB Directives


The focus of the KYC/AML/CFT policy is on obtaining comprehensive information regarding new customers at the initial stage and that of existing customers over a predetermined period, thereby establishing the bona-fides of customers opening accounts and/or conducting transactions and identifying and keeping a watch on high value transactions and those of suspicious nature, as well as reporting them to Law Enforcement / Regulatory authorities, as and when required.

2. Scope and Application of the Policy

This policy is applicable to all branches/extension counters, departments, offices, banking subsidiaries of the Bank and is to be read in juxtaposition with related policies /procedural guidelines/circulars/office orders/instructions issued by the Bank from time to time. The contents of the policy shall always be comprehended auto-corrected with the amendments/revisions/modifications which may be advised by NRB, FIU-Nepal and / or by ALPA/ALPR or by Bank through internal circulars from time to time.

3. Definitions and Explanations of Terms used in the Policy

Definitions and explanation of the terms used in this policy and procedures are as under: i) Customer

“Customer” is defined as a person or entity that maintains or attempts to establish business relationship or conducts or intends to conduct any transaction with the bank. Following person or entity also falls under the ambit of customer.

• A person or an entity that maintains an account and/or has a business relationship with the Bank in any way (e.g. borrowers and guarantors of loan sanctioned by the bank, Demat account holders, Locker holders etc.)

• A person or an entity on whose behalf the account is maintained i.e. the beneficial owner.

• Beneficiaries of transactions conducted by professional intermediaries (e.g. Stock Brokers, Chartered Accountants, lawyers etc), as permitted under the law.

• Any person or entity connected with a financial transaction with the Bank.

ii) Transaction

“Transaction” means purchase, sale, distribution, transfer, investment, use or any type of agreement or any of the following acts performed for any type of economic or business activities:

• Establishment of business relation.

• Opening of an account.

• Deposits or collection of fund, payment, payment order, exchange or transfer of fund in whatever currency, whether in cash or by cheque or other instruments through electronic or any other means.


• The use of a safe deposit (Locker).

• Establishing any fiduciary relationship.

• Any payment made or received in whole or in part based on any contractual or other legal obligation; or

• Establishing or creating a legal entity or legal arrangement.

iii) Beneficial Owner (BO)

“Beneficial Owners” or ultimate Beneficial Owners refer to those natural persons, who are ultimate beneficiaries or owners or those who, directly or indirectly, own, control, direct or influence customers, transactions, assets, legal entity or legal arrangement and/or the natural person on whose behalf a transaction is being conducted. Beneficial owner enjoys the benefit of ownership even though the title of some form of property is in another name.

iv) Politically Exposed Person (PEP)

Politically Exposed persons are individuals who are or have been entrusted with prominent public function in the country or abroad. However, the definition is not intended to cover middle ranking or more junior individuals in the foregoing categories. Politically Exposed Person (PEP) includes Domestic PEPs, Foreign PEPs, and PEPs of International Organizations. It further denotes the person specified as PEP by Government of Nepal by publication through Nepal Gazette at the recommendation of National Coordination Committee. PEP can be categorized as under:

• Domestic PEP It includes following officials and any person having such responsibility or having been designated such responsibility: ➢ President ➢ Vice-president ➢ Prime Minister ➢ Chief justice ➢ Speaker and deputy speaker of House of Representatives ➢ Chairman and vice-chairman of National Assembly ➢ Governor of province ➢ Minister of Government of Nepal ➢ Chief minister of provincial government ➢ Member of federal parliament ➢ Officials of constitutional bodies ➢ Speaker & deputy speaker of provincial assembly ➢ Ministers of provincial government ➢ Officials of special class or its equivalent position or higher level of

Government of Nepal ➢ Judge of high court or that of higher level ➢ Members of provincial assembly ➢ Central level officials of national level political parties


➢ Head and deputy head of district coordination committee ➢ Mayor and deputy mayor of municipalities ➢ Chairman and vice-chairman of rural municipalities ➢ Senior officials of the institutions owned fully or partly by government

• Foreign PEP It includes foreign head of the state, , head of the government, senior politician, central level officials of national level political parties, top level administrator, senior judicial authorities, senior security officials, senior officials of state-controlled institutions or the person having such responsibility or having been designated such responsibility.

• PEP of International Organization It includes board member, manager, director, deputy director having been assigned top level responsibility of international organization or the person having similar responsibility or having been designated such responsibility.

v) Correspondent Banking

Correspondent banking is the facility of banking services provided by one bank (the “correspondent bank”) to another bank (the “respondent bank”). These services may include cash/funds management, international wire transfers, drawing arrangements for demand drafts and mail transfers, payable-through accounts, cheques clearing etc. Section 2(g) of ALPA has defined correspondent Banking as an arrangement of providing banking service to its customer by a financial institution through other financial institution.

vi) Downstream Correspondent (Nested) relationship

A downstream correspondent (also referred to as “nested”) relationship occurs when a Correspondent Bank client provides correspondent services to other banks, domiciled Inside or outside their country, to facilitate international products and services on behalf of the Downstream Correspondent’s clients. This is a practice where a respondent bank provides downstream correspondent services to other financial institutions and processes these transactions through its own correspondent account.

vii) Payable-through Accounts (PTA)

Payable-through accounts, also terms as “Pass-through account” or “Pass-by accounts”, are the correspondent accounts that are used directly by third parties to transact business on their own behalf. In other words, the institution providing the correspondent banking services allows its correspondent Banking Clients’ accounts to be accessed directly by the customers of that correspondent, e.g., the customers of the correspondent may have cheque writing privileges or otherwise be able to provide transaction instructions directly to the institution or through a sub-account.


viii) Shell Entity

Shell Entity means a firm/company that is incorporated for legitimate business purposes, but has no independent assets or operations of its own. It serves as a vehicle for business transactions and may be used by its owners to conduct specific business dealings or maintain control of other firm/companies. Shell entities may not be illegal as they may have legitimate business purposes. However, they can also be a main component of underground activities, especially those based in tax havens.

ix) Shell Bank

Shell Bank refers to Financial Institution or group of financial institutions that has no physical existence in the country of incorporation or license or Financial Institution or group of financial institutions that is not under any regime of effective regulation and supervision.

x) Offshore Entity

The term offshore entity has two definitions depending on its perspective. From the standpoint of the principals of the company, it is a company that has been filed outside of the country where its principals (officers, directors, shareholders, members, partners etc.) reside. From within its country of formation, it is a company that has been formed for the purpose of operating outside of the jurisdiction where it was originally filed.

xi) Offshore Bank

An offshore bank is a bank located in a jurisdiction different from that where its depositors reside. Offshore banks usually prohibit the bank from establishing business activities in the jurisdictions of establishment. An account held in a foreign offshore bank is often described as an offshore account.

xii) Non face-to-face customers

Non face-to-face customers are those with whom the Branch has not had direct interaction at the time of opening the account i.e. customers who open the account without visiting the Branch.

xiii) Walk-in-Customers

The customers who intend to conduct a transaction or establish any type of business relation with the Bank without having his/her/own account with the Bank.

https://en.wikipedia.org/wiki/Bank


xiv) Walking Accounts

A Walking Account is an account for which the account holder has provided standing instructions that upon receipt all funds should be immediately transferred into one or more accounts. By setting up a series of walking accounts, criminals can automatically create several layers as soon as any fund transfer occurred.

xv) Escrow Accounts

Escrow Account is an account which is opened by a third party on behalf of two other parties that are in the process of completing a general transaction such as purchase/sale of goods or properties. In case of such accounts, the funds of a party are held by the escrow agent in escrow account for payment to the other party upon receipt of appropriate instructions from them or until predetermined contractual obligations have been fulfilled.

For example, a company selling goods wants to be certain that it will get paid when the goods reach their destination. Conversely, the buyer wants to pay for the goods only if they arrive in good condition. The buyer can place the funds in escrow account and give irrevocable instructions to disburse them to the seller once the goods arrive. This way, both parties are safe, and the transaction can proceed.

xvi) Customer Due Diligence (CDD)

Customer Due Diligence is a process by which the Bank collects, independently verifies and analyzes the information about a customer that enables the Bank to assess the extent to which the customer exposes it to a range of risks especially the risk of money laundering and terrorist financing. If CDD leads to a high risk determination, the Bank is required to conduct an Enhanced Due Diligence.

xvii) Simplified Customer Due Diligence (SCDD)

Simplified Customer due diligence (SCDD) is the lowest level of due diligence that can be applied to a customer. This is appropriate where there is little opportunity or risk of Bank’s services or customer becoming involved in money laundering or terrorist financing.

xviii) Enhanced Customer Due Diligence (ECDD) Enhanced Customer Due Diligence (ECDD) refers to additional due diligence pertaining to the identity of the customer, source of income, nature and value of transaction etc. for the customer posing high risk. Enhanced Customer Due Diligence (ECDD) is required where the customer and product/service combination is considered to be a higher risk.


4. Definition of Know Your Customer(KYC), Money Laundering and Financing of Terrorism

4.1 Know Your Customer (KYC) “Know Your Customer (KYC)” is a process of identifying the customer, verifying their identity, monitoring their transactions and reviewing their profiles based on risk based approach and adopting necessary measures to protect the Bank from being the vehicle of money laundering. It is the documented norms for the Bank which enables it to acquire the information pertaining to its customers/clients and the legitimacy of its business/transactions so as to prevent potential risks. It requires due diligence that the Bank must implement to identify its clients and obtain relevant information as detailed as possible pertaining to the dealings or doing business or financial transactions with them. It is the measures implemented to validate the legitimacy of the customers’ transactions and their information. In this regard, it is absolutely imperative to know clearly the customer identity, source of fund/assets and nature of transaction. Proper documentation for the KYC should be a pre-condition.

4.2 Money laundering

It is a process by which criminal disguises the original ownership and control of the proceeds of criminal conduct by making such proceeds appear to have derived from a legitimate source. It is the process whereby proceeds of crimes such as drug trafficking, smuggling (alcohol, arms), kidnapping, gambling, robbery, counterfeiting, bogus invoicing, tax evasion, misappropriation of public funds and the like are converted into legitimate money through a series of financial transactions making it impossible to trace back the origin of funds. Most often, such clandestine deals are the first step in using the banking system to launder or clean up the cash obtained from trade of illegal goods or services. Once the money is placed within the Bank, it goes through an intricate web of transactions, better known as layering that leave no audit trail. Conversion of this unofficial or black money into official currency thereby ‘changing its colour’ is money laundering. In this regard, Anti money laundering (AML) refers to a set of procedures, laws and regulations designed to stop the practice of Money Laundering. Under Section 3 of Chapter 2 of ALPA “Offences of money laundering” has been defined as under:

Assets shall be supposed to have been laundered if anyone commits any of the following acts: i) Converting or transferring property by any means knowing or having reasonable

grounds to believe that it is proceeds of crime for the purpose of concealing or disguising the illicit origin of property, or assisting any person involved in the offence for evading legal consequences of offender.

ii) Concealing or disguising or changing the true nature, source, location, disposition, movement or ownership of property or rights with respect to such


property knowing or having reasonable grounds to believe that it is proceeds of crimes.

iii) Acquiring, using, possessing any asset knowingly or having reasonable grounds to believe that it is the proceeds of crime.

No person shall conspire, aid, abet, facilitate, counsel, attempt, associate with or participate in the commission of the acts mentioned above. Money launderers use the banking system for cleansing ‘dirty money’ obtained from criminal activities with the objective of hiding/disguising its source. The process of money laundering involves creating a web of financial transactions so as to hide the origin and true nature of these funds.

4.3 Financing of Terrorism

Financing of terrorism refers to the activities that provide financing or financial support to individual terrorists or terrorist groups or terrorist organizations. Under Section-4, Chapter 2 of ALPA, provisions in regard to combating of financing of terrorism has been stipulated under the point “Terrorist Activities not to be financed” as under: i) No person shall, by any means, directly or indirectly, with unlawful intention and

willfully, provide or collect funds or assets, despite of having knowledge that such funds or assets shall be used or may be used, in whole or in part, in order to carry out a terrorist act or by a terrorist or a terrorist organization.

ii) No person shall attempt for carrying out any act as mentioned above.

iii) No person shall provide or conspire to provide material support or resources to any terrorist or terrorist organization by any means, directly or indirectly, in order to carry out a terrorist act.

iv) In relation to any of the acts mentioned above, no person shall commit any of the following acts:

a) To participate as an accomplice in such act,

b) To organize or direct others to commit such act,

c) To contribute a group of persons which commits such act or has a common purpose of committing such act or willfully promote such group of persons for furthering their criminal activities or to achieve such purpose.

v) Even if any of the following circumstances exist in relation to any act mentioned

above, It shall be the offence of terrorist financing:

a) Terrorist act does not occur or is not attempted,

b) Assets or funds are not actually used to commit terrorist act or attempt thereof.

c) Assets or funds are linked or not linked to a specific terrorist act.


d) Terrorist act or intended terrorist act occurs or will occur in the country, state or territory where such act was intended to occurs or somewhere else,

e) Individual terrorist or terrorist organization is located or not in country, state or territory where the person committing such act resides or somewhere else.

f) Whether the assets or funds are collected or made available from legitimate or illegitimate, any source or means.

If any person commits any of the activities as mentioned above, the same shall be offense of financing terrorist activity.

Even if any act or offence mentioned above is committed in the foreign country or territory provided that the act is treated as offence under the law of respective country, the same shall be treated as the offense of Money laundering and Terrorist financing committed in Nepal.

For the purpose of this document, the term money laundering would also cover financial transactions where the end use of funds goes for terrorist financing irrespective of the source of the funds.


4.4 Money Laundering Process

There are three stages involved in money laundering; placement, layering and integration.

i) Placement It is the initial stage of money laundering, where "dirty" cash or proceeds of crime from the source enters into the financial system. Generally, this stage serves two purposes: a) It relieves the criminal from holding and guarding large amounts of bulky

cash; and

b) It places the money into the legitimate financial system.

It is during the placement stage that money launderers are the most vulnerable to being caught. This is due to the fact that placing large amounts of money (cash) into the legitimate financial system may raise suspicions of officials.

ii) Layering

The second stage in money laundering is layering. In this stage, money launderers carry out series of conversions or movement of fund mostly to distance from their original source. By way of layering, launderers make it more difficult to detect and uncover a laundering activity. It is meant to make the trailing of illegal proceeds difficult for the law enforcement agencies.

iii) Integration

The final stage of the money laundering process is termed as integration. It is at the integration stage where the money is returned to the criminal, after series of transactions, from what seem to be legitimate sources. Having been placed initially as cash and layered through a number of financial transactions, the criminal proceeds are now fully integrated into the financial system and can be used for any purpose.

4.5 Money Laundering Area

Three stages of money laundering placement, layering and integration always do not take place simultaneously rather they may occur separately or overlap. Though money laundering can practically take place anywhere in the world, money launders tend to seek out areas in which there is a low risk of detection due to weak or ineffective anti-money laundering programs. Money laundering activities may be concentrated more at a place or territory based on the stage of money laundering at which the funds have reached. For example, the funds are usually processed in the proximities of the underlying criminal activity especially in the country where it originated, though always it may not be the case.


In the stage of layering, the launderer might choose an offshore financial center, a large regional business center, or a world banking center – any location that provides an adequate financial or business infrastructure. Finally, at the integration phase, launderers might choose to invest laundered funds in still other locations if they were generated in unstable economies or locations offering limited investment opportunities. Among others, a latest trend in money laundering involves use of the new technologies, like smart Cards, online Banking, electronic Cash etc. To prevent the bank from being used as a vehicle of money laundering through new technologies, the bank requires being vigilant and should administer the robust controlling, monitoring and reporting system.

5. Policy Framework

The bank shall follow the applicable international as well as domestic legal framework in relation to AML/CFT.

5.1 International Framework

The Financial Action Task Force (FATF) is an independent inter-governmental body that develops and promotes policies to protect the global financial system against money laundering, terrorist financing and the financing of proliferation of weapons of mass destruction. The FATF Recommendations are recognized as the global anti-money laundering (AML) and counter-terrorist financing (CFT) standard. FATF’s Forty Recommendations revised and adopted in 2012 set out a comprehensive and consistent framework of measures which countries should implement in order to combat money laundering and terrorist financing, as well as the financing of proliferation of weapons of mass destruction. Countries have diverse legal, administrative and operational frameworks and different financial systems, and so cannot all take identical measures to counter these threats. The FATF Recommendations, therefore, set an international standard, which countries should implement through measures adapted to their particular circumstances. Recommendations of FATF and other functional bodies like Asia/Pacific Group on Money Laundering (APG), International Monetary Fund (IMF) and World Bank shall be taken into cognizance by the Bank as applicable. Further, the standards prescribed by United Nations and Basal Committee for Banking Supervision (BCBS) shall also serve as the basis for the Bank for combating money laundering and terrorist financing where mandatory/applicable.

5.2 Domestic Framework The applicable major domestic legal frameworks pertaining to AML/CFT are as follows:

i) Asset (Money) Laundering Prevention Act, 2064 (Including amendments) (ALPA)

ii) Asset (Money) Laundering Prevention Rules, 2073 (ALPR)


iii) Asset (Money) Laundering Prevention (Freezing Asset or Fund of listed individual, group or organization) Rules, 2070

iv) Unified Directives No. 19 on AML/CFT issued by Nepal Rastra Bank

v) Directives/Guidelines issued by FIU-Nepal (AML/CFT Directives to Financial Institutions, Directives to implement UNSCR (United Nations Security Council Resolutions) 1267 & 1373, Threshold Transaction Reporting Guidelines, Suspicious Transaction Reporting Guidelines)

5.2.1 Obligations of Bank under ALPA

Section 7(P) and 7(R) of ALPA has stipulated following obligations of the Bank, in addition to others:

i) The Bank shall develop and implement AML/CFT Policy and Procedures

compatible with its nation, territory, working area, size of business, customer, transaction and risk for the prevention of money laundering and financing of terrorism for the compliance of the provisions stipulated under ALPA, ALPR and directives thereunder. The policy and procedures so developed should include following components:

a. Internal policies, procedures and control arrangement relating to customer identification, business relation, monitoring, transaction information/reporting, record keeping and other obligations.

b. Arrangement for ongoing due diligence.

c. Arrangement to implement obligations as per ALPA, its rules and directives thereunder.

d. Adequate procedural arrangement for ensuring high standard of employees, inter alia, during selection and appointment.

e. Arrangement for ongoing training and refreshment to employees,

f. Effective arrangement for independent monitoring, review and audit of the activities and updating the records.

g. Measures for detection and reporting of suspicious transaction,

h. Other measures required for fulfilling the obligations as per ALPA, ALPR and NRB Directives and other arrangement required for evaluation of effectiveness of the same.

i. Other measures as prescribed by the Regulator,

ii) Bank shall have to appoint compliance officer of managerial level to comply the obligation pursuant to the provision of ALPA, its rules and directives thereunder. The Bank shall have to ensure following function, rights and duties of the compliance officer and required resources for the same:


a. Have access to any of the required records, books of accounts and related documents in the course of delivering his/her responsibility.

b. Seek for and obtain data, information, details or documents from concerned employee of the Bank.

c. Perform other necessary functions for implementation of ALPA, its rules and directives thereunder.

d. Perform other functions as prescribed by the regulator

iii) The Bank shall maintain records, as under, accurately and securely for minimum five years after the termination of business relationship or from the date of transaction or from the date of occasional transaction:

a. All documents and records related to identification and verification of customer and beneficial owner,

b. All documents, records and conclusion of the analysis of customer or beneficial owner and transaction,

c. All documents, details and records related to accounting and business relation of the Bank

d. All documents, details and records relating to domestic and foreign transactions,

e. All documents, details and records of attempted transactions,

f. All other documents, details and records as prescribed by regulators.

iv) The Bank shall have to maintain specified documents, details and records for more than five years up to the stipulated period securely.

v) The Bank shall maintain documents, details and records as mentioned above in such a way that each of the transactions is clearly visible and sufficient to be produced in the course of legal action as evidence.

vi) The documents, details and records shall have to be maintained in such a way that the same could be made readily available to competent authorities upon demand.

vii) The Bank shall have to maintain the report of suspicious transaction for the period of five years.

viii) Other arrangement in regard to preservation and maintenance of documents, detail and records shall be as prescribed.

As per the provision stipulated under Section 7(V) of ALPA, regulator may impose stipulated action/actions and punishment if the Bank does not comply with the order, direction or prescribed standard issued as per ALPA, rule or directives issued thereunder.

5.2.2 Duty, Function and Rights of FIU under ALPA

Section 9 and 10 of ALPA have stipulated following major duties, functions and rights of FIU in relation to the reporting entities including banks:


i) Receiving reports on threshold transactions, suspicious transaction

and any other information, details and documents related to money laundering and terrorist financing from financial institutions and non-financial institutions as per ALPA.

ii) Carrying out analysis of suspicious transaction report and any other report and information received as per the provisions of ALPA and forwarding the conclusion of analysis to Department of Money Laundering Investigation or any other agencies engaged in the investigation as per the prevailing laws if found suspicious of the offense of money laundering or financing of terrorism or any other offense.

iii) Arranging for trainings to its employees, reporting entities, related agencies and regulating bodies as per requirement.

iv) Providing necessary feedback or guidelines to reporting entities or concerned agencies in regard to detection of suspicious transaction and report and information of suspicious transactions.

v) Assisting regulating bodies for inspection of reporting entities in regard to detection, evaluation and reporting system of suspicious transactions and their effectiveness or providing feedback based on the report of inspection and supervision.

vi) Developing understanding with foreign agencies, performing similar function, for mutual cooperation.

vii) Seeking required information or assistance from FIUs or agencies performing similar function in the foreign countries and providing required information or support to them at their request.

viii) Seeking for and obtaining required additional document, record, details and information from reporting entities where required.

ix) Issuing direction to reporting entities in regard to reporting requirements where required

x) Imposing penalties, up to the amount of Rs. Ten Lacs, to reporting entities based on the severity of non-compliance if they do not comply with the reporting requirements in regard to suspicious transactions or if they do not abide by the order/instruction issued or do not produce the information/documents demanded.

6. Risk Management

While the Bank has adopted a risk based approach to the implementation of this policy, it is necessary to establish appropriate framework covering proper management oversight, systems, controls and other related matters.

6.1 Flow Chart for AML/CFT Reporting

For the purpose of management of money laundering and terrorist financing risk, flow chart for AML/CFT reporting in the Bank shall be as under:


(Flow Chart as above for AML/CFT Reporting)

Integrated Risk Management Department

1. Central Management Committee (CENMAC)

2. Operational Risk Management Committee (ORMC)

Group Risk &

Compliance Officer (GRCO)

Chief Risk & Compliance

Officer (CRCO)

Chief Technology

Officer (CTO)

Chief Operating

Officer (COO & Deputy

CEO)

Chief Credit Officer (CCO)

Chief Financial Officer (CFO)

Project Financing &

Infrastructure Lending

Risk Management Committee of the Board

(RMCB)

Managing Director

(MD & CEO)

Board of Directors

(BOD)

Compliance Department (Compliance

Officer)

Information Security Officer

Regulatory & Internal

Compliance Unit

KYC/AML Unit

Head- Special

Branches

Head- Province

Office

Department Head

Officials at Department

Branch Manager/ In-charge of Extension Counter

KYC Compliance

Officer/ MLRO at Special

Branches Office

KYC Compliance

Officer/ MLRO at Province

Office n Counter

KYC Compliance

Officer/ MLRO at Department

Officials at Branch/

Extension Counter

KYC Compliance Officer/ MLRO

at Branch/ Extension Counter

Officials at Province

Office

Officials at Special

Branches Office


6.2 Role & responsibilities Role and responsibilities of various authorities in regard to AML/CFT compliance in the Bank shall be as under:

6.2.1 Board of Directors (BOD)

Board of the Directors of the Bank shall formulate internal policy and procedure for compliance of AML/CFT provisions as per ALPA, ALPR, NRB Directives and international standards of AML/CFT applicable to the Bank. The Board shall carry out the review of the report submitted by Risk Management Committee of the Board (RMCB) and/or AML/CFT Committee of the Board in regard to AML/CFT compliance and activities carried out thereon. It shall maintain oversight over management of money laundering and terrorist financing risk through reports so received from RMCB or AML/CFT Committee or other committees of the Board constituted as per the provisions of NRB Directives. It shall review AML/CFT policy at least once in a year. However, the policy may further be reviewed by the Board of Director any time before one year based on need.

6.2.2 Risk Management Committee of the Board (RMCB) / AML/CFT Committee of the Board RMCB or AML/CFT Committee of the Board constituted as per the provisions of NRB Directives shall oversee compliance status of the Bank in regard to AML/CFT guidelines and submit the report of the activities undertaken for compliance of the provisions of ALPA, ALPR & NRB Directives at least once in every three months for review of the same by BOD. Such report, in addition to others, shall also include relevant information in relation to suspicious transaction report. The committee shall provide necessary suggestion, feedbacks, instructions to the Management for compliance of AML/CFT provisions in the bank and enrichment of compliance status and compliance culture.

6.2.3 Operational Risk Management Committee (ORMC)

Operational Risk Management Committee shall oversee the implementation of AML/CFT Policy of the Bank along with compliance of AML/CFT provisions as per ALPA, ALPR and NRB Directives. It shall analyze the gap if any in regard to compliance to AML/CFT provisions and provide suggestion, feedback and instruction for the compliance of the same. In addition, there exists a Central Management Committee in the Bank (CENMAC) comprising high level management officials. The committee may, review, based on need, the status of implementation of AML/CFT guidelines in the Bank and provide necessary instruction, suggestion and action plan to the concerned departments/offices/branches for ensuring implementation of AML/CFT guidelines.


6.2.4 Group Risk and Compliance Officer (GRCO) Group Risk and Compliance Officer, a senior management level official, shall work as a bridge between Nepal SBI Bank Limited and State Bank of India (SBI). He shall extend necessary support and provide expert opinion / suggestion to formulate/ review policies, manuals, guidelines related to AML/CFT. GRCO shall coordinate with CRCO for effective implementation of the policies related to KYC/AML/CFT compliance in the Bank. He shall directly report to Risk Management Committee of the Board (RMCB) and shall have dotted line reporting to the Managing Director.

6.2.5 Chief Risk and Compliance Officer (CRCO)

Chief Risk and Compliance Officer, a senior management level official, is entrusted with the responsibility of managing AML/CFT risk in the Bank. CRCO shall provide necessary suggestion, feedback and extend required support to compliance department for ensuring effective compliance. He/she shall further coordinate with Group Risk and Compliance Officer (GRCO) for his expert opinion/ suggestion in regard to formulation of policy and procedural guidelines on KYC/AML/CFT. He shall have direct reporting line to RMCB. He/she shall put up the report on activities undertaken by the Bank for compliance to AML/CFT measures and status of AML/CFT compliance of the Bank as per the provisions of ALPA, ALPR and NRB Directives to RMCB or AML/CFT Committee of the Board at least once in 3 months for review and further reporting by RMCB or AML/CFT Committee to the Board of the Bank. Such report, in addition to others, shall also include relevant information in relation to suspicious transaction report. He/she shall assist the Board/RMCB/ AML/ CFT Committee of the Board for managing the Bank's AML/CFT risks and formulating necessary policy/procedure/guidelines.

6.2.6 Compliance Officer

Head of the compliance Department, who shall be at least managerial level official of the Bank, shall be the compliance officer of the bank. He/she will act as focal person to comply with the obligations pursuant to the provision of ALPA, ALPR and NRB directives and Bank’s KYC/AML/CFT policy and shall directly report to Chief Risk and Compliance Officer. The Bank shall report name, address, qualification, contact number, email address etc of the compliance officer to FIU-Nepal and report all such details of new incumbent in case of change. The Bank shall ensure following functions, rights and duties of the compliance officer and required resources for the same:

• Drafting policy, procedures and guideline for effective compliance of AML/CFT provisions as per ALPA, ALPR and NRB Directives.

• Analyzing and investigating the information related to suspicious and unusual activities received from departments, officials and employees.


• Seeking for and obtaining the service of experts from any department/officials and/or necessary data, information, details or documents from concerned employee of the Bank.

• Monitoring the compliance of the AML/CFT provisions as stipulated under ALPA, ALPR and NRB Directives and submitting the report.

• Recommending for departmental punitive action to the officials or employees who do not submit data, information, details, records or documents sought in the course of fulfilling the obligations as per the AML/CFT provisions of ALPA, ALPR and NRB Directives.

• Performing other necessary functions for implementation of ALPA, rules and directives.

• Performing other functions as prescribed by the regulator

In addition to above functions prescribed by regulator, compliance officer shall have the following duties:

• Overall monitoring of implementation of Bank’s KYC/AML/CFT policy.

• Monitoring and reporting of transactions, and sharing of information, as required under the law.

• Interaction with MLROs in Branches/Offices/Departments for ensuring full compliance with the Policy.

• Timely submission of Threshold Transaction Reports (TTRs) and Suspicious Transaction Reports (STRs) to FIU.

• Maintaining liaison with the law enforcement agencies, banks and other institutions which are involved in the fight against money laundering and combating financing of terrorism.

• Ensuring submission of periodical reports related to AML/CFT to the Top Management /Board level committees/Board.

• Updating the list of predicate offenses under the laws and circulating to the Branches/Extension Counters.

• Performing other KYC/AML/CFT compliance related functions as prescribed by FIU-NRB from time to time.

Compliance Officer shall be supported by necessary number of officers and staff posted at Compliance Department. In the course of discharging duties by Compliance Officer, he/ she shall regularly consult Chief Risk and Compliance Officer in regard to AML/CFT related issues, its compliance status and initiatives to be taken for improving the same. He/she shall be responsible for furnishing necessary information, documents, reports related to AML/CFT to NRB, FIU and investigating authorities, competent to receive such information/ documents as per the law as sought by them and confirming execution of order received from the competent authorities. While making any such correspondence/ communication, it shall have to be


ensured that information in regard to investigation/inquiries about any customer or any other party is not tipped off by the concerned.

6.2.7 Assistant Compliance Officer & compliance functionaries:

The officers posted at Compliance Department to support compliance officer are Assistant Compliance Officers. Assistant Compliance Officers at KYC/AML unit under Compliance Department shall have the responsibility of ensuring KYC/AML/CFT policy of the Bank along with the AML/CFT provisions of ALPA, ALPR and NRB Directives. Assistant Compliance Officers and compliance functionaries at KYC/AML unit shall regularly monitor the transactions/ customer activities and communicate to the concerned employees, Special branches office, province offices, departments/branches/extension counters in regard to unusual transactions/suspicious activities and shall advise concerned employees/ branches/ offices/ departments for submission of related documents/information where required. While making any such correspondence/ communication, they shall ensure, on their part as well as on the part of the concerned, that there is no tipping off. They shall monitor the compliance status of AML/CFT provisions, obtain information/report from the branches/extension counters, analyze the same and report to Compliance Officer. They shall regularly consult Compliance Officer in regard to AML/CFT matters and perform all other AML/CFT/Compliance related functions as assigned by Compliance Officer and/or deemed necessary. Assistant Compliance Officers and compliance functionaries at Regulatory and Internal Compliance unit under Compliance Department shall also perform those functions where assigned by Compliance Officer and/or deemed necessary.

6.2.8 Branch Manager/ Officer-in-charge of Extension Counters

Branch Manager/ Officer-in-charge of extension counter is the ultimate authority at operating unit to ensure that AML/CFT provisions as per prevailing rules and regulations and bank’s internal policy and procedures are complied with at the concerned branch/ extension counter. He/ she shall scrutinize the account opening request of the customer and ensure that the relevant KYC information/documents are obtained from the customers so as to identify and verify the customer and beneficial owners, proper due diligence has been carried out, sanction screening has been conducted, necessary approval has been obtained from higher authority where required and all other AML/CFT guidelines have been complied with before establishing business relation. He/she shall ensure that the transactions of the customers are being monitored and all unusual/ suspicious transaction/ activity have been reported. He/she shall further analyze the observations of self-audit, internal/ external audit, regulatory inspection and all other inspection/ reports pertaining to AML/CFT measures of the branch/ extension counters and adopt appropriate corrective actions so as to ensure the rectification of such discrepancies and avoid recurrence of the similar issues. In case of transfer of staff or change in role and responsibilities of MLRO, he/she shall designate MLRO and reliever of


MLRO immediately and report the same to Compliance Department. In Branch Manager’s Monthly certificate (BMMC), he/she shall have to certify regarding compliance with KYC/AML/CFT guidelines and reporting of unusual /suspicious activity/transactions. He/she shall further ensure that inquiry/ investigation about any customer and reporting of unusual / suspicious activity/ transaction are not tipped off by the concerned employees to any customer, unrelated staff or any other party as the same is punishable act.

6.2.9 Department Head Department Head is the ultimate authority at the respective department to ensure that AML/CFT provisions as per prevailing rules and regulations and bank’s internal policy and procedures are complied with at the concerned department. He/she shall ensure that the AML/CFT guidelines are complied with while discharging the function of respective departments including establishing business relation, outsourcing services from third party and introducing any new product/service and reviewing existing product or service. He/she shall ensure that the business relation with the vendor/third party and their transaction are being regularly monitored to identify and report any unusual/ suspicious transactions. He/she shall further ensure that inquiry/ investigation about any customer and reporting of unusual / suspicious activity/ transaction are not tipped off by the concerned employees to any customer, unrelated staff or any other party as the same is punishable act.

6.2.10 Head-Province Office

Head-Province Office has the dual role of complying with the AML/CFT measures at the level of province office and monitoring the AML/CFT compliance status of the branches under his/her province. He/she shall ensure that the AML/CFT guidelines are complied with while discharging the function of the province office including establishing business relation, outsourcing services from third party etc. He/she shall have to ensure prompt reporting of prima facie suspicious transactions at the province office to the Compliance Officer. During branch visit, he/she shall verify compliance status of AML/CFT measures of the branches falling under purview of province office and suggest appropriate actions to the branches/ extension counters for improving compliance culture in AML/CFT area. He/she shall coordinate with Compliance Officer and/or Human Resources Department for conducting trainings on KYC/AML/CFT matters where required. He/she shall further ensure that inquiry/ investigation about any customer and reporting of unusual / suspicious activity/ transaction are not tipped off by the concerned employees to any customer, unrelated staff or any other party as the same is punishable act.


6.2.11 Head-Special Branches

Head-Special Branches has the dual role of complying with the AML/CFT measures at the level of special branches office and monitoring the AML/CFT compliance status of the branches under his/her purview. He/she shall ensure that the AML/CFT guidelines are complied with while discharging the function of the special branches office including establishing business relation, outsourcing services from third party etc. He/she shall have to ensure prompt reporting of prima facie suspicious transactions at the special branches office to the Compliance Officer. During branch visit, he/she shall verify compliance status of AML/CFT measures of the branches falling under purview of special branches office and suggest appropriate actions to the branches/ extension counters for improving compliance culture in AML/CFT area. He/she shall coordinate with Compliance Officer and/or Human Resources Department for conducting trainings on KYC/AML/CFT matters where required. He/she shall further ensure that inquiry/ investigation about any customer and reporting of unusual / suspicious activity/ transaction are not tipped off by the concerned employees to any customer, unrelated staff or any other party as the same is punishable act.

6.2.12 KYC Compliance Officer/Money Laundering Reporting Officer (MLRO)

Though Compliance Officer will have overall responsibility for maintaining oversight and coordinating with various functionaries in the implementation of KYC/AML/CFT policy and procedures, primary responsibility of ensuring implementation of KYC/AML/CFT Policy and related guidelines will be vested with the respective Branches/Offices/Departments. For the purpose, each Department/Province Office/ Special Branches Office/Branch/Extension Counter will designate an official as KYC Compliance Officer/Money Laundering Reporting Officer (MLRO) who would ensure compliance of AML/CFT policy along with the AML/CFT provisions as per ALPA, ALPR and NRB Directives in their department/office/branch/extension counter. MLRO shall be the focal person for the respective department/office/branch/ extension counter and shall have the responsibility of ensuring compliance to AML/CFT provisions while establishing any business relation such as opening account, locker, conducting financial transaction, acquiring third party product/services, outsourcing, introducing new products/procedures as well as reviewing of existing products/procedures and monitoring of the activities/transactions at their Department/Office/branch/extension counter from AML/CFT perspective. They shall adopt necessary measures to update customer identification status of existing customers including their beneficial owners as per the provisions of NRB Directives and Bank’s KYC policy at least at the required frequency and as and when the need be. They shall monitor customer activities/ transactions on ongoing basis, carry out customer due diligence and enhanced due diligence as required. They shall further carry out investigation/ analysis in relation to any prima facie suspicious activity


detected by them and reported by other staff members at their branch/ office so as to report the same to Compliance officer. They shall ensure that no any business relation shall be maintained with banned individual/entity or/and with those falling in the sanction list. They shall further maintain confidentiality in relation to all activities/ transactions as per the extant guidelines and ensure that there is no tipping off in relation to any inquiries, investigation, reporting of unusual/ suspicious activity. They shall report any unusual or suspicious activity/transaction to Compliance Officer through Department Head/Head of the office/Branch Manager/In-Charge of Extension Counter as applicable. To assist MLRO and to perform the functions of MLRO during his/her absence, the department/ office/branch/extension counter shall designate reliever of MLRO.

6.2.13 All Employees of the Bank

It is the responsibility of each and every staff of the Bank to understand the AML/CFT provisions applicable to their area of operation and ensure compliance of the same invariably. In this regard, all the employees of the Bank shall:

• Have through understanding of AML/CFT Policy of the Bank along with the provisions of ALPA, ALPR and NRB Directives.

• Comply with KYC/AML/CFT policy and procedures.

• Remain alert at all the times to the possibility of money laundering and reporting suspicious or unusual transactions to the concerned KYC Compliance Officer/MLRO for further reporting to Compliance Officer.

• Make effective use of training and seek clarifications whenever necessary.

• Ensure that there is no tipping off.

• Be aware that violation of ALPA, its rules and NRB Directive in relation to AML/CFT shall attract penalties including fines and breaches of policy and procedures of the Bank may be construed as gross negligence attracting disciplinary actions as per the Staff Service Byelaws of the Bank.


6.2.14 The chain of duties and responsibilities:

The chain of duties and responsibilities at branches/extension counters/departments/ Province Offices/ Special Branches Office are summarized as under:

Official Duties & Responsibilities

Employee / Operation-in-charge/ officer vested with the authority to open new accounts/ MLRO

• To interview the potential customer

• To verify customer and beneficial owner’s details / profile.

• To exercise due diligence in identifying suspicious transactions.

• To ensure against establishing business relation/ opening accounts in the names of terrorist/banned organisations and carrying out transaction with such individual/entities or individuals/entities related with them.

• To adhere to the provisions of ALPA, ALPR, NRB Directives in relation to establishing business relation/ opening of account and required information/documents to be received for the same.

• To adhere with Foreign Exchange (Regulation) Act and the provisions of NRB directive/circulars in relation to foreign exchange.

• To comply with the guidelines issued by the Bank from time to time in respect of opening and conduct of account.

Branch Manager/ Officer In-Charge of Extension Counter

• To scrutinize and satisfy himself/herself that the information furnished in the account opening form / customer profile / are in strict compliance with KYC/AML/CFT guidelines before authorizing opening of account.

• To ensure that the transactions of the customers are being regularly monitored to identify and report any unusual/ suspicious transactions.

• To ensure that unusual/ suspicious transactions pertaining to the branch/ extension counter are reported to Compliance Officer.

• To certify in the Branch Manager's Monthly Certificate regarding compliance with KYC/AML/CFT guidelines and reporting of unusual/ suspicious activity/transactions.

Department Head

• To ensure that the AML/CFT guidelines are complied with while discharging the function of respective departments including establishing business relation, outsourcing services from third party and introducing any new product/service and reviewing existing product service.

• To ensure that the business relation with the vendor/third party and their transaction are being regularly monitored to identify and report any unusual/ suspicious transactions.

• To ensure that unusual/ suspicious transactions pertaining to the department are reported to Compliance Officer.

Internal • To verify and record their comments on the effectiveness


Auditor

of measures taken by the branches / level of implementation of KYC/AML/CFT guidelines in the course of audit.

• To record their observations if any in regard to efficacy of policy and procedural measures for compliance to AML/CFT guidelines in the course of audit.

Head-Province Office

• To ensure that the AML/CFT guidelines are complied with while discharging the function of province office and ensure prompt reporting of unusual / suspicious transaction.

• To verify KYC Compliance status at the branches during branch visits and monitor AML/CFT compliance status of the branches falling under their purview and suggest appropriate course of action.

• To coordinate with Compliance Officer and/or Human Resources Department for conducting trainings on KYC/AML/CFT matters.

• To ensure that unusual/ suspicious transactions pertaining to the office are reported to Compliance Officer.

Head-Special Branches

• To ensure that the AML/CFT guidelines are complied with while discharging the function of Special Branches Office and ensure prompt reporting of unusual / suspicious transaction.

• To monitor the AML/CFT compliance status of the branches falling under his/her purview.

• To coordinate with Compliance Officer and/or Human Resources Department for conducting trainings on KYC/AML/CFT matters.

• To ensure that unusual/ suspicious transactions pertaining to the office are reported to Compliance Officer.

6.3 Control Function:

6.3.1 Self Audit

As a part of risk focused internal audit, each branch/extension counter performs self-audit on half-yearly basis. During the self-audit, proper assessment and analysis in regard to implementation of AML/CFT measures shall be conducted by the branches/ extension counters and appropriate actions shall be taken by them so as to improve compliance culture and avoid recurrence of discrepancies.

6.3.2 Control by Head-Province Office

Head-Province Office shall monitor AML/CFT compliance status of the branches/ extension counters falling under province office. He/ she shall further suggest branches/ extension counters in regard to appropriate actions to be undertaken for effective compliance and monitor the progress in this regard.


6.3.3 Control by Head- Special Branches

Head-Special Branches shall monitor AML/CFT compliance status of the branches falling under his/her purview. He/she shall further suggest branches/ extension counters in regard to appropriate actions to be undertaken for effective compliance and monitor the progress in this regard.

6.3.4 Internal Audit

Bank’s Internal Audit will provide an independent evaluation of compliance with AML/CFT Policy including legal and regulatory requirements in regard to AML/CFT during their audit. During audit of branches/ extension counters, Internal Auditor shall check/ scrutinize AML/CFT compliance status at the branches at least once in one and half year or at more frequent intervals. During the audit, they shall specifically check and verify the AML/CFT procedure along with the forms/formats being used at the branches and comment on the lapses observed in this regard. A copy of the report in regard to status of AML/CFT compliance at branches/ extension counters shall also be provided to Compliance Department by Internal Audit.

6.3.5 Inspection by Compliance functionaries

Chief Risk and Compliance Officer himself/herself or compliance functionaries as assigned by him/her, may carry out inspection of the branches/extension counter with or without prior information to the concerned branch/extension counter. During the inspection, they shall assess the gap areas in regard to compliance of AML/CFT measures in addition to others and provide suggestion, feedback and guidance to the branch functionaries.

7. Risk Perception Non compliance with KYC/AML/CFT standards can lead to use of banking products and services including the technology channels of the Bank for Money Laundering/terrorist financing activities and thus expose the Bank to risks such as Operational Risk, Reputation Risk, Compliance Risk and Legal Risk etc. Failure to comply with the Anti-Money Laundering regulations constitutes an offence and those not complying with the law will find their reputation severely damaged and details of the offence published in the local/national/international press. Bank should therefore comply with the established laws and regulations in order to protect good name and reputation of the Bank, decrease the likelihood of becoming a victim of fraud or illegal activity, and ensure safe and sound business practices for customers.


8. Key Elements of the Policy

The KYC/AML/CFT Policy and procedures of the Bank has the following key elements:

• Customer Acceptance Policy (CAP)

• Customer Identification Procedures (CIP)

• Monitoring of Transactions and

• Risk Management 9. Customer Acceptance Policy (CAP)

Bank’s Customer Acceptance Policy (CAP) lays down the guidelines for acceptance of potential customers and ensures that only those customers whose identity and purpose of opening accounts or performing transactions can be duly established and verified as legitimate are accepted.

Bank shall open account in the name of natural person or any type of entities. The name shall have to be exactly the same and consistent with the one appearing in the identification document. No account shall be opened in the anonymous or fictitious name. Requisite information/documents shall be obtained from the customer for opening account or establishing business relation.

9.1 Guidelines in regard to acceptance of customer

The guidelines in respect of the customer relationship in the bank, broadly, are:

• No account shall be opened if customer does not provide document, information and details required for customer identification and verification and customer due diligence.

• No account shall be opened if identity of the customer cannot be verified and documentation requirements and other information to be collected, as per ALPA, ALPR, NRB Directives and Bank's circulars/guidelines/instructions cannot be obtained/confirmed/verified.

• Customers should be accepted only if their identity could be verified as laid down in customer identification procedure and no account shall be opened if customer profile cannot be created, risk category of the customer cannot be determined and/or customer due diligence, based on the risk category, cannot be applied.

• No Account shall be opened if documents, information and details provided appear conflicting to the identity of the customer.

• No account should be opened where the Bank is unable to verify identity of the customer and appropriate customer due diligence measures cannot be applied due to non-cooperation of the customer or non-reliability of the documents/ information furnished to the Bank.

• Multiple accounts of same nature in local currency, except term deposit accounts, shall not be opened in the name of a natural person. However, this


restriction shall not be applicable in case of the accounts to be opened for specific purpose as permitted by prevailing laws/ NRB Directives.

• No account is to be opened in anonymous or fictitious/benami name(s). In other words, thorough checking of antecedents is required to avoid opening of account in fictitious/benami names.

• No account is to be opened if the customer hides beneficial ownership.

• Numbered Accounts shall not be opened.

• No account of shell entity/shell bank shall be opened.

• No account shall be opened in the name of unregulated charities.

• No account of red light business/ adult entertainment business (i.e. business of an enterprise including, but not limited to, sexually explicit or sexually oriented matters, book/magazine stores, adult games/ devices, pictures, theaters, shows, establishments or similar business) shall be opened.

• No account shall be opened in the name of the company that is engaged in trading/ manufacturing of legally prohibited items (E.g. Marijuana).

• No account shall be opened in the name of company engaged in gambling/ gambling house/ internet gambling (However, casinos established as per the law of the country are not restricted).

• No Account of the person/entity shall be opened if the identity of the customer matches with the name appearing in the sanction lists as published by Ministry of Home Affairs of Nepal, United Nations Security Council, Office of Foreign Assets Control (OFAC) (United States Sanction List), HM Treasury (UK Sanction List), European Union. Branches/extension counter will also have to be guided by the information available in public domain for the purpose.

• Accounts of persons having relationships with sanctioned/banned persons or entities such as individual terrorists, terrorist group or terrorist organizations etc. are not to be opened.

• No account should be opened in the name of the person/entity if the credit facility availed by him/her/them from any financial institution is found to be in default where such information is available from any source or if he/she/they are blacklisted by Credit Information Bureau of Nepal, unless otherwise required to do so, as a matter of exception, under prevailing laws/regulations. Before opening account, name of the perspective customer has to be checked from official website of Credit Information Bureau (https://cibnepal.org.np) to ascertain that he/she/it is not blacklisted.

• Accounts should not be opened for persons found to be convicted for predicate offences such as money laundering, terrorist activities, drug trafficking, bank frauds, immoral trafficking etc. where such information is available from any source. List of predicate offenses has been furnished as Annexure G of this policy, subject to review from time to time.

• Identity of the new customer shall have to be checked to ensure that it does not match with any person known to have criminal background.

• Accounts of persons who have been convicted and are lodged in jails can be opened, with suitable safeguards decided on case to case basis, jointly with the Superintendent of the respective Jail, with a view to ensuring financial inclusion, provided such persons have not been punished for predicate offences. However,


it should be ensured that banking facilities are not denied, for genuine purposes, merely for the reason that criminal charges have been leveled against them or they have undergone some form of punishment in the past.

9.2 Guidelines in relation to Transaction

No transaction is to be carried out if:

• The customer cannot provide required documents, information and details related to the transaction for customer identification and verification process as applicable.

• Documents, information and details provided appear conflicting to the identity of the customer.

• The transaction is accompanied with incomplete or otherwise misleading documents or information.

• Payment instruction is accompanied with inaccurate representation of the person placing the order.

• Remittance order from other banks/financial institutions are without specifying name or account number of the beneficiary.

• Transaction is connected with person/entity whose name matches with the name appearing in the sanction lists as published by Ministry of Home Affairs of Nepal, United Nations Security Council, Office of Foreign Assets Control (OFAC) (United States Sanction List), HM Treasury (UK Sanction List), European Union.

• Transaction is related with shell entity/shell bank.

• Transaction is for Downstream Correspondent Banking service unless correspondent bank permits/ provides consent for the same.

• Transaction is for Payable-through Account.

• Transaction is related to virtual currency/crypto-currency.

• Transaction is related to online gambling (internet gambling).

It is important to bear in mind that the adoption of Customer Acceptance Policy and its implementation should not become too restrictive and must not result in denial of banking services to general public. Nor will the Bank project any intrusive behavior on the transaction carried out by the client.


10. Customer Identification Procedure (CIP)

Customer identification means undertaking client due diligence measures while commencing an account-based relationship, but not limited to, including identifying and verifying the customer and the beneficial owners on the basis of the officially valid documents.

Customer identification requires identifying the customer and verifying his/her/their identity by using reliable, independent source documents, data or information. Thus, the first requirement of Customer Identification Procedures (CIP) is to be satisfied that a prospective customer is actually who he/she claims to be. The second requirement of CIP is to ensure that sufficient information is obtained on the identity and the purpose of the intended nature of the banking relationship. This would enable risk profiling of the customer and also to determine the expected or predictable pattern of transactions. Customer Identification requirements are different for different types of customer whether they are natural persons or entities.

While identifying customer in relation to opening account or establishing any type of business relation including conduction of transaction, following facts shall have to be ensured:

• Whether the customer is acting or establishing business relationship or conducting transaction, on behalf of himself/herself/themselves or on behalf of third party.

• Whether there is any other beneficial owner of the customer.

• Whether the customer is PEP or family member of PEP or close associate of PEP.

• Whether the customer is non face-to-face customer.

• Whether the customer is sanctioned/listed individual, organization, group or defaulter/blacklisted or incompetent to establish business relation with the Bank.

Required customer identification procedures along with due diligence have to be completed in case of beneficial owner, PEP as well as non face-to-face customers. General guidelines in relation to customer identification procedure shall be as under:

• For the customer that is a natural person, KYC Compliance Officer/Money Laundering Reporting Officer (MLRO) shall ensure that supporting identification documents as per Annexure-19.1 of NRB Directives No. 19 and Annexure A of this policy along with recent photograph are obtained and identity of the customer is verified accordingly.

• For the customer that is a legal entity/legal arrangement, MLRO will ensure that supporting identification documents as per Annexure-19.1 of NRB directives No. 19 and Annexure A of this policy is obtained and identity of the customer is verified accordingly. It shall further be ensured that such entities have proper identification and existence and are engaged in legitimate activity. All measures shall be adopted to verify ownership structure and control structure and necessary identification document/details shall be obtained from the natural persons having controlling interest over the entity such as proprietor, partner, shareholder, executives, directors, authorized persons including account operators as per this policy and NRB Directives.


• Thumb impression or bio-metric, in addition to signature of account holders and account operators in case of natural person and that of account operators in case of legal entities/legal arrangement need to be obtained while opening account.

• Copy of identification documents of customers shall have to be verified from originals by MLRO/ authorized staff of the bank and a stamp marking “Original Seen and Verified” shall be duly put on the copies to this effect. Exceptionally, notarized copy/ copy duly verified by the authorized signatory of correspondent bank whose signatures are verifiable at our end may be accepted.

• In case of Government of Nepal (GoN), offices/entities/organized institutions under/owned by GoN, organizations established under special act, Financial Institutions licensed by NRB, insurance companies which have been licensed by Insurance Board and have issued share to general public, UN or offices or specialized organizations under UN, international organizations and foreign Embassy, identification document/ detail may be obtained only for authorized account operators as per NRB guidelines. Moreover, staff identity card shall be sufficient for identification of account operator in case of the accounts of the government office.

• The customer must physically be present at the Bank and have face to face contact/meeting with MLRO/ authorized staff of the Bank It will be the responsibility of MLRO to ensure that such contact or meeting is held with the customer. Copies of the submitted identification documents must be verified against the original identification documents during the process. Where the accounts are opened through online mode, debit transactions in such accounts shall be permitted only after the customer is present in the Bank and face to face contact or meeting is held. However, credit transaction in such accounts opened through online mode may be permitted up to the certain limit, decided by the Bank even before face-to-face interaction.

• In case of the account operated by way of Power of Attorney, Customer identification procedure will be applied to both the customer and person authorized to operate the account.

• In case of the account to be opened in the name of minor, customer identification procedure shall be applied for the guardian who operates accounts as well.

• Also, while providing credit and facilities to customer, necessary customer identification procedure shall have to be applied for customer (whether natural person or legal entity), guarantors, beneficial owners etc. as well. Moreover, information related to group concerns/ sister concerns/ related parties etc. have also to be obtained.

• Prior to establishing relationship with a customer, basic background information will be obtained with regard to nature of the customer’s business and sources of income, expected level of turnover / transactions on the account and purpose for opening the account.

• Opening of account for one off transaction must be avoided.

• Extra care should be taken while opening accounts of various firms and companies belonging to the same group especially in the light of beneficial owners/real beneficiaries of such group accounts.

• Mobile message or SMS or Email message shall be sent in all instances of opening of new accounts to all customers having mobile number/ email address with dual purpose of thanking them for opening the account with the Bank and for verification of genuineness of mobile number/ email address furnished by the customer.


10.1 Unique Customer Identification Code

The increasing complexity and volume of financial transactions necessitate that customers do not have multiple identities within a bank, across the banking system and across the financial system. This can be achieved by introducing a unique identification code for each customer. The Unique Customer Identification Code will help banks to identify customers, track the facilities availed, monitor financial transactions in a holistic manner and enable banks to have a better approach to risk profiling of customers. It would also make banking operations smooth for the customers. In this context, there shall be unique CIF ID for each customer, where all the accounts of the same customer should be tagged. A customer should not be allotted more than one CIF ID.

10.2 Customer Identification Requirements

Requirement of Identification data and documents for different classes of customers shall be as under: 10.2.1 Natural persons

The customer identification shall be carried out on the basis of information and documents provided by the customers. Following set of documents along with proprietary information that is sufficient to identify the customer, assess risk and report to the concerned authorities should be obtained in case of natural persons:

• Proof of identity

• Recent photograph

10.2.1.1 Proof of identity

Acceptable proof of identity, to be obtained from the customers shall generally be National ID card or passport or any other valid document as per NRB Directives and this policy. Based on the nature, nationality and residential status, acceptable document shall differ from one type of customer to other. List of the information/ documents to be received from the customer for verification of their identity shall be as per NRB Directives, which has also been represented at Annexure A of this policy. The KYC documents to be obtained from the customers shall have to be verified from originals and the information should be verified through the documents and reliable and independent sources available. Further, identification details of the customers have to be verified through official website of Election Commission, Nepal, at http://www.election.gov.np/election/np/bbvrs (Official website of Election Commission of India in case of Indian nationals) where available and any other available official websites.

http://www.election.gov.np/election/np/bbvrs


Documents accepted for proof of identity should be verified through public/concerned authority’s website wherever such information is available online.

10.2.1.2 Recent photograph

Recent passport size photograph shall have to be invariably obtained from the customer. In addition to aforementioned documents, duly filled prescribed account opening form has to be invariably obtained from the customer in all cases.

Moreover, there may be the requirement of additional documents based on the nature, nationality, risk category etc of the customer.

10.2.2 Customer Identification requirements for legal entities

Following set of documents along with information that is sufficient to identify the customer, understand ownership and control structure, assess risk and report to the concerned authorities should be obtained in case of legal entities:

• Documents related to incorporation and business operation/operating license.

• Proprietary documents of beneficial owners and account operators.

Legal status of the legal entities shall have to be established through proper and relevant documents as per ALPA, ALPR, NRB Directives and this policy. It should be ensured whether any person purporting to act on behalf of the legal entity is so authorized and identity of that person is established and verified. Ownership and control structure of the entity has to be understood and it should be determined who are the natural persons who ultimately control the legal entity. The customer identification is carried out on the basis of information and documents provided by the customer. The documents required for legal entities and legal arrangement differ from one to other based on the nature of incorporation and control structure. List of information/documents to be obtained from different types of legal entities shall be as per NRB Directives, which are also represented as Annexure A to this Policy. The KYC documents obtained from the legal entity shall have to be verified from originals and the information should be verified through the documents and reliable and independent sources available.


10.3 Customer identification requirements for specific type of customers

i) Firm/Companies

Branches/Offices need to be vigilant against business entities being used by individuals as a ‘front’ for maintaining accounts with the Bank. They should examine the control structure of the entity, determine the source of funds and identify the natural persons who have a controlling interest and who comprise the management. In this regard, proprietor, partners, shareholder having 10% or more share of the company, directors, Chief Executive Officer, authorized account operators, trustee, ultimate beneficial owners etc have to be identified as per the extant KYC guidelines. These requirements may be moderated according to the risk perception e.g. in the case of a legal entity listed to Stock Exchange, it will not be necessary to identify beneficial owners if their ownership structure/details, shareholding pattern, controlling interest, beneficiary details are published as per the law or if such particulars are easily available and if it is ensured from the reports that the entity has complied with international standards on AML/CFT. While carrying out Customer Identification Procedure, tax registration details i.e. PAN registration details of the firm/company should be verified through official website of the Inland Revenue Department of Nepal, www.ird.gov.np/PanSearch. Similarly, details of registration of companies should be verified through official website of the Office of Company Registrar of Nepal, www.ocr.gov.np, where available, in addition to verification of copies of KYC documents from the originals thereof. Money Laundering Reporting Officers (MLRO) are required to keep duly stamped web generated copy of verification of company registration (where applicable) and PAN of the firm/company, the stamp should consist of date of visit of website and name and signature of visiting officer.

http://www.ird.gov.np/PanSearch

http://www.ocr.gov.np/


ii) Legal Arrangements like Trust/Nominee or Fiduciary Accounts

There exists the possibility that trust/nominee or fiduciary accounts can be used to circumvent the customer identification procedures. Branches/offices should determine whether the customer is acting on behalf of another person as trustee/nominee or any other intermediary. If so, branches/offices should insist on production of satisfactory evidence of the identity of the intermediaries and of the persons on whose behalf they are acting and ensure that the details and nature of the trust or other arrangements have been identified/ verified through proper documents. While opening a Trust account, branches/offices should take reasonable precautions to verify the identity of the trustees, settlers of trust (including any person settling assets into the trust), protectors, controller, beneficiaries, signatories and any other natural persons having controlling interest. In the case of a ‘foundation’ or non-governmental organization registered under the Organization Registration Act, 2034, steps should be taken to verify the founders/members/office-bearers/directors and the beneficiaries.

iii) Client Accounts opened/maintained by professional Intermediaries

Accounts opened/maintained by professional Intermediaries (such as corporate and trustee services providers, asset managers, fund managers, wealth intermediaries, security dealers, tax consultants, Lawyers, accountants, stock brokers etc.) on behalf of their single or a number of clients are client accounts maintained by professional intermediaries. When the bank has knowledge or reason to believe that the client account opened by a professional intermediary is on behalf of a single client, such client must be identified. Branches/Offices may hold ’pooled’ accounts managed by professional intermediaries on behalf of entities like mutual funds, pension funds or other types of funds. Branches/Offices may also maintain ‘pooled’ accounts managed by lawyers/chartered accountants or stockbrokers for funds held ‘on deposit’ or ‘in escrow’ for a range of clients. Accounts of such professional intermediaries who are bound by any client confidentiality that prohibits disclosure of the client details to the Bank should not be opened. Where funds held by the intermediaries are not co-mingled and there are ‘sub-accounts’, each of them attributable to a beneficial owner must be identified. Where such funds are co-mingled, the Branches/Offices should still look through to the beneficial owners. Where the Branches/Offices rely on the ‘customer due diligence’ (CDD) done by an intermediary, they should satisfy themselves that the intermediary is regulated and supervised and has adequate systems in place to comply with the KYC requirements. It should be understood that the ultimate responsibility for knowing the customer lies with the Bank.


iv) Politically Exposed Persons (PEPs), their family members and close associates

The Bank has adopted Risk Management System to screen its existing as well as potential customers and their beneficial owners to identify their status as Politically Exposed Person (PEP) and/or family members and/or close associates of PEP. Branches should gather sufficient information on any person/customer of this category intending to establish a relationship by way of due diligence and check all the information available on the person in the database circulated by the Bank and those available on public domains. Moreover, the Bank has been using “Ace Pelican OFAC” having been incorporated the World-check database of PEPs for screening, which the branches/ extension counter shall compulsorily visit and ensure if the proposed customer is found in the said PEP database or not before opening account. Branches should further verify the identity of the person and seek information about the sources of funds before accepting the PEP as a customer.

Following measures shall be applied in case of PEPs:

a) To establish business relation with such customer only with the prior

approval of higher authority of the Bank. Authorized official for the purpose, shall be as mentioned under point no. 10.12 of this policy.

b) To obtain proof of identity as mentioned in this policy and NRB Directives of all family members, including minors, of such customers. In case of legal entities having PEP control or PEP as beneficial owners, such proof of identity of all family members (including minor) of account operators shall have to be obtained.

c) Obtaining proof of current address of customer as per Annexure B of this policy if the customer is natural person and that of account operators in case of legal entities having PEP control or PEP as beneficial owners.

d) To adopt all reasonable measures to identify the sources of fund and wealth of such customers. To satisfy this requirement the Branches shall obtain customer's declaration in regard to sources of funds/wealth and documents evidencing sources of funds/wealth where feasible (e.g., copy of tax clearance certificate, sell/purchase deed (Rajinama), salary sheet, pension proof, contract paper, etc.).

e) To monitor transaction/business relationship with such customers on an ongoing basis.

f) To update KYC information and conduct Enhanced Customers' Due Diligence (ECDD), at least once in a year.

The above norms shall be equally applicable to the family members and close associates of PEP. Those measures shall further be applicable to the


customers, whose beneficial owners are PEPs or the legal entities having PEP control. In the event of an existing customer, having been known as PEP in the subsequent date, branches should obtain approval as mentioned above for continuation of business relationship and apply necessary measures as mentioned above.

v) Accounts of Non face-to-face Customers

Branches/Offices are instructed to avoid opening of accounts of non face-to-face customers as a general rule. Exceptionally, they may accept verification of documents by officers of correspondent banks whose signatures are verifiable through one of the branches of the Bank. Additionally, verification of documents by Notary Public or officials of Nepalese Embassy may be accepted, but with utmost care. With the introduction of telephone and electronic/ online banking, increasingly accounts are being opened by banks for customers without the need for the customer to visit the bank branch. In the case of non-face to face customers, apart from applying the usual customer identification procedures, there must be specific and adequate procedures to mitigate the higher risk involved. Certification of all the documents presented should be insisted upon and, if necessary, additional documents may be called for. In such cases, debit transactions in such accounts shall be permitted only after the customer is present in the Bank and face to face contact or meeting is held. However, credit transaction in such accounts opened through online mode may be permitted up to the certain limit, decided by the Bank even before face-to-face interaction. In the case of cross-border customers, there is the additional difficulty of matching the customer with the documentation and the bank may have to rely on third party certification/introduction. In such cases, it must be ensured that the third party is a regulated and supervised entity and has adequate KYC systems in place as responsibility for correctness of identity/residence proof lies with the branch monitoring such account or handling one off transaction.

vi) Accounts of Minors

Often, guardian of minor would open an account for minor. As the minor himself/herself cannot operate the account independently, identity proof of the guardian along with KYC information who opens and operates the account shall be obtained along with that of minor while opening such account. All KYC requirements and procedures, applicable for a natural person, shall be equally applicable for the account of minor. In case of such account, Customer Due Diligence and risk assessment shall have to be carried out based on KYC profile of the guardian that operates the account rather than the minor in whose name account is being opened. Moreover, account of minor shall have to be updated and Customer Due Diligence shall have to be carried out immediately as soon as the minor attains the age of majority by obtaining updated customer identification details (and document where applicable) of the customer along with proof of majority and customer’s instruction for operation of account. Branches/ extension counters are


required to inform the customer in advance so that such accounts can be updated on time. In case, the accounts of minors could not be updated on due time, such accounts are required to be frozen till such time the account is updated.

10.4 Care to be exercised in regard to customer identification

i) Whenever request for change of signatory is received, care should be taken to ensure that the identity of any new signatory has been verified as per the norms laid down under Customer Identification Procedure.

ii) Customers availing Internet Banking facility and other New Technology products also should be subjected to customer identification procedure.

iii) The information collected from the customer at the time of opening account and updating the same will be treated confidential and not be used or divulged for cross selling.

10.5 Customer Profile For the purpose of monitoring transactions in accounts, “Customer Profile” of the accountholders has to be compiled. For individual account holders, customer profile should be compiled in the account opening forms, covering the following information, in addition to others:

• Date of Birth

• Gender

• Nationality

• Educational Qualification

• Occupation

• Source of fund/ Wealth

• Annual Income

• Estimate Annual Transaction in the Account

• Value of Assets (Approximate value)

• Details of existing accounts (Deposit/loan) if any

For legal entities, customer profile should be compiled in the account opening forms, covering the following information, in addition to others:

• Type of legal entity

• Registration details


• Territory/ area of operation

• Ownership structure

• Nature of business

• Source of fund

• Estimate Annual Transaction in the Account

• Details of existing accounts (Deposit/loan) if any

• Details of beneficial owners

Customer profiles are to be prepared for all customers. Customer profiles have to be reviewed whenever the branch/office has doubt about the authenticity/veracity or the adequacy of the previously obtained customer identification data. Accounts opened in one Branch/Office should not be transferred to other Branch/Office. In case any account is required to be transferred for any reason, the customer profile should be updated by the Branch/Office where the account is transferred. While converting any inactive, inoperative and dormant account into live ledger, it should be ensured that KYC Guidelines are complied with.

Following additional Information has to be collected for Risk Categorization:

• Purpose/reason for opening the account or establishing the relationship

• Anticipated level and nature of the activity that is undertaken

• Expected source of funds

• Details of occupation / employment/business and sources of wealth or income.

10.6 Identification of Beneficial Owner

As per the provisions stipulated under ALPA, ALPR and NRB Directives, the Bank shall have to identify beneficial owner while establishing business relation with customer or carrying out any transaction. It should be determined whether a client is acting on behalf of a beneficial owner. In addition to requirement of identifying beneficial owners of legal entities, the beneficial owner shall have to be identified even in case of natural persons where beneficial owner other than customer himself/herself exists. The branches/ extension counters shall have to adopt all reasonable steps required to be adopted to verify the identity of the beneficial owner. The customer is also permitted to act on behalf of another person/entity, beneficial owner on following circumstances: i) To represent individual for transactions/agreement within delegated authority by

way of express documentary mandate in his/her favour by the maker of such mandates and to the extent permitted by such mandates subject to laws of the land.


ii) To represent legal/fiduciary entities for transactions / agreements / arrangements with the Bank, within the express documentary delegated authority in his/her favour by the maker of such mandate subject to laws of the land.

iii) To enter into transactions/ agreements with the Bank as directed by legislative/Executive/Judicial authorities to the extent and for the purpose specified by such authority.

iv) To enter into transactions / agreements with the Bank in respect of the individuals / entities as acceptable to the Bank in the light of prevalent banking laws and practices.

In case of legal entities/legal arrangements, ownership and control structure of the customer has to be determined and it should be identified who are the natural persons who ultimately control the legal entity. In general, following measures shall have to be applied to identify beneficial owners of legal entities/legal arrangements: i) If there is any natural person, who owns or controls legal entity, such natural

person shall have to be identified.

ii) If there is no such information or if there is uncertainty about the natural persons who own or control legal entity, it should be ensured whether there is any natural person or not who controls such entity.

iii) If there is no natural person that controls legal entity, key persons involved in the operation and management of such entity shall have to be identified.

Beneficial owners and the natural persons if any who control them, as mentioned below, shall have to be identified in case of legal entities/legal arrangements:

i) Natural persons that control or own the legal entity/ legal arrangement, directly or

indirectly, by virtue of 10% or more share, other types of ownership, value or voting right or decision.

ii) Where 10% or more share of a legal entity is owned by other legal entity, all those natural persons who own 10% or more share of the other entity.

iii) Natural person that have been involved in management or similar function of legal entity.

iv) Natural persons those may have control over legal entity.

v) In case of legal arrangement like trust, trustee, controller, protector, settler, beneficiaries and the natural person that control them.

While measuring effectiveness of indirect ownership or control of legal entity through natural persons, following standards should also be taken care of:

• In case of shareholder, partner of beneficiaries, their proportionate ownership.

• In case of control through family, proportionate ownership of family members.

• In case of control through other legal entities, proportionate ownership of partners, shareholders.

In case of legal entities listed to Stock Exchange, if their ownership structure/details, shareholding pattern, controlling interest, beneficiary details are published as per the


law or if such particulars are easily available and if it is ensured from the reports that the entity has complied with international standards on AML/CFT, identification details of beneficial owners may not be necessary. Branches/offices, while opening accounts of customers or establishing business relation with them, shall follow the identification procedure in respect of its beneficial owners also, in addition to the customer before opening such account or conducting transaction. For identification of beneficial owner of a customer, the branch/office shall collect sufficient information from the customer, check the information available in public domains and records/reports maintained as per the law.

10.7 Customer Identification Stages and measures

10.7.1 Customer Identification Stages Customer Identification procedures along with Customer Due Diligence have to be carried out at following stages:

• While establishing business/ banking relationship;

• While opening an account

• While executing fund transfer through electronic channel (e.g. wire transfer)

• While carrying out occasional transaction of Rs. 1.00 Lacs or above in local or equivalent foreign currency by non-account holders (walk-in-customers).

• While carrying out occasional transaction above the applicable designated threshold if any for the account.

• When there is doubt of involvement of third person other than family member in the transaction of natural person

• When the Bank has a doubt about the authenticity or adequacy of the customer identification data it has obtained earlier and it seems necessary to reconfirm the same.

• When the bank feels it necessary to obtain additional information from the existing customers based on the conduct or behavior of the account.

• When additional verification is required in case of suspicion of money laundering or terrorist financing irrespective of threshold

• When the transaction carried out in a single operation or in several operations appears to be linked.

• When the bank finds a person involved in suspicious transaction or act or connected to such transaction or act, regardless of any exemptions or thresholds that are referred elsewhere.

• While conducting high value one-off transitions

• While making frequent transactions below the threshold


• While customer is found intentionally structuring a transaction into series of transactions

• While executing any transaction which can pose significant reputational or other risks to the Bank.

• At each transaction of high risk customer including that of politically exposed person

In addition, while accepting cash deposit of more than Rs. 1.00 Lacs in an account from any person other than concerned account operator, identification document/details of the depositor along with purpose of deposit has to be obtained.

10.7.2 Customer Identification Measures

The Bank shall adopt following measures to undertake proper identification and Customer Due Diligence of its customers:

• KYC details and documents as per NRB Directives and Bank’s policy have to be obtained from natural personal as well as legal entities while establishing business relation.

• Information and disclosure regarding transaction or business relation and purpose or intended nature of business of the customers have to be obtained.

• Sufficient information/ documents have to be obtained to verify ownership structure and control structure of legal entities/ legal arrangement.

• When a person is establishing business relationship or conducting transaction on behalf of another customer, obtaining identification document of such person and the person working on behalf of him/her including evidence verifying that that such person is properly authorized to act.

• To obtain other information and details regarding customer, transaction and its nature as per the requirement.

• To adopt other measures as prescribed by the regulators from time to time.

10.8 Enhanced Customer due diligence

Enhanced Customer Due Diligence is required to be exercised when establishing business relationship or conducting transaction with the following customers:

i) Customer identified as high risk customers

ii) Customer who conducts complex, unusual large transactions and unusual patterns of transactions or which have no apparent economic or visible lawful purpose

iii) Customers of the country, which are internationally, identified as a deficient or non-compliant to international AML/CFT standards


iv) Customers of the country, which are identified to be at high risk based on corruption, tax evasion or similar type of criminal activities or the customers residing at or conducting profession/ business at the locations which are identified as high risk.

v) PEP, his/her family member and close associates of PEP.

vi) Customer consuming high risk products and services.

vii) Customer conducting transaction only through electronic channel viii) High Net Worth Individuals (HNI)- The individuals having total deposit of Rs.

10.00 crores or more

ix) Customer suspected of Money laundering, terrorist financing or other offence x) Customer engaged in the cash-intensive business

xi) Other customers as prescribed by the Regulator.

While carrying out Enhanced Customer Due Diligence with respect to the customers posing high risk, following measures shall be adopted:

• To obtain approval from higher authority as mentioned under point no. 10.12 of this policy, for establishing or continuing business relation with high risk customers.

• To obtain proof of identity as mentioned in this policy and NRB Directives of all family members (including minors), of customer if the customer is natural person and such documents of account operators if the customer is legal entity.

• Obtaining proof of current address of customer as per Annexure B of this policy if the customer is natural person and that of account operators if the customer is legal entity.

• To adopt all reasonable measures to identify the sources of fund and wealth of such customers. To satisfy this requirement the Branches shall obtain customer's declaration in regard to sources of funds/wealth and documents evidencing sources of funds/wealth where feasible (e.g., copy of tax clearance certificate, sell/purchase deed (Rajinama), salary sheet, pension proof, contract paper, etc.).

• Testing the purpose and background of unusual transactions, having no apparent economic or visible lawful purpose and those which are complex, large or unusual.

• Obtaining or collecting additional information in relation to customer, beneficial owners and related persons.

• Obtaining additional information in relation to business relation, transaction and background, nature and purpose of the same.

• To adopt other possible measures to identify background and purpose of transaction.

• To update KYC information and conduct Enhanced Customer Due Diligence (ECDD) at least once in a year.


• To carry out ongoing monitoring

While carrying out enhanced customer due diligence of the existing customer upon finding activity/ transaction of customer unusual/ suspicious, it should be taken care that the customer should, by no means, understand such suspect. If the situation is such that the customer will have such doubt, additional information/ documents required for enhanced customer due diligence may be obtained later on at appropriate time but at the earliest when customer takes the same as regular procedure of customer identification.

10.9 Simplified Customer Due Diligence (SCDD)

The general rule is that customers must be subject to the full range of Customer Due Diligence (CDD) measures, including the requirement to identify the beneficial owner. Nevertheless, there are circumstances where the risk of money laundering or terrorist financing is lower, where information on the identity of the customer and the beneficial owner of a customer is publicly available, or where adequate checks and controls exist elsewhere in national systems. In such circumstances, it could be reasonable to apply simplified CDD measures when identifying and verifying the identity of the customer and the beneficial owners. Examples of customers or accounts or transactions for whom/ which simplified CDD measures could apply are: i) Accounts opened/ maintained for executing programmes at local level for social

and economic benefit of Nepalese Nationals, upon prior approval of Nepal Rastra Bank. However, such approval shall not be required if such programmes are launched for the period of 3 months or lesser.

ii) Account, of natural person having no bank account, opened with the mission of opening accounts of all Nepalese under the campaign “Let’s Open Account” launched by Government of Nepal

iii) Bank and Financial Institutions Licensed and supervised by Nepal Rastra Bank

iv) Public companies listed with the stock exchange regulated by Securities Board of Nepal

v) Foreign public companies which fulfill all of the following requirements:

• Listed with foreign stock exchange

• Regulated and supervised under the appropriate disclosure mechanism.

• Located at the territory which is fully compliant with international standards on AML/ CFT norms.

vi) Foreign Financial Institutions which fulfill all of the following requirements:

• Licensed, regulated and supervised under the mechanism established to combat money laundering and terrorist financing in consistent with the International standards

• Not questioned or penalized on the ground of violation of international standards on combating of money laundering and terrorist financing


• Located at the territory which is compliant with international standards on AML/ CFT norms.

While determining compliant status, with international standards on AML/ CFT norms, of the territories or countries of non- resident and foreign companies as mentioned in (v) & (vi) above, the list or report published by Nepal Rastra Bank and the information/report published on the website of FATF, APG, IMF, World Bank are to be taken into consideration. Notwithstanding anything contained hereinabove, simplified customer due diligence measures should not be applied for following customers:

• Foreign nationals

• Customer of the countries that are largely non-compliant with international standards on combating of money laundering and terrorist financing or customers having transactions at such territories or countries

• Customer listed to Stock Exchange of the countries that are largely non-compliant with international standards on combating of money laundering and terrorist financing

• Legal entities or legal arrangements, if the details of their beneficial owners are not publicly available

• PEP or family member of PEP or close associate of PEP or customer having PEP as beneficial owner

• Customer posing high risk

• Customer having suspicious activity

• Customers suspected of being involved in money laundering or terrorist financing activities

• Customers conducting annual transaction of more than Rs. one lacs In regard to non-applicability of Simplified Customer Due Diligence for any customer, the Bank shall use its assessment based on the information received through Nepal Rastra Bank or any other reliable independent source or any other doubtful ground for such risk thereof for any reason whatsoever.

For the customers as mentioned hereinabove, only limited customer identification details and documents as decided by the Bank, however consistent to NRB Directives, shall be sufficient. Separate account opening form shall be developed and implemented for such customer. Customer acceptance policy and the procedure of due diligence, however, will be the same as applicable to other customers. Moreover, maximum period of updating KYC information along with Customer Due Diligence followed by review of risk category shall be 8 years in case of such customers till the customers meet the requirements as mentioned hereinabove.

10.10 Reliance on third party customer identification

For the purpose of identifying and verifying the identity of customers at the time of commencement of an account-based relationship, Bank may rely on a third party.


However, Customer identification and verification may be executed through third party only if: i) The Bank can ensure that the customer identification procedure is conducted

by third party as per the standard AML/CFT norms to be followed by the Bank

ii) All the details, information and documents obtained for identification and verification of the customer is immediately available to the Bank

However, The Bank shall not accept the customer identification and verification executed by third party if such third party is not regulated and supervised entity as per standard AML/CFT regime or if such party does not have adequate system in place for customer identification and verification as per standard AML/CFT norms or if such party is located at the jurisdiction of poor AML/CFT compliance or AML/CFT non-compliant jurisdiction. Even in the case of third party customer identification and verification, ultimate responsibility of ensuring proper authenticity of information/documents lies with the branch maintaining such account.

10.11 Periodic Updating of KYC information

KYC information of the customers and beneficial owners has to be updated along with Customer Due Diligence and review of risk category for every customer on regular basis as furnished below:

• For high risk customers- At least once a year

• For medium risk customers- At least once in every three years

• For low risk customers- At least once in every five years (In case of low risk customer whom Simplified Customer Due Diligence is applicable- At least once in every eight years.)

During updating of KYC information, only those information of customer and beneficial owners that are likely to change or have changed over the period, have to be obtained/ updated. However, fresh proofs of identity at the time of periodic updation need not be sought from the customers if the documents obtained earlier are valid and there is no change in status with respect to their identities. In case of legal entities, audited financial statements of last fiscal year (Financial statements prepared by the firm itself in case of firm not requiring auditing) and tax clearance certificate or tax return of last fiscal year should also be obtained during updating of KYC information in addition to other changed/ updated details.. Fresh photograph need not be obtained if there is no remarkable change in face of the customer with respect to photograph obtained earlier. The time limits prescribed above would apply from the date of opening of the account/ last verification of KYC.

In addition to periodic updating, KYC information of the customers and beneficial owners has to be updated immediately under following circumstances: i) If transaction pattern is not commensurate with customer profile

ii) If customer identification procedure is not complete


iii) If the Bank has doubt over authenticity or veracity of KYC data, information or details obtained from the customer

In the course of updating KYC information, about the customer, received by any employee or official, directly or indirectly, formally or informally may also be considered as basis. Such KYC exercise may include all measures for confirming the identity, address and other particulars of the customer that the bank may consider reasonable and necessary based on the risk profile of the customer and the adequacy of data obtained. While updating KYC information, the particulars that are required for reporting to Financial Information Unit shall have to be obtained. In case KYC status of the customer cannot be updated in spite of all efforts, separate details of the customers have to be prepared.

10.12 Authority Structure for KYC Compliance

The branch manager/officer-in-charge of extension counter is vested with the authority to open the account by ensuring compliance with the KYC guidelines. The employee designated for opening account and MLRO, who is basically responsible for ensuring compliance to AML/CFT measures should subscribe his/her signature, in the space provided in the CDD form prescribed in Annexure-D of this Policy, for having interviewed the prospective customer, conducted necessary CDD measures and ensured compliance with all aspects of KYC guidelines. For the purpose of opening accounts/lockers of High Risk customers and PEPs, including family members of PEPs and close associates of PEPs, prior approval of the following authorities shall have to be obtained by the concerned branch/ extension counter:

➢ Head-Province Office in case of branches/extension counters falling under

province office. ➢ Head-Special Branches in case of the branches/extension counters falling

under special branches office. ➢ Head-Central Operations Department in case of branches not falling under

province Office/ special branches office. Such approval of higher authority shall be required for continuation of business relation even if existing customer of lower risk category moves to high risk category.

10.13 KYC Compliance for existing accounts

All the accounts to be opened henceforth as well as the accounts opened prior to issuance of this Policy are required to be fully KYC compliant in terms of this Policy as well as ALPA, ALPR and NRB Directives. In case, there are any gaps, these should be filled on an urgent basis Revised KYC guidelines are applicable to all new as well as existing accounts, transactions like remittances, new technology initiatives/alternate channels like


online banking, Debit cards, correspondent transactions, wire transfers, RTGS, etc.

10.14 Suspension of KYC non-compliant accounts

Where the appropriate KYC measures could not be applied due to non-furnishing of information and/or non-cooperation by the customer, the branch shall suspend/ freeze the account i.e. Debit transaction in the account shall be frozen. Where the Bank feels it necessary to freeze credit transactions as well or total transactions of such KYC non-compliant accounts, the Bank shall issue instruction accordingly to the branches/ extension counter in this effect. Before exercising this option of suspending account, all efforts will be made to obtain the desired information/documents and, in the event of failure, due notice shall be sent to the particular customer at the address furnished by the customer or public notice shall be published in Bank’s official website and/or at National level daily newspaper for updating of KYC status of the account. In case of publishing public notice, the same shall not be addressed to specific customer. The competent authority to permit suspension / freezing of such accounts shall be the Branch Manager/Officer-In-charge of the concerned branch/ extension counter.

11. Risk Categorization

For proper risk assessment of business relationship with customers and evolving suitable monitoring mechanism, all new customers are to be categorized as High risk, Medium risk and Low risk. While the extent of knowledge / information available on customers to prove their identity will determine the risk perception and concomitantly risk categorization, the risk categorization should be also be based on the factors like location/territory/working area, nature/type of business/occupation, customer, product or service, transaction, channel etc. It is to be specifically noted that risk categorization is meant for proper monitoring of accounts and does not reflect in any way on the account holders. Risk Categorizations done by the Branch should not be disclosed to the customers. Branch should ensure that risk categorization of all customer accounts is completed expeditiously and thereafter reviewed at least in the following frequency:

• For high risk customers- At least once a year

• For medium risk customers- At least once in every three years

For low risk customers- At least once in every five years (In case of low risk customer whom Simplified Customer Due Diligence is applicable- At least once in every eight years.)

Following benchmarks have been finalized for facilitating risk categorization of all accounts as well as standalone transactions in the Bank. Branches/Extension Counters/Offices should complete the form as per 'Annexure D' at the time of opening the account and every time the account is reviewed thereafter and keep the same in the File of the Customer. We give below an illustrative list of Accounts/ customers / groups/transactions who may be assigned different risk categories:


11.1 Low Risk

• Salaried employees / pensioners whose income structures are well defined

• People belonging to lower economic strata of the society whose accounts show small balances and low turnover.

• Agriculturists, rural artisans, labourers

• Students

• Households/Housewife

• Retail traders/business

• Small workshop/ repair & maintenance business

• School/ college/ universities

• Printing press

• Petroleum product dealers (Authorized dealers dealing with petrol/diesel)

• Cottage and small industries

• UN Agencies

• Missions of United Nations or its agencies

• Government of Nepal (including state and local level), Government Departments/bodies/corporation/companies/organization, JVs with Government.

• Statutory bodies

• Regulators

• Banks and Financial Institutions licensed by Nepal Rastra Bank.

• Public limited companies listed to Stock Exchange

• All such customers as classified by FIU-NRB as Low Risk.

• Accounts opened under financial inclusion

• Accounts opened for distribution of social security allowances/grants/supports/reliefs by Government of Nepal.

• Individuals with debit or credit summations up to Rs. 25.00 lacs p.a. (For existing accounts, summation for last year will be considered and for new accounts, projected level will be considered).

• Legal entities, with debit or credit summations up to Rs.50.00 lacs p.a. (For existing accounts, summation for last year will be considered and for new accounts, projected level will be considered).

• Loan accounts, other than NPA accounts, having credit limit upto Rs. 1.00 crores.

• Revolving loan accounts if the annual turnover falls within 10 times of Fund based limit.

• All office accounts, inter office accounts.

11.2 Medium risk

• Non-Bank financial institutions

• Stock-brokers

• Gatekeepers (Professionals such as lawyers, notaries, accountants, auditors, investment advisors and trust and company service providers

• Telephone/ communication providers


• Individuals with debit or credit summations above Rs. 25.00 lacs p.a. to Rs. 200.00 lacs p.a. (For existing accounts, summation for last year will be considered and for new accounts, projected level will be considered).

• Legal entities, with debit or credit summations above Rs.50.00 lacs p.a. to Rs. 10.00 crores p.a. (For existing accounts, summation for last year will be considered and for new accounts, projected level will be considered).

• Individuals, firms, companies or organizations classified by FIU-NRB as Medium Risk

• Loan Accounts, other than NPA accounts, having credit limits above Rs. 1.00 crore upto Rs.10.00 crores

• All accounts having more than 60%, but up to 75% forex remittance transactions

• Accounts having more than 60%, but up to 75%, transactions through alternate channels such as card, mobile banking, internet banking etc.

• All dormant/inoperative accounts

• All customer/ accounts other than those classified as Low Risk and High Risk.

• If actual annual transactions in the low risk category exceed by more than 200% to 300% of estimated annual transaction.

11.3 High Risk

• Dealers of high value or precious metals (e.g. jewel, gem, precious metals/ goods, art and antique dealers etc)

• Mining/ Extractive industries

• Restaurants, bar, casinos

• Money Service Business (MSB), Money Changers/Remitters

• Payment Service Providers

• Companies issuing bearer shares

• Personal Investment companies

• Entities involved in manufacturing and/or trading of arms/ equipments/ atomic power as per the prevailing laws

• Firms with sleeping partners

• Embassies, consulates, Missions

• Virtual currency exchanges/ Providers

• Real Estate business

• Trusts, charities, Non-Profit Organizations, NGOs and organizations receiving donations from Nepal and abroad.

• Religious charities/ religious institutions

• Entities having close family shareholding or beneficial ownership

• Customer having complex business ownership structure (E.g. having more than 3 layers of ownership structure)

• Services involving bank notes

• Asset Management services

• Offshore Entity/Offshore Banks

• Non-resident Nepalese (NRN)

• Politically Exposed Persons (PEPs), their family members & close associates

• Non-face to face customers

• Customers with dubious reputation.

• Trade finance (especially letter of credit)

• Private banking business


• High net-worth individuals-individuals with total deposit of Rs. 10.00 crores or more

• Customers domiciled/ having transaction with high risk countries/sanctioned countries as categorized by FATF, updated by FIU/Home Ministry and updated by Bank from time to time.

• Customers involved in any fraud/forgery/antinational activity/terrorism/tax evasion/insider trading etc.

• Customer suspected of Money laundering/ terrorist financing

• Customer of the countries, having been informed/ reported in high risk based on corruption/ tax evasion and other criminal activities

• Currency Exchange transactions

• Pooled Accounts/ Escrow Accounts

• Accounts operated by professional intermediaries where the identity of underlying clients is not disclosed

• Individuals with debit or credit summations above Rs. 200.00 lacs p.a. (For existing accounts, summation for last year will be considered and for new accounts, projected level will be considered).

• Legal entities, with debit or credit summations above Rs.10.00 crores p.a. (For existing accounts, summation for last year will be considered and for new accounts, projected level will be considered).

• Loan accounts having limits above Rs. 10.00 crores

• Loan account, turned to NPA.

• Correspondent Bank Accounts

• Accounts of natural persons operated by Power of Attorney holders

• Accounts having more than 75% forex remittance transactions

• Accounts having more than 75% transactions through alternate channels such as card, mobile banking, internet banking etc.

• All other accounts classified by FIU-NRB as "High Risk Account".

• A person, who due to his/her position and influence, may potentially abuse his/her position for the purpose of committing money laundering (ML) offences and related predicate offences.

• If actual annual transactions in the low risk category exceed by more than 300% of estimated annual transaction or exceeds in the medium risk category by more than 200% of estimated annual transactions.

11.4 Risk Assessment of remittance transactions

In respect of foreign inward remittances and commercial remittances, risk assessment and monitoring shall be done by Central Operations Department, Corporate Office through suitable measures.

11.5 Risk assessment of Locker holders

In regard to locker holders, following facts have to be taken care:

• All those customers, who shall not be accepted for opening account or establishing business relation/transaction, shall not be provided with locker facility.

• The customer availing locker facility shall also be categorized into low, medium and high risk category.


• It should further be identified if the customer availing locker facility is PEP, his/her family member or close associate.

• Beneficial ownership of locker holder shall have to be identified.

• Approval authority for locker service shall be same as applicable to customer account in case of low, medium, high risk or that of PEP.

Since locker facility is provided to the customer having account with the Bank, risk

category of the locker, shall be same as that of the customer account associated with the locker. Hence, as and when customer identification procedure is applied, customer due diligence is carried out and risk category is reviewed for the customer/account of the customer, the updated risk status of the locker shall be same as that of associated account.

12. Monitoring of Transactions

A dedicated Compliance Department for the entire Bank has been established at Corporate Office under the control of the Chief Risk and Compliance Officer. There shall be a dedicated KYC/AML unit under Compliance Department for carrying out monitoring as well as other AML/CFT functions of the bank. The Compliance Department shall be headed by at least Managerial level official who will report to the Chief Risk and Compliance Officer (CRCO). The department and KYC/AML unit under it will have adequate component of officers for analysis of alerts generated by the Anti Money Laundering (AML) system (AMLOCK) in use. Though the department analyzes the alerts on transactions handled across the Bank with the help of the AMLOCK system, also the arrangement is in place to monitor the transactions and generate reports on manual basis. For carrying out the task of analyzing transactions alerts, functionaries at the Compliance Department will be required to contact branches/offices and their controllers/ province offices/ special branches office as well as departments frequently and repeatedly. All functionaries are required to attend to the request received from the Compliance Department, over phone, fax, e-mail, or any other established mode of communication, promptly in order to ascertain these alerts as suspicious transaction within the specified time frame. However, the concerned functionaries should not tip off the customer and/or divulge the information called for by compliance department to the customer concerned / others, nor should the transactions in account being investigated should be stopped/restrained. It is reiterated that the communications/investigations are of strictly confidential nature and are required to be handled discreetly. In this connection, it is further clarified that functionaries at Branches/Offices/departments shall have to continuously look for any unusual/ suspicious transactions/activities at their end and escalate the same to MLRO for further analysis. MLRO shall carry out analysis of the same and in appropriate cases, arrange to report such unusual/suspicious activity/ transaction to Compliance Officer in the prescribed formats for further analysis and submission of STRs by Compliance Department if found so. On the other hand, Compliance Department at Corporate Office shall carry out system supported monitoring of transactions to identify any unusual/ suspicious transaction.


12.1 Ongoing Monitoring

The Branches/offices shall exercise ongoing due diligence by carrying out the following activities: i) Closely examine the transactions of customers in order to ensure that such

transactions are consistent with the KYC information of customer, the customer’s business and risk profile thereon.

ii) To request for or examine the source of funds if is required.

iii) To review and update the document, data, details or information of customers including that of PEP, high risk customer or of beneficial owner, their business relation, transaction in order to ensure that the same are kept up-to-date,

iv) To regularly monitor cross border correspondent banking relation and wire transfer transactions.

v) To regularly monitor the transactions executed in foreign country through electronic instruments or cards issued by our Bank so as to ascertain whether such electronic instruments or cards have been used for the purpose for which they were issued or not and also to monitor the use of electronic instrument or card issued by foreign bank or financial institutions in our network/ devices. If use of such electronic instrument or card is found suspicious, such instrument or card shall have to be blocked.

vi) To perform other functions as prescribed by the Regulator,

vii) To perform other functions as prescribed by the Bank as deemed necessary from time to time.

In case of finding any transaction, activity of the customer or attempted transaction or use of electronic instrument or card unusual or suspicious, same has to be immediately reported to Compliance Officer after analysis of the transaction by MLRO of the concerned branch/ office/ department through Branch Manager/ Department Head as the case may be, for further analysis and reporting to FIU and/or other concerned authority if the same is concluded as suspicious by Compliance Department.

12.2 Transactions Requiring Special Attention

It is important to recognize that the KYC process does not start and end with opening of accounts. Transactions should be monitored depending on the risk sensitivity of the account. Branches/ Extension Counters should pay special attention to all complex, unusually large transactions and all unusual patterns, which have no apparent economic or visible lawful purpose. Transactions that involve large amounts of cash inconsistent with the normal and expected activity of the customer should particularly attract the attention of the branch functionaries. High risk accounts should be subjected to intensive monitoring. High value transactions by non-account holding customers also need to be monitored carefully. As walking accounts may be used for layering, transactions in such accounts require to be monitored with proper care. Transaction with/ related to the individual, entity or legal arrangement of the countries which have been identified


as poorly compliant or non-compliant to international standards of AML/CFT norms have to be monitored with extra care. In relation to the transactions requiring special attention, background and purpose of the transaction should be tested in depth and conclusion of the findings shall have to be recorded in written form.

13. Reporting Requirements

13.1 Reporting to Financial Information Unit (FIU) In terms of ALPA and NRB Directives, Compliance Officer is obliged to file following reports to the Financial Information Unit-Nepal (FIU-Nepal) which has been set up as a national unit, for interalia, collecting, analyzing, and disseminating information in respect of financial transactions: i) Threshold Transactions Reports (TTRs)

ii) Suspicious Transactions Reports (STRs)

iii) Risk Assessment and Review Report 13.1.1 Threshold Transactions Reports (TTR)

Following threshold transactions shall have to be filed within 15 days from the date of transaction:

• Cash transaction of Rupees 10.00 Lacs or more by a customer in one transaction or in a series of transactions in one day.

• Payment of foreign currency equivalent to Rs. 10.00 Lacs or more to a customer or cross-border electronic transfer or other types of transfer of Rs. 10.00 Lacs or more to a customer in one transaction or in a series of transactions in one day.

• Foreign currency cash transaction equivalent to Rs. 5.00 Lacs or more by a customer in one transaction or in a series of transactions in one day.

Moreover, the Bank shall have to obtain source of fund from the customer while accepting cash deposit of Rs. 10.00 Lacs or more from him/her / them. Following transactions shall be exempted from threshold transaction reporting:

• Transaction conducted by GoN or office/entities under GoN.

• Transaction conducted by the organization established under Special Act.

• Transactions executed by licensed Bank and Financial Institutions by themselves or with other licensed Bank or Financial Institutions or with government entities.


• Transactions conducted by public limited companies with other public limited companies, government or semi-government offices/organizations/companies/entities, organizations established under Special Act.

• Transactions conducted by insurance companies while carrying out reinsurance business.

• Transaction of loan disbursed to its customer by the Bank as per the prevailing laws.

• Transaction conducted by United Nations Organization (UNO), offices and specialized entities under UNO and International Organizations.

• Transactions pertaining to the services and facilities provided to the employees by the Bank

• Non-cash fund transfer from account maintained at one bank or financial institution to other bank or financial institution within Nepal through cheque issued by Bank or financial institution.

13.1.2 Suspicious Transactions Report (STR)

Suspicious Transactions Report also termed as Suspicious Activity Report (SAR) is required to be made within 3 days of reaching conclusion that the transaction is of suspicious nature. Such report is to be filed even if the activity of the customer is suspicious and actual transaction has not taken place and in case of attempted transaction. "Suspicious Transaction" refers to the transaction of such nature that is impossible in general economic, commercial and business practice and the term also means similar other transactions, the FIU declares from time to time , as suspicious transaction. "Suspicious transaction" means a transaction whether or not made in cash which, to a person acting in good faith: i) Gives rise to a reasonable ground of suspicion that it may involve the

proceeds of crime or

ii) Appears to be made in circumstances of unusual or unjustified complexity; or

iii) Appears to have no economic rationale or bonafide purpose; Some of the characteristics to suspect involvement of money laundering activity are as under:

• Involvement of funds in illegal activity

• Intended to hide or disguise assets derived from illegal activities

• Designed to evade anti money laundering guidelines

• No business or apparent lawful purpose


• The sort of transaction in which the particular customer is not normally expected to engage in and for which, after examining available facts, satisfactory linkage is not obtained

• Unusual characteristics or activities

• Attempts to avoid reporting or record keeping requirements

• Provides insufficient or suspicious information One of the measures for identifying suspicious activity is through the transaction history i.e. scrutinizing transactions, which are above the threshold as set in customer profile. Experiences with the customer in past dealings may also be another source of identification. Branch officials handling the transactions should use reasonable judgment in determining the suspiciousness of the transaction based on proper monitoring. It is very important that the customers are neither told nor given any room for doubts in their mind about the course of enquiry while seeking additional information that the Bank is looking at their transactions / activity with suspicion. Such disclosure indication is against the provisions of relevant Act / guidelines. In case of transactions carried out by a non-account based customer, i.e. a walk-in customer, where the amount of transaction is equal to or exceeds Rupees fifty thousand in case of foreign currency and Rupees One Lacs in case of local currency, whether conducted as a single transaction or several transactions that appear to be connected, the customer’s identity should be verified. Further, if there is sufficient reason to believe that a customer is intentionally structuring a transaction into a series of transactions below the threshold, the branch should verify identity of the customer and analyze the pattern as well as purpose of transaction and also consider forwarding the transaction as suspicious transaction to Compliance Officer. Branches are required to record and report all transactions of suspicious nature in deposit, loan accounts and remittances etc., with full details on the prescribed format to the Compliance Officer, Corporate Office, immediately as it has to be immediately reported by Compliance Officer to FIU where such transaction is concluded as suspicious transaction. Besides, Compliance functionaries at Compliance Department of the Bank continuously monitor the transaction of the customer through AMLOCK alerts in addition to others. Where any alert or transaction is seen prima facie suspicious, the compliance functionaries may seek for additional information, documents, analysis from the end of concerned employees/branch/ extension counter/ department as per the requirement. Upon receiving sufficient information, documents and report of analysis from them, compliance officer shall conclude regarding reporting of STR to FIU. A copy of the format for reporting suspicious activity/ transaction by branches/departments to Compliance Officer, with guidelines for filling up the


same is enclosed as Annexure 'C' .Soft copy/updated copy of the format is placed on FTP site of the Bank and can be downloaded as and when required. Submission of the information/ report of unusual transaction/ suspicious transaction by branches/ extension counter/ departments to Compliance Officer and STR submitted by Compliance Department to FIU have to be kept confidential and branches/departments are cautioned against tipping off the customers who are being inquired upon/reported upon. The illustrative list of suspicious transactions has been furnished as Annexure 'E'. Bank has decided to fix following alert scenarios for transaction monitoring through AMLOCK, subject to review from time to time, for filtering transactions and generating alerts.

Transaction Scenario for filtering Transactions through AMLOCK for STR purposes:

Monitoring of transactions through AMLOCK for the purpose of generating Suspicious Transaction Reports (STR) is being done by Compliance Department, through pre-determined scenarios and thresholds fixed by the Bank. The scenarios have been set up by Compliance Department upon approval of Chief Risk and Compliance Officer. Presently, following scenarios have been used for filtering transactions and generating alerts. Existing scenarios are subject to review from time to time.

S.N. Name of Scenario

1 Cash Deposits to Numerous Accounts under same CIF

2 Frequent transactions above threshold

3 Frequent Transactions just below threshold

4 Funds In & Funds Out

5 Large Number of transactions in a day

6 Large Value Forex Transaction

7 Large foreign exchange frequencies

8 Numerous Low Cash Deposits

9 Significant activity in previously dormant accounts

10 Significant transactions in newly opened CIF

11 Cash In Cash Out Matches

12 Transaction in High Risk Accounts

13 Daily cash deposits by staff

14 High Transaction Volume

The system of periodically revising transaction thresholds for such filtration with the approval of Chief Risk and Compliance Officer of the Bank shall be continued so that regular improvement in the process may be ensured. Further, various scenarios fixed for generating alerts, are dynamic and may change from time to time. Change/revision in the alert scenarios shall be implemented in AMLOCK System with the approval of the Chief Risk and Compliance Officer as and when deemed necessary.


If the Bank decides for upgradation of existing screening/ monitoring application or use of any other application for such purpose, screening/ monitoring of transactions shall be done accordingly.

For filtering transaction for the purpose of identifying suspicious transaction at the level of branch/ extension counters, the same shall be done by the branch functionaries on regular basis focusing more on high value transactions, occasional transactions, transaction of high risk customers, transactions not matching customer profile, transaction just below the reporting threshold in addition to other scenarios discussed in the policy and NRB/FIU Directives. For the purpose, the branch functionaries can review transactions beyond certain threshold or pertaining to certain type of customers through Finacle system, threshold transaction report and behaviour of customer while carrying out transaction or furnishing source or reason of transaction.

13.1.3 Risk Assessment and Review Report Quarterly Risk Assessment and Review Report consisting of numerical details of customers, KYC non-compliant customers, customer falling under different risk categories, STR, TTR, training etc. in the prescribed format shall be prepared and submitted by Compliance Officer to FIU and Nepal Rastra Bank within 15 days from the end of each quarter.

13.2 Reporting to Nepal Rastra Bank

Following reports shall have to be prepared and submitted to Nepal Rastra Bank. The Compliance Officer will report to NRB, Bank Supervision Department regarding the following:

• The AML CFT Reporting Format (Offsite Data Collection) will be prepared on half yearly basis i.e. every Ashad end and Poush end and will be submitted within 15 days from the end of each half of the year.

• The AML CFT Reporting Format (Bank Self-Assessment Questionnaire) will be prepared on yearly basis i.e. every Ashad end and will be submitted within 15 days from the end of fiscal year.

13.3 Counterfeit Currency Reporting

If any currency note or coin received from customers or any other parties at the branches/ extension counters is suspected to be counterfeit, due diligence of the customer has to be conducted by the branch/extension counter to ascertain the suspiciousness of the activity and such suspected coin or note has to be sent by concerned branch/ extension counter directly or through designated branch as specified by the Bank to Nepal Rastra Bank/ Currency Management Department of Nepal Rastra Bank for their confirmation/verification along with Suspicious Currency Note Report, copy of deposit slip and depositor’s Identity document (where available) and the instance has to be reported to Compliance Department along with relevant


information/ document/ report immediately. Copies of each of such notes/coins have to be retained by the branch/extension counter along with office copy of letter/report. Once Nepal Rastra Bank confirms whether such currency notes/coins are counterfeit or not, the matter has to be duly intimated to Compliance Department. In case the customer transaction/activity is found to be suspicious upon analysis by Compliance officer, Compliance officer shall report STR to FIU.

13.4 Reporting of information to various agencies/authorities

Nepal Rastra Bank, Department of Money Laundering Investigation (DMLI), Commission for Investigation of Abuse of Authority (CIAA), Courts etc may issue order for freezing/unfreezing of assets/funds of the customer. Moreover, various investigating authorities may seek information/details of the customer in the course of investigation of money laundering related crimes or any other crimes. Whenever, such freezing order or request for information/documents of the customer/transaction from such agencies/ authorities, which are competent to receive such information/details/documents as per the prevailing laws, is received, action should be taken immediately and the report/information/details should be furnished to the concerned authorities promptly, but not later than the prescribed timeline if any. In this regard, Compliance Department shall, on daily basis, download such letters uploaded at the prescribed link of Nepal Rastra Bank and obtained from other investigating authorities directly or indirectly through email, fax or other means and correspond to the concerned employees/branches/extension counter/ departments for taking action and furnishing information/details/reports as required. Upon receipt of such correspondence, concerned employees at the branches/ extension counters/ concerned department shall have to take action as sought and respond to Compliance Department immediately but not later than the prescribed timeline if any. In addition, Compliance Department shall also check the system to ensure that necessary action has been taken/ required information has been submitted. Upon receipt of the response concerned employees of the branches/ extension counters, Compliance Department shall arrange for reporting the same to concerned agencies/authorities, which are competent enough to receive such information/details as per the law. Such response from the branch/ extension counters shall be made by MLRO or reliever of MLRO only and not by others. It is very important that the customers and any other person including unrelated staff are neither told nor given any room for doubts in regard to inquiries made by Nepal Rastra Bank, FIU or other competent authorities about their details/ transactions. Such disclosure indication is against the provisions of relevant Act / guidelines. Hence, the concerned staff has to keep it confidential.

13.5 Reporting to Management/ Board level committees

Compliance Department shall have to put up report of status of compliance of KYC/AML/CFT guidelines as per the ALPA, ALPR, NRB Directives and Bank’s policy at least at the quarterly meetings of Operational Risk Management Committee (ORMC). Chief Risk and Compliance Officer, shall further put up the report on activities undertaken by the Bank for compliance to AML/CFT measures and status


of AML/CFT compliance of the Bank as per the provisions of ALPA, ALPR and NRB Directives to RMCB or AML/CFT Committee of the Board at least once in 3 months for review and further reporting by RMCB or AML/CFT Committee of the Board to the Board of the Bank. Upon requirement, the Compliance Department shall put up the report of compliance status of KYC/AML/CFT guidelines to the Management, ORMC and RMCB any time.

14. Reporting arrangement

FIU entertains AML/CFT related reporting only by designated Compliance Officer. Accordingly, all reporting of TTRs and STRs to FIU will be done only by the Compliance Officer or Assistant Compliance Officer(s).

For the purpose, undernoted reporting arrangement is in place.

14.1 Regarding Threshold Transaction Report

Extraction of TTRs has been centralized at Compliance Department, Corporate Office through such data/ details generated by MIS Department and reporting to FIU will be done by the Compliance Officer or Assistant Compliance Officer Further, the MLROs of the Branches/Offices shall also go through threshold transactions of their branch so as to analyze patterns of transactions to zero on prima facie suspicious transactions, if any.

14.2 Regarding Suspicious Transaction Report

• Scrutiny of unusual transactions that may lead to suspicion should be done by officials at branches/extension counters/offices on regular basis. Major responsibility of scrutinizing any unusual transaction with respect to the amount, at branch/ extension counters shall be as per the posting power delegated to them. In case of detection of prima facie suspicious transaction and/or suspicious activity at the level of branch/office/extension counter, concerned staff shall report the same to MLRO for further analysis and MLRO of the branch/ extension counter, after analysis of the same, will report to Compliance officer through Branch Manager.

• In case of detection of prima facie suspicious transactions and/or suspicious activity at the level of province office, MLRO of the province office, after analysis of the same, will report to Compliance Officer through Head- Province Office.

• In case of detection of prima facie suspicious transactions and/or suspicious activity at the level of special branches office, MLRO of the special branches office, after analysis of the same, will report to Compliance Officer through Head- Special Branches.

• In case of detection of prima facie suspicious transactions and/or suspicious activity at the level of corporate office departments, MLRO of the concerned department, after analysis of the same, will report to Compliance Officer through Department Head.


• Compliance Department at Corporate office shall analyze the alerts generated through AMLOCK system by way of various scenarios set up by the department to generate alerts on prima facie suspicious transactions based on parameters of the scenario set as per the approval of Chief Risk and Compliance Officer and through any other available means i.e. information received, transaction analysis, reports etc. Such alerts generated through AMLOCK, through other sources and information/ report received from branches/ offices/ department shall be analyzed by Compliance Department to ensure/ascertain whether the transactions are suspicious or not. In the course of analysis, Compliance Department may seek information, details or documents from the concerned employees/branches/offices/ department through phone, fax, email or any other suitable means, which the concerned shall have to respond promptly. In respect of all alerts not found suspicious, the same shall be settled by the department with their comments/observation. In case of alerts that are concluded as suspicious, suspicious transaction report shall be prepared by Compliance Officer.

• To observe “four eyes” concept in reporting suspicious transactions following arrangement is in place at different levels:

➢ At branch/extension counter/ office/departments, first dealing staff will report any unusual/suspicious activity/transaction to the KYC Compliance Officer/MLRO, who will carry out analysis on the same and get himself/herself satisfied about existence of a suspicious activity/nature and then report to the Compliance Officer through the Branch Manager/ In-Charge of Extension counter/ Head Province Office/ Head- Special Branches/Department Head, as the case be.

➢ The report of suspicious activity/transaction received from branches/offices/extension counter/departments as well as alerts generated/ transactions identified/ informed/observed as prima facie suspicious at Compliance Department, will further be analyzed by the Compliance Department, corporate office for finalization of STR by Compliance Officer. While finalizing any STR for the purpose of reporting to FIU, the Compliance Officer will compulsorily put up the same to Chief Risk and Compliance Officer. Once the decision of filing STR is so finalized, the compliance officer shall file STR to FIU.


Flow chart in respect of filing STR to FIU has been presented below:

Analysis of the report forwarded by Branches/Extension Counter/ Departments/

Province Office/ Special Branches office and unusual/ suspicious activity detected at

Compliance Department by Compliance functionaries & further reporting to Chief Risk

and Compliance Officer by Compliance Officer in case of finding the same suspicious

Analysis by KYC Compliance Officer/ MLRO


15. Maintenance and Preservation of Records

All information, details, documents, reports, conclusion of analysis and records, as mentioned below shall have to be mentioned accurately and securely for minimum 10 years after termination of business relation with the customer or from the date of transaction or from the date of occasional transaction:

• Related to Account opening

• Related to the identification and verification of customer and beneficial owner.

• Related to conclusion and report of analysis carried out in relation to customer, beneficial owner and transaction.

• Related to domestic or foreign transactions

• Related to attempted transactions

• Related to monitoring, risk assessment and internal control.

• Related to the transactions requiring special attention.

• Related to suspicious transactions/activities

• Related to accounting and business relation

• Wire transfer related

• Remittance related

• Suspicious Transaction Report

• Other documents, details and records as prescribed by regulator

Notwithstanding the period mentioned above, documents, information and records, prescribed in the prevailing rules and regulations, shall have to be maintained for additional period beyond 10 years. All information, documents and records as mentioned above shall have to be maintained in such a way that each transaction is clearly visible and the same is sufficient to be produced as evidence in the course of legal proceedings. Above mentioned records shall have to be maintained in readily available form for submission to competent authority on demand.

ICT Department shall arrange for maintaining above mentioned information, documents and details in electronic form through Document Management System.

16. Combating of Financing of Terrorism

As per the provision of ALPA, as and when list of terrorist individuals, group or organizations are received for freezing their fund or assets, as approved by Security Council Committee established pursuant to various United Nations' Security Council Resolutions (UNSCRs), Ministry of Foreign Affairs may publish such updated list of listed individual, group or organization in its website and it further sends the same promptly to Ministry of Home Affairs through Electronic channel. Accordingly, Ministry of home Affairs publishes such updated list of terrorists along with freeze order in its website at http://www.moha.gov.np/home/pageDetails/72. In addition, Ministry of Home Affairs shall also publish the list of individual, group or organizations found to be involved in terrorist activity as per the decision of government of Nepal based on the investigation of Ministry of Home Affairs as per its own findings or request received from foreign countries through Ministry of Foreign Affairs of Nepal at its website with freeze order. Banks should ensure to update the consolidated list of such terrorist individual, group or organization by regularly visiting the website of Ministry of Home Affairs and immediately freeze the fund or assets of such terrorist individual, group or organization without prior information.

http://www.moha.gov.np/home/pageDetails/72


Moreover, in terms of Section 110 of the Banks and Financial Institutions Act, 2073, Nepal Rastra Bank may direct banks to freeze any account opened in the concerned licensed institution in the name of any individual, firm, company or institution in such a manner as to prevent the withdrawal or transfer of funds in any way from that account in connection with investigations into any type of crime or in connection with protecting the national interests by checking money laundering and terrorist activities or organized crimes.

16.1 Execution of freezing order

Compliance Department at corporate office regularly visits the website of Ministry of Home Affairs and designated link of Nepal Rastra Bank so as to extract freezing order of such authorities. Moreover, such freezing order may also be received from Nepal Rastra Bank through any other means such as direct letters, email etc.

To ensure compliance of freezing order of Ministry of Home Affairs and that of Nepal Rastra Bank, following procedure shall be adopted:

i) Compliance Department shall correspond with the order for freezing of assets/funds of the customers to the concerned employees/branches/extension counters/departments based on the nature of order for taking action as required within 24 hours from the receipt of such order. In this regard, the branches/extension counters are required to freeze the assets/fund of such customers within 24 hours from the receipt of the order and confirm the same to Compliance Department. Such freezing order shall be executed without prior notice to designated individuals/ entities. Besides, Compliance Department shall also scan the system to ensure that the required freezing action has been taken in respect of fund/assets of designated individuals/ entities as per the order. Upon receipt of such confirmation from the branches/ extension counters, compliance Officer shall immediately pass the information to Financial Information Unit, Nepal (FIU-Nepal) and/or any other concerned authority.

ii) In case, the particulars of any of customers match with the particulars of designated individuals/entities, the Branches/Offices shall immediately, not later than 24 hours from the time of finding out such customer, inform full particulars of the funds, financial assets or economic resources or related services held by such customer at their branch/office to the Compliance Officer, Corporate Office. If the Compliance Officer finds that the particulars of the customer exactly match with the particulars of designated individuals/ entities, he/she immediately passes the information to Financial Information Unit, Nepal (FIU-Nepal) and/or any other concerned authority.

iii) In case, the match of any of the customers with the particulars of designated individuals/entities is beyond doubt, the branches would prevent designated persons from conducting financial transactions, under intimation to Compliance Officer, Corporate Office.

iv) The Branches/extension counters shall report suspicious activity/ transaction to the Compliance Officer, Corporate Office covering all suspected transactions in the accounts carried through or attempted. It will be the duty of the compliance Officer, Corporate Office to analyze and investigate such report received from the branches/extension counter. Upon analysis, if such activity/ transaction are considered suspicious by Compliance officer, he/she shall put up the same to Chief Risk and Compliance Officer for finalization of STR. Once the same is


finalized, he/she shall immediately file Suspicious Transaction Report (STR) with the FIU in the prescribed format.

16.2 Unfreezing of funds, Financial Assets or economic resources

Any individual or entity, if it has evidence to prove that the freezing of funds, financial assets or economic resources or related services, owned/held by them has been inadvertently frozen, they shall move an application giving the requisite evidence, in writing, to the concerned Branch. The Branches shall inform and forward a copy of the application together with full details of the asset frozen given by any individual or entity informing of the funds, financial assets or economic resources or related services have been frozen inadvertently, to the Compliance Officer, Corporate Office within two working days. The Compliance Officer shall cause such verification as may be required on the basis of the evidence furnished by the individual/entity and if he/she is satisfied, puts up a note to the Chief Risk and Compliance Officer who then will pass an order within fifteen working days, for unfreezing the funds, financial assets or economic resources or related services, owned/held by such applicant under intimation to the concerned branch. However, if it is not possible for any reason to pass an order unfreezing the assets within fifteen working days, Compliance Officer shall inform the applicant through the concerned Branch.

16.3 Prohibiting transactions with sanctioned jurisdictions and sanction screening

Sanctioned Countries/territories are those countries/territories against whom the political and economical trade restrictions are put in place with the aim of maintaining or restoring international peace and security. Their principal purpose is usually to change the policies and actions of the sanctioned country’s regimes, individuals or groups in a direction which will improve the situation in that country. It is also aimed at preventing weapons from falling into the wrong hands, disrupting terrorist operations and prohibiting the transfer of funds to a sanctioned country and freezing the assets of a government, the corporate entities and residents of the sanctioned country.

In this regard, the Bank shall carry out no transactions at/with/through following countries, their nationals, institutions, vessels or correspondent bank or by any means at/with the countries that fall in “Call for Action” list of Financial Action Task Force (FATF) under the list of “High Risk and other monitored jurisdictions”. Such list is accessible under the link, http://www.fatf-gafi.org/countries/#high-risk.

At present, following countries, subject to review by FATF from time to time, fall under “Call for Action” of Financial Task Force:

• Democratic People’s Republic of Korea (North Korea)

• Iran

Accordingly, with respect to the following countries/territories under sanction for most of the transactions by OFAC (US Sanction), subject to review from time to time, no transactions shall be carried out at/with/through their nationals, institutions, vessels or correspondent bank or by any means at/with them:

• Cuba

• Democratic People’s Republic of Korea (North Korea)

• Iran

• Sudan

• South Sudan

http://www.fatf-gafi.org/countries/#high-risk


• Syria

• Crimea

• Sevastopol

Similarly, under-mentioned transactions shall not be carried out with following countries, subject to review from time to time, under limited sanction of US.

• Myanmar - Transaction relating to any of the military activities or dealing in arms or jadeite, rubies or any item which includes goods such as jewelry.

• Russia - Transaction relating to exploration or production of deepwater, Arctic offshore or shale projects in Russia or the oil and gas industry in Russia or dealings in the military or defense items involving Russia (for e.g. Trade finance in relation to export of the equipment for offshore oil or gas exploration) .

• Venezuela - Transaction relating to transactions and dealings with Government of Venezuela (its property, and its interests in property, which includes entities owned 50 percent or more, individually or in the aggregate, by the Government of Venezuela).

The Bank shall, further, strictly prohibit direct or indirect dealing/ transaction with the sanctioned parties under following sanction lists, in addition to the list published by Ministry of Home Affairs of Nepal:

• UN Sanction List, accessible at following link http://www.un.org/sc/committees/1267/aq_sanctions_list.shtml.

• US Sanction List (OFAC Sanction list), accessible at following link http://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/default.aspx

• UK Sanction List (HM Treasury Sanction list), accessible at following link http://www.hm-treasury.gov.uk/financialsanctions

• EU Sanction List, accessible at following link https://eeas.europa.eu/headquarters/headquarters-homepage/8442/consolidated-list-sanctions_en

In this regard, the branches/extension counters are advised that no any business relation shall have to be established with the individuals/entities falling under above mentioned sanction lists.

For the purpose, The Bank has put in place the arrangement for sanction screening during on-boarding of the customer and carrying cross-border SWIFT transactions through the application-Ace Pelican OFAC. UN Sanction list, US Sanction list, UK Sanction list and EU Sanction list as per the database of World Check have been incorporated in Ace Pelican OFAC.

In this regard, Branches/extension counters, before opening any new account, shall compulsorily check the name of proposed customer through Ace Pelican OFAC and further through the website of Ministry of Home Affairs of Nepal to ensure that the name(s) of the proposed customer does not appear in the sanction lists. In case of false name matches, the Branch Manager/ In-Charge of Extension counter shall permit opening of accounts by white-listing such false matches and stamping the account opening form in effect of sanction screening. In case of exact match of the name of proposed customer with the sanctioned individual, entity or group, the same should immediately be reported to Compliance Officer for further analysis and reporting to FIU.

http://www.un.org/sc/committees/1267/aq_sanctions_list.shtml

https://eeas.europa.eu/headquarters/headquarters-homepage/8442/consolidated-list-sanctions_en

https://eeas.europa.eu/headquarters/headquarters-homepage/8442/consolidated-list-sanctions_en


Further, MIS Department shall arrange for sanction screening of the existing accounts against aforementioned sanction lists at least once a year. During such screening through Ace Pelican OFAC, blocked/suspected message shall be displayed in case of full or partial name match of the customers. In case of such blocked/ suspected message, Branch Manager/In-Charge of Extension counters/ authorized official, shall arrange for through checking of the detail for the customer and white-list the false matches. Full details of accounts bearing resemblance with any of the individuals/entities in the sanction list should immediately be intimated to Compliance Officer, Corporate Office for further analysis and necessary action including freezing of fund/assets held with the bank and submission to FIU, NRB or other concerned authority where required.

17. Correspondent Banking

Transactions conducted through correspondent banking relationships need to be managed taking a risk-based approach. "Know Your Correspondent" procedures should be established to ascertain whether the Correspondent Bank or counter-party is itself regulated for money laundering prevention and, if so, whether the correspondent is required to verify the identity of their customers as per Financial Action Task Force (FATF) standards.

Following due diligence measures shall be applied while establishing correspondent banking relation and carrying out transaction with them:

• Adequate information/documents shall be obtained in regard identification and activities/nature of business being performed by the correspondent/counter-party.

• Credibility of correspondent/counter-party, quality of supervision applicable to it and action taken if any on it for breaching AML/CFT norms shall be assessed based on publicly available information.

• Assessing correspondent/ counter-party's internal policy on AML/CFT and its adequacy.

• Assessing adequacy of monitoring transactions and reporting mechanism for unusual/suspicious activity

• Ensuring that the counter-party does not establish any business relation with shell bank.

• No correspondent banking relation shall be established with shell banks.

While establishing any correspondent banking relation and reviewing the same, requisite information/details shall be obtained from the correspondent bank/ counter-party through “General Information and Questionnaire for correspondent banking” as per Annexure F of this policy. The information/details/ document so obtained through questionnaire shall be assessed and additional information/ document shall be sought for if deemed necessary. Such relation shall be established/ continued only with those Banks which comply with standard AML/CFT measures.

Bank’s Forex & Treasury Department shall establish correspondent banking relations in consultation with and upon approval of Chief Financial Officer (CFO). Forex & Treasury Department shall arrange for review of existing correspondent banking relation at least on annual basis, preferably at fourth quarter of each fiscal year. Where required for assessment, Forex & Treasury Department may seek the support of Compliance Department. Upon assessment, if any correspondent/counter-party is


found not complying with AML/CFT measures, correspondent banking relation with such party shall be terminated after giving notice.

18. Wire Transfers

Banks use wire transfers as an expeditious method for transferring funds between bank accounts. Wire transfers include transactions occurring within the national boundaries of a country or from one country to another. As wire transfers do not involve actual movement of currency, they are considered as a rapid and secure method for transferring value from one location to another.

In the process of wire transfer, the bank may be involved as ordering bank, intermediary or beneficiary bank. 18.1 Salient features of Wire Transfer

The salient features of a wire transfer transaction are as under:

i) Wire transfer is a transaction carried out on behalf of an originator person (natural person or legal entity) through a bank by electronic means with a view to making an amount of money available to a beneficiary person at a bank. The originator and the beneficiary may be the same person.

ii) Cross-border transfer means any wire transfer where the originator and the beneficiary bank or financial institutions are located in different countries. It may include any chain of wire transfers that has at least one cross-border element.

iii) Domestic wire transfer means any wire transfer where the originator and receiver are located in the same country. It may also include a chain of wire transfers that takes place entirely within the borders of a single country even though the system used to effect the wire transfer may be located in another country.

iv) The originator is the account holder, or where there is no account, the person (natural person or legal entity) that places the order with the bank to perform the wire transfer.

18.2 Information and details to be obtained for Wire transfer

Wire transfer is an instantaneous and most preferred route for transfer of funds across the globe and hence, there is a need for preventing terrorists and other criminals from having unfettered access to wire transfers for moving their funds and for detecting any misuse when it occurs. This can be achieved if basic information on the originator of wire transfers is immediately available to appropriate law enforcement and/or prosecutorial authorities in order to assist them in detecting, investigating, prosecuting terrorists or other criminals and tracing their assets. The information can be used by Financial Information Unit for analyzing suspicious or unusual activity and disseminating it as necessary. The originator information can also be put to use by the beneficiary bank to facilitate identification and reporting of suspicious transactions to FIU. Owing to the potential terrorist financing threat posed by small wire transfers, the objective is to be in a position to trace all wire transfers with minimum threshold limits.

Accordingly, branches/ extension counters/offices must ensure that all wire transfers are accompanied by required minimum information as mentioned below for accurate identification and verification of customer irrespective of the currency and amount:


i) Originator’s full name

ii) Account Number of originator and where account does not exist, unique reference number that is sufficient for identification of transaction

iii) Address of the originator and where the same is not available, date of birth and birth address or citizenship number or national identification number or customer identification number. This information may be waived in case of the wire transfer amounting to Rs. 75,000.00 or less.

iv) Name and account number of beneficiary and where account does not exist, unique reference number that is sufficient for identification of transaction.

Originator here also refers to the beneficial owner of the originator. In relation to the wire transfer, following points shall have to be considered and taken care of:

i) Information and details as mentioned above shall also be applicable in case of several individual transfers from a single originator, bundled in a batch file for transmission to beneficiaries i.e. wire transfer through batch file.

ii) All originator information accompanying a wire transfer is to be retained with the transfer by a bank processing as an intermediary element of a chain of wire transfer. In case the Bank acts as an intermediary or beneficiary bank, it should ensure that originator’s information is retained with the transfer. In case such information is not retained with transfer, the Bank shall have to seek the same from ordering bank or intermediary. If such information is not received from ordering bank or intermediary, such payment shall have to be withheld till the required information is received. In case such payment is found suspicious, the same shall have to be reported as suspicious transaction.

iii) While making payment of wire transfer of Rs. 75,000.00 and above, customer identification procedure has to be applied for beneficiary.

iv) All cross-border wire transfer equivalent to Rs. 50,000.00 (Rupees Fifty Thousands only) and above has to be effected only by debit to customer’s account or against cheques/drafts and not against cash.

v) Sanction screening has to be carried out in respect of all wire transfers and the fund of terrorist individual, group or organization has to be immediately frozen so that no transfer or transaction can be made out of the same. Further, suspicious transaction report has to be filed in case of such transfers.

vi) In case of having agent in relation to wire transfer, it should be ensured that such agent should have implemented the programme for anti money laundering and combating of financing of terrorism and implementation of the same shall have to be regularly monitored. Further, updated list of such agents shall have to be published by the Bank in Bank’s official website.

vii) If a bank has reason to believe that a customer is intentionally structuring wire transfers to below Rs. 75,000/- (Rupees Seventy Five Thousand) to several beneficiaries in order to avoid reporting or monitoring, the bank must insist on complete customer identification before effecting the transfer. In case of non-cooperation from the customer, efforts


should be made to establish his/ her identity and the activity/ transaction is to be reported as Suspicious Transaction.

viii) Special attention has to be given in regard to high value wire transfer as well as wire transfer to/from high risk jurisdictions and tax haven jurisdictions. Adequate information has to be obtained and verified through independent sources in regard to counter-party, source, purpose, relation between remitter and beneficiary and legitimacy of such fund being transferred. If legitimacy of such fund received cannot be properly established, the same should be suspended and the case has to be immediately reported to Compliance Officer as suspicious transaction for further analysis and reporting to FIU and/or other agencies where required.

ix) If the information furnished by the customer for receiving payment of cross-border wire transfer seems related to domestic wire transfer, details/statement of the sender (individual or entity) who sends fund through domestic wire transfer has to be prepared. If such transfer is received frequently which does not commensurate with the customer profile, the same has to be reported to Compliance Officer as suspicious transaction for further analysis and reporting to FIU.

18.3 Exemptions

Requirement of originator’s information may be waived in following transactions:

a) Wire transfer, resulted on account of purchase of goods or services through debit card, credit card or prepaid card where details of the transaction are recorded in the card.

b) Interbank transfers and settlements, where both the originator and beneficiary are banks or financial institutions.

c) If the Bank is satisfied with existing customer identification and verification of the customer and does not envisage any money laundering or terrorist financing risk associated with him/her in case of originator or beneficiary being existing customer of the Bank.

18.4 Role of Ordering, Intermediary and Beneficiary

i) Ordering Bank

An ordering bank is the one that originates a wire transfer as per the order placed by its customer. The ordering bank must ensure that qualifying wire transfers contain complete originator information. The bank must also verify and preserve the information at least for a period of ten years.

ii) Intermediary Bank

For both cross-border and domestic wire transfers, a bank processing as an intermediary element of a chain of wire transfers must ensure that all originator information accompanying a wire transfer is retained with the transfer. Where technical limitations prevent full originator information accompanying a cross-border wire transfer from remaining with a related domestic wire transfer, a record must be kept at least for the period mandated by prevailing laws and same has to be made available to the beneficiary bank upon demand.


iii) Beneficiary Bank

A beneficiary bank should have effective risk-based procedures in place to identify wire transfers lacking complete originator information. The lack of complete originator information may be considered as a factor in assessing whether a wire transfer or related transactions are suspicious and whether they should be reported to FIU. The beneficiary bank should also take up the matter with the ordering bank if a transaction is not accompanied by detailed information of the fund remitter. If the ordering bank fails to furnish information on the remitter, the beneficiary bank should consider restricting or even terminating its business relationship with the ordering bank.

19. Relationship with vendors, service providers and other parties

The Bank shall have to obtain relevant information/documents as deemed necessary for its relationship with vendors, service providers and other parties such as business partners, consultants, valuators, etc. Following measure shall be adopted for carrying out their due diligence:

• Obtain Identification documents at the time of commencing of business relationship.

• Strictly follow the customer identification procedures and customer acceptance policy before establishing relation with them.

• Carry out initial Due Diligence at the time of establishing relationship. This shall include but not limited to verification of antecedents and screening procedures to verify that the related party has a clean history/business record.

All functionaries in the Bank will ensure at the time of approving outsourcing services that KYC/AML/CFT measures are implemented in letter and spirit and no access is given to any individual/entity having direct/indirect link to banned entities/individuals.

20. Downward Correspondent Banking (Nested Account)

The Bank shall not provide/permit downward correspondent banking service and nested account activities to other financial institutions unless concerned correspondent bank permits/ provides consent for the same.

21. Payable-through Accounts (PTA)

The Bank will not provide customers with the services of payable through accounts i.e., direct access to any of its correspondent account held with foreign banks.

22. Introduction of New Technology

Bank will pay special attention to the money laundering threats arising from new or developing technologies and take necessary steps to prevent its misuse for money laundering activities. Bank will ensure that appropriate KYC procedures are duly applied to the customers using new technology driven products. Moreover, the bank shall assess the AML/CFT risk and arrange for necessary procedure/mechanism for managing the same while introducing any new technology, product or service.

23. Resubmission Policy

Once a transaction is rejected by Bank due to sanctions/money laundering/terrorist financing concerns, concerned department/branch shall maintain the record of such rejected transactions and shall not accept the same submitted by correspondent bank after stripping off


information. Moreover, the Bank shall maintain record of the transactions rejected by correspondent bank and shall not attempt to resubmit same transactions after stripping off information.

24. Importance of KYC for Employees

The Bank employees will conduct themselves in accordance with the highest ethical standards and the extant regulatory requirements and laws. Staff should not provide advice or other assistance to individuals who are indulging in money laundering activities.

Human Resources Department will ensure that proper Know Your Employee (KYE) Policy and Procedures are put in place, duly circulated and followed strictly to ensure that unwanted individuals do not have access to the Bank by way of employment. He/she will also ensure that any prima facie suspicious activity/behaviour from AML/CFT angle is reported to the Compliance Officer for finalization and reporting to FIU wherever required.

24.1 Recruitment/Hiring of Employees

KYC norms/ AML standards/CFT measures have been prescribed to ensure that criminals are not allowed to misuse channels of the Bank. Bank will put in place necessary and adequate screening mechanism as an integral part of its recruitment/hiring process of personnel.

24.2 Employee Training

Ongoing employee training programmes should be conducted so that staff members are adequately trained in KYC/AML/CFT policy and procedures. All employees shall be provided with AML/CFT training at least once a year through direct or indirect means. The training modules/materials should be such that staff members are adequately trained in KYC/AML/CFT norms, policy, procedures and mechanisms.

Human Resources Department conducts KYC/AML/CFT trainings/seminars at regular intervals at various Centers as per yearly/quarterly training calendar, so that necessary awareness in regard to Bank’s obligations under ALPA as well as NRB/FIU guidelines are disseminated to all levels of Bank’s functionaries specially MLROs and Branch Managers who have been vested with the responsibility of ensuring meticulous compliance with KYC/AML/CFT regulations. Compliance Department shall provide necessary inputs/feedbacks in regard to content of the training programme. External as well as internal resource persons shall be utilized for training based on the assessment of training need.

24.3 Employee Protection

For reporting unusual/ suspicious activity to Compliance Department by any concerned staff or submitting suspicious transaction report to FIU by compliance officer/concerned designated staff in good faith, Bank, its officers and employees, are exempted from criminal, civil or administrative liability as the case may be, or for breach of any restriction on disclosure of information imposed by contract or by any legislative, regulatory or administrative provision, regardless of the result of the correspondence.

In case if any loss occurs to anyone because of submission of information to the Financial Information Unit or any government or other investigative entity competent to receive such information as per the law, staff and officials of the reporting Bank will not be held liable for such consequences.


25. Tipping off & Confidentiality

The Bank and branches/ extension counters/departments shall maintain the details of all transactions of unusual/ suspicious activity reported, STRs, TTRs and correspondence record to and from FIU, NRB and other investigating authorities relating to its customers/transaction under the investigation strictly confidential and will not share the same with the customer or any irrelevant bank staffs, unrelated official meetings or anyone outside the bank. Doing so would constitute “Tipping Off”, which is an offense prohibited by law. The bank is required to keep the documents, information and transaction details of the customer confidential and will not leak/share to unauthorized person.

Investigation Officer or staff or person involved in the investigation and inquiry processes of AML /CFT will not violate confidentiality that evolves during the course of such investigation and inquiry or performing his/her duty, unless any prevailing law requires doing so. In the course of obtaining additional information/details from the customer in regard to any suspicious activity/ transaction, concerned staff should use proper discretion to evade the risk of realizing the same by the customer.

26. Capacity Enhancement programmes for Board Members & Top Management

For effective and result-oriented implementation of AML/CFT provisions as per ALPA, ALPR and NRB Directives, the bank shall arrange knowledge sharing programmes on AML/CFT for capacity enhancement of Board members, top management and shareholders having 2% or more share of paid-up capital at least once a year and at more frequent intervals upon requirement.

27. Customer Education

The Bank recognizes the need to spread awareness on KYC, Anti Money Laundering measures and the rationale behind them amongst the customers and shall take suitable steps for the said purpose. The customer awareness materials on KYC/AML measures, role and responsibilities of customers in this regard will be displayed on the bank’s website and/or in the form of poster/display boards etc. at the branches/extension counters or through campaigns or through financial literacy programmes or other means as per requirement.

28. Miscellaneous

• Information collected from the customers for KYC compliance should be relevant to the perceived risk, not intrusive and should be treated as confidential. The same is not to be used/divulged for cross selling or any other such purpose.

• Of late, it has been observed that monitoring of accounts of Non-Profit Organisations, Non-Governmental Organisations, Trusts and fiduciary agencies are posing a challenge to Banks in respect of KYC/AML compliance as such agencies have a mix of complex structure, range of activities, number of persons involved, sources of funds, beneficiaries of funds and types of activities supported by such entities. Branches/ extension counters are therefore, specifically advised to monitor transactions in such accounts with more than ordinary care and in case any suspicious activities/ transactions is detected, the respective MLROs should forward the same to the Compliance Officer through the Branch Managers for finalization.

• Branches/Extension counters/Department should also note that suspicious activity reports are required to be filed even in respect of abandoned transactions, unscrupulous enquiries by individuals and forfeiture of activities / transactions after enquiries are made, hence reporting of such instances have to be done to Compliance Department by respective


MLRO through the Branch Manager/ Department Head as the case may be for finalization of the same as STR by Compliance officer.

• Trade-Based Money Laundering (TBML) is being rapidly growing around the world for the purpose of disguising proceeds of the crime and moving value through the use of trade transactions. This may be done in many ways such as through misrepresentation of the price, quantity or quality of imports or exports. Methods mostly used for TBML are over-invoicing or under-invoicing, over-shipping or short-shipping, ghost-shipping, use of shell companies, multiple invoicing etc. TBML is frequently used in combination with other money laundering techniques to further obscure the money trail. Hence, enhanced due diligence has to be meticulously done while executing trade transactions.

• In the course of customer identification and verification, updating such details, identification of PEP, beneficial owners, assessment of risk associated with the customers, reporting of suspicious activity, branches/offices/ department are required to assess the information available from various sources such as publicly available information, information available in social networks/public domains, information received through paper/news portals, information received through any bank staff etc in addition to the information furnished by customer, database circulated by Bank, automated systems of monitoring/screening used by bank and records maintained as per the law.

29. Review of the Policy

This Policy will be reviewed at least once in a year. However, it can be reviewed more frequently as and when considered necessary by the Board.

Annexure: A

(A) Following information/documents have to be obtained, from the customers while opening their accounts depending on the type and nature of the customer:

(a) Personal Accounts (In case of Nepalese citizen)

1. Name and surname

2. Gender

3. Date of Birth

4. Nationality

5. Permanent address (With Province, district, municipality/rural municipality, Ward No., Tole/street, House No., Telephone No., Mobile No., Email Address etc.)

6. Current Address (With Province, district, municipality/rural municipality, Ward No., Tole/street, House No., Telephone No., Mobile No., Email Address etc.)

7. Details of at least any one of Identity proof among citizenship certificate, passport, Voter ID or driving license along with such identity proof [ID No, Issuing Authority, Issue District/ Place, Issue date, Validity period (Expiry Date)]

8. In case of minor, details of Birth registration certificate or Minor Identity card (ID No, Issuing Authority, Issue District/ Place, Issue date) and Details of at least any one of Identity proof among citizenship certificate, passport, Voter ID or driving license of the guardian [ID No, Issuing Authority, Issue District/ Place, Issue date, Validity period (Expiry Date)] along with such identity proof of minor and guardian

9. In case of Nepalese citizen having not been issued citizenship certificate, details of recommendation letter of rural municipality/ municipality (Ref. No/ letter no./ dispatch no., Issuing Authority, Issue Date) along with such recommendation letter

10. Permanent Account Number (PAN)

11. Name of parents, grand-parents, and family members (Including in-laws in case of married woman)

12. Occupation/Business (with name and address of employer/business, contact no., position, estimated annual income/ remuneration and other details)

13. Copy of identity card in case of employee (where available)

14. Recent Passport size Photograph

15. Other information/documents (Specified from time to time)

Note:

• In case of having no house no., telephone no., mobile no, email address, passport, occupation/business, PAN etc, the same shall have to be self-declared.

• In case of customer requiring enhanced customer due diligence, citizenship certificate or passport or voter ID or driving license of all of the family members (including minor identity card in case of minor family member) of undivided family

• In case of refugee, Refugee Identity card issued by Government of Nepal or other competent authority.

• In case of accounts of minor being operated by guardian, such accounts shall have to be operated by customer himself/herself by producing identity proof as applicable to major as soon as the minor attains the age of majority.

(b) Accounts of Proprietorship or Partnership firm

1. Name of the firm

2. Address of Registered office (With Province, district, municipality/rural municipality, Ward No., Tole/street, House No., Telephone No., Fax No., Email Address, Website etc.)

3. Business/Operating Address (With Province, district, municipality/rural municipality, Ward No., Tole/street, House No., Telephone No., Fax No., Mobile No., Email Address, Website etc.)

4. Certificate of registration, license or permit and operating license (With Registration/certificate no., registering/issuing authority, issue district/place, registration/issue date, Expiry period/ Validity period)

5. PAN registration certificate or similar certificate issued by Government Authority for tax purpose

6. Nature of Business/ Transaction

7. Working area/ territory

8. Number of Branches/Offices and location of major branches/offices

9. Estimated Annual Turnover

10. Personal details of proprietor, partners and account operators (Position, name, surname, name of spouse, three generation details, permanent address, current address, telephone number, mobile number, email address)

11. Recent passport size photograph and citizenship certificate or passport or voter ID or driving license of proprietor, partners and account operators

12. Audited financial statements of last fiscal year (Financial Statements prepared by the firm itself in case of those not requiring auditing)

13. Tax clearance certificate or tax return of last fiscal year

14. Partnership Deed in case of partnership firm

15. Authorization for conducting financial and administrative transactions, in case of partnership firm


(c) Accounts of Companies

1. Name of the company

2. Address of Registered office (With Province, district, municipality/rural municipality, Ward No., Tole/street, House No., Telephone No., Fax No., Mobile No., Email Address, Website etc.)

3. Business/Operating Address (With Province, district, municipality/rural municipality, Ward No., Tole/street, House No., Telephone No., Fax No., Mobile No., Email Address, Website etc.)

4. Certificate of registration, license or permit and operating license (With (Registration/certificate no., registering/issuing authority, issue district/place, registration/issue date, Expiry period/ Validity period)






10. Personal details of Director, members of management committee or similar committee formed for such purpose, CEO, top management members and account operators (Position, name, surname, name of spouse, three generation details, permanent address, current address, telephone number, mobile number, email address)

11. Personal details of shareholders having 10% or more shares of the company (Name, surname, name of spouse, three generation details, permanent address, current address, telephone number, mobile number, email address)

12. Where 10% or more shares of the company is held by other legal entity, personal details of shareholders having 10% or more shares of such legal entity (Name, surname, name of spouse, three generation details, permanent address, current address, telephone number, mobile number, email address)

13. Recent passport size photograph and citizenship certificate or passport or voter ID or driving license of directors, CEO and account operators

14. Audited financial statements of last fiscal year


16. Where company is a subsidiary of foreign company, name and address of parent company.

17. Certificate of incorporation and formation of company

18. Memorandum of Association and Article of Association

19. Board decision and authorization for opening of account and its operation

20. Authorization of Board of Directors to CEO and other officers in regard to financial transactions.


Note:

• In case of organized institutions incorporated under Special Act, details related to registration certificate shall not be required.

(d) Accounts of Club/Non-governmental Organization (NGO)

1. Name of the club/ NGO


3. In case of change in registered address, changed address (With Province, district, municipality/rural municipality, Ward No., Tole/street, House No., Telephone No., Fax No., Email Address, Website etc.)

4. Certificate of registration, license or permit and operating license (With (Registration/certificate no., registering/issuing authority, issue district/place registration/ issue date, Expiry period/ Validity period)


6. Nature of Transaction




10. Personal details of members of Executive committee, trustee, protector, controller and settlers (Position, name, surname, permanent address, current address, telephone number, mobile number, email address; Name, address and contact No. of Employer organization) along with proof of address.

11. Personal details of CEO and account operators (Position, name, surname, name of spouse, three generation details, permanent address, current address, telephone number, mobile number, email address etc.)

12. Recent passport size photograph and citizenship certificate or passport or voter ID or driving license of CEO and account operators


14. Registration certificate

15. Constitution of club/ NGO

16. Decision of Executive committee for opening of account

17. Authorization for operation of account and financial transactions.


(e) Account of Cooperatives

1. Name of Institution


3. Business/Operating Address (With Province, district, municipality/rural municipality, Ward No., Tole/street, House No., Telephone No., Fax No., Email Address, Website etc.)

4. Certificate of registration, license or permit and operating license (With (Registration/certificate no., registering/issuing authority, issue district/ place, registration/ issue date, Expiry period/ Validity period)






10. Personal details of Director, CEO and account operators (Position, name, surname, name of spouse, three generation details, permanent address, current address, telephone number, mobile number, email address)

11. Recent passport size photograph and citizenship certificate or passport or voter ID or driving license of directors, CEO and account operators



14. Constitution of cooperative

15. Certificate of registration

16. Board decision for opening of account and authorization for financial transaction


(f) Accounts of Public and Private Trust (Guthi)

1. Name of the trust



4. Certificate of registration, license or permit and operating license (With (Registration/certificate no., registering/issuing authority, issue district/ place, registration/ issue date, Expiry period/ Validity period)






10. Personal details of Director or members of management committee or officials of similar committee formed for such purpose, CEO and account operators (Position, name, surname, name of spouse, three generation details, permanent address, current address, telephone number, mobile number, email address)


12. Proof of address of directors or members of management committee



15. Constitution of trust

16. Deed in regard to formation of trust

17. Certificate of incorporation

18. Board decision/ Decision of Management Committee for opening of account and authorization for financial transaction


(g) Accounts of School or Campus

1. Name of the school or campus



4. Certificate of registration (With Registration no., registering authority, issue district/ place, registration date, Expiry period/ Validity period)






10. Personal details of Director or members of management committee or officials of similar committee formed for such purpose, CEO and account operators (Position, name, surname, name of spouse, three generation details, permanent address, current address, telephone number, mobile number, email address)





15. Certificate of incorporation/ approval issued to the institution

16. Board decision/ Decision of Management Committee for opening of account and authorization for financial transactions.


(h) Accounts of International Non-Governmental Organization (INGO)

1. Name of INGO


3. In case of change in registered address, changed address (With Province, district, municipality/rural municipal, Ward No., Tole/street, House No., Telephone No., Fax No., Email Address, Website etc.)

4. Certificate of registration (With Registration No., registering authority, issue district/ place, registration date, Expiry period/ Validity period)






10. Personal details of director, CEO, representative or chief appointed for Nepal and account operators (Position, name, surname, name of spouse, three generation details, permanent address, current address, telephone number, mobile number, email address; Name, address and contact No. of Employer organization) along with proof of address.

11. Recent passport size photograph and citizenship certificate or passport or voter ID or driving license of CEO, representative or chief appointed for Nepal and account operators


13. Tax return of last fiscal year in case of organization that is required to file tax return

14. Agreement if any executed with Social Welfare Council

15. Agreement if any executed with Government of Nepal

16. Recommendation letter of the concerned country or its embassy in case of those INGOs, which have not obtained affiliation or approval from competent authority of Nepal

17. Constitution of INGO

18. Authorization of the organization for opening of account and authorization for financial transaction


(i) Account of Foreign Individual

1. Full Name (with surname)

2. Gender

3. Date of Birth

4. Nationality

5. Permanent address in foreign country (Full address)

6. Temporary address in foreign country (Full address)

7. Address in Nepal (With Province, district, municipality/rural municipality, Ward No., Tole/street, House No., Telephone No., Mobile No., Email Address etc.)

8. Name of parents, grand-parents and family members

9. Passport along with its details (Passport No, issuing country, issuing authority, issue place, issue date, validity period /Expiry Date)

10. Valid VISA [with its validity period (expiry date)]

11. In case of Indian National not having passport, certificate issued to the person as an evidence of Indian nationality as per Indian Law (Voter ID issued by Election Commission of India may be acceptable as such documents) and/or registration certificate issued by Indian Embassy

12. In case of employee, name, address and contact no. of employer organization along with recommendation letter

13. In case of refugee, Refugee Identity card issued by concerned Government Authority or International Authority with its details (ID No., Issuing Authority, Issue place, Issue date and Expiry Date)


(j) Accounts of Foreign Company

1. Name of the company

2. Address of Registered office of the company in foreign country (With country, state/province, city, street, House No., Telephone No., Fax No., Email Address, Website etc.)

3. Business/Operating Address of the company in foreign country (With country, state/province, city, street, House No., Telephone No., Fax No., Email Address, Website etc.)

4. Full address of office of the company in Nepal (With Province, district, municipality/rural municipality, Ward No., Tole/street, House No., Telephone No., Fax No., Email Address, Website etc.)

5. Type/ nature of office of the company in Nepal (Branch, liaison, project or other)

6. Certificate of registration, license or permit and operating license of the company in foreign country (With registration/certificate no., registering/issuing country, registering/issuing authority, issue place, registration / issue date, Expiry period/ Validity period)

7. Documents and details related to registration, license or permit and operating license issued in Nepal (With registration/certificate no., registering/issuing authority, issue district/ place, , registration/ issue date, Expiry period/ Validity period), if registered in Nepal






13. Authorization by foreign company for opening account and conducing transaction

14. Personal details of directors and CEO of foreign company (Position, name, surname, address, telephone number, mobile number, email address etc.)

15. Personal details of representative appointed for Nepal and account operators (Position, name, surname, name of spouse, three generation details, permanent address, current address, telephone number, mobile number, email address)

16. Recent passport size photograph and citizenship certificate or passport of two principal officials of foreign company, representative appointed for Nepal and account operators along with proof of address.


18. Tax return of last fiscal year.


(k) Accounts of Diplomatic Mission/Embassy

1. Letter of Mission/Embassy

2. Authorization for operation of the account

3. Full Name, address and recent passport size photograph of the account operators along with proof of address.

4. Other information/ documents (Specified from time to time)

(l) Accounts of Non-Resident Nepalese

1. Name and surname 2. Gender 3. Date of Birth 4. Nationality 5. Permanent address in foreign country (Full Address) 6. Current address or address of employer organization in foreign country (Full address) 7. Means of immediate communication in foreign country 8. Full address in Nepal or contact place 9. Name of parents, grand-parents and family members 10. Document evidencing income source 11. NRN ID card of Non-resident Nepalese issued by competent authority of Nepal government 12. Passport 13. Other information/ documents (Specified from time to time)

(m) Accounts of Consumer Committee

1. Name of consumer committee 2. Nature of Transaction 3. Estimated Annual Turnover 4. Decision of the committee in regard to formation of the committee and operation of Account 5. Recommendation letter of local level for operation of account of the committee with specification

of account operators 6. Certificate of registration if registered with any entity/ authority 7. Personal details of the officials of the committee and account operators (Position, name,

surname, name of spouse, three generation details, permanent address, current address, telephone number, mobile number, email address)

8. Recent passport size photograph and citizenship certificate or passport or voter ID or driving license of account operators

9. Declaration of account operators in regard to their accountability for transactions in the account 10. Declaration of consumer committee in regard to operation of the account only for the purpose for

which consumer committee is formed. 11. Other information/ documents (Specified from time to time)

Note:

If account of any entity is to be opened within such period from the end of a fiscal year by which the entity has not got its financial statements for the year audited and tax returns filed as permitted under prevailing laws, the account of such entity may be opened by obtaining audited financial statements and tax clearance certificate or tax returns of the immediate preceding year.

(B) Customer with no account in the concerned bank

With respect to the customers requesting remittance or payment of remittance or any other occasional transaction, below the threshold mandatory for customer identification too, the customer shall have to produce valid identity card such as citizenship certificate or passport or voter ID or driving license along with current address for appropriate identification and recording of the same by the bank securely so as to be able to retrieve at the time of need.

Annexure B Proof of address

For the purpose of establishing current address of the customer and ensuring delivery of the letter

sent by the Bank to the given address of the customer, any one or more of the following documents

shall be obtained from the customer as the proof of address in addition to identity proof obtained for

customer identification. Such proof of address shall have to be obtained in case of high risk

customers, customers requiring enhanced due diligence and in other cases where the same has to

be obtained as per NRB Directives and Bank’s Policy. Unless otherwise stated, such proof of address

shall not be mandatory for low risk or medium risk customers.

• Voter ID Card

• Migration Registration Certificate

• Land Ownership Registration Certificate (Lalpurja)

• PAN Card

• Salary slip

• Income/Wealth Tax Assessment Order

• Bank account statement

• Letter from employer

• Letter from Government authority

• Pension Payment Orders issued to retired employees

• Registered Leave & License agreement/ Sale Deed/ Lease Agreement

• In case of practicing professional like lawyer, auditor, chartered accountant, engineer, doctor,

etc., license issued by the competent authority.

• In respect of a person residing in the house owned/ registered in the name of family member,

utility bill or any other document evidencing such address

• In respect of a person residing with relative, name, address and contact number of the relative

and utility bill or any other document evidencing such address

• For the applicant residing on rent; name, address and contact number of the house-owner and

lease agreement (if possible) and/or utility bill or any other document evidencing such address of

house-owner.

• Any other document sufficient to substantiate the address

Annexure-C

Format for submission of Suspicious Activity/ Transaction by Branches/ Offices/Departments

A. Name of Reporting Branch/Office

1. Name of Reporting Branch/Office/Department

B. Details of Customer

1. a. Name of the Accountholder/customer

b. Suspected Beneficial owner:

2. Nationality

3. Date of Birth (For Natural Person)/ Date of Establishment (For Legal entity)

4. Nature of Ownership: (Individual/ Proprietorship/ Partnership/ Company/ Other, Pls. specify)

5.

a. Permanent Address (Registered Address for Legal entity)

b. Present Address

6. Profession (As per KYC)

7. Other Business (if any)

8.

a. Type & No. of Identification document

b. Issue Date and Place

c. Issuing Agency/ Authority

9.

a. Father's Name (For Natural Person)

b. Mother's Name (For Natural Person)

c. Spouse’s Name (For Natural Person)

d. Grand Father’s Name (For Natural Person)

e. Chairman/MD/CEO (For legal entity)

f.

Names of Proprietor/ Partners/ Directors etc (For legal entity)

C. Details of Account

1. Account Number

2. Nature of the account (Current/ Savings/ Loan/ Other, Pls specify)

3. Date of A/C Opening

4. Other account(s) number (if any)

5. Accounts of related parties (with name) (if any)

D. Transaction (Details to be filled up for the customer having account)

a. Transaction Details (for each A/c) (Excluding returned cheques/correcting entries) (For last 2 FYs and running period of current FY)

A/c No. Fiscal Year Total No. of Dr. Trans.

Total Dr. Amount

Total No. of credit Trans.

Total Cr. Amount

Closing Balance

b. Details of Top 5 deposits (for last one year)

S. N. Date Depositor Conductor Amount Remarks

1

2

3

4

5

c. Details of Top 5 withdrawals (for last one year)

S. N. Date Cheque/

Voucher No. Payee Conductor Amount Remarks

1

2

3

4

5

d. Details of Loan and any other business and transaction with the bank:

e. Transaction Tree or Map:

E. Reason for considering the activity/transaction as unusual/suspicious.

• Summary of unusual/ suspicious Activities:

• Analysis or Examination:

• Possible Linkage:

F. Suspicious Activity Information/Typology:

Summarize characterization of suspicious activity/ transaction/specify the typologies (As per Act & FATF Guideline):

a. Corruption/Gratuity e. False Statement i. Structuring

b. Cheque Fraud f. Debit/Credit or other card fraud

j. Mysterious disappearance/ behavior

c. Tax Evasion g. Identity Theft k. Counterfeit instrument

d. Loan Fraud h. Terrorist Financing l. Misuse of Position or Self

Others (Please specify) ……………………………………………….

G. Has the Branch/Office/Department taken any action in this context? Give details.

______________________________ __________________ Money Laundering Reporting Officer Branch Manager/HOD Name: Name: Designation: Designation: Date: Date:

Annexure D Form for Customer Due Diligence (CDD) (Only for the use of Bank)

Nepal SBI Bank Limited

Know Your Customer (KYC) & Customer Due Diligence (CDD) Report

1. Brief Profile of the Customer & Account

Type of customer Individual Legal Entity Type of Account SB CA TD ……

Name of customer Account No.

Account Name (as per system)

CIF ID

Type & No. of ID Nationality

Occupation/Business Purpose of opening/ maintaining Account

Anticipated annual transaction (Actual annual transaction in case of review) (Rs. in lacs)

Anticipated frequency of transaction (Actual no. of Dr. and Cr. Transaction in case of review)

Beneficial owner of the customer (if any)

Nominee of the customer (If any)

2. List of Documents Obtained Including additional documents in case of review)

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

Have you verified all documents with the original? Yes No

3. Document not submitted (if any) (List of documents, not submitted by the customer if BM consents for the same):

1

2

3

4

5

Agreed date after which the concerned BM agreed to freeze the account in case the pending documents were not submitted by the customer:

4. Further documents/information obtained

Is the customer residential? Yes No

Proper residential address disclosed by the customer & satisfied? Yes No

Power of Attorney/Mandate given to anyone?, If yes, furnish the information below: Yes No

• Identification document of power of attorney holder/ mandatee obtained & verified? Yes No

• Proper residential address of power of attorney holder/ mandatee disclosed & satisfied? Yes No

• Relationship between Account holder and power of attorney holder/ mandatee established? Yes No

If yes, furnish the relationship …………………………….

5. Details related to source of fund:

S.N. Source Estimated Annual Amount (In lacs)

1

2

3

Total estimated amount

6. Risk Assessment:

Do you consider ownership structure of the customer as high risk? Yes No

Do you consider beneficial owner (if any) of the customer as high risk? Yes No

Do you consider nature of occupation/business of the customer as high risk? Yes No

Do you consider the country/territory/residential status of the customer as high risk? Yes No

Do you consider position/designation of the customer as high risk? Yes No

Do you consider the level of net worth of the customer as high risk? Yes No

Do you consider source of fund of the customer as high risk? Yes No

Do you consider the customer as high risk for the reason of being PEP or family member of PEP or associated person of PEP or in case of legal entity being controlled by them?

Yes No

Do you consider activity/ behaviour (Past activity/behaviour in case of review) of the customer high risk?

Yes No

Do you consider estimated annual transaction/ frequency of transaction (Actual frequency & transaction in case of review) as high risk?

Yes No

Do you consider purpose of Account opening/ account maintained as high risk? Yes No

Do you consider type of account/product availed by customer from the Bank as high risk? Yes No

Do you consider mode of operation of the account as high risk? Yes No

Do you consider loan limit or turnover or loan category of the customer as high risk? Yes No

Do you consider volume or proportion of remittance transaction ( In case of review) as high risk?

Yes No

Do you consider volume or proportion of transaction through alternate channels (In case of review) as high risk?

Yes No

Recommended Risk category High Risk Medium Risk Low Risk

Brief reason for above categorization

In case of review, earlier risk category

Did you post the current risk categorization detail in the system? Yes No

If you consider the account is to be categorized as High Risk Account, furnish following additional information for the purpose of Enhanced Customer Due Diligence:

Analysis regarding profile, ownership structure and beneficial owner (Changes/updates in the review period and/or differences as compared to earlier declaration in case of review)

Analysis regarding occupation/business and related parties (Changes/updates in the review period and/or differences as compared to earlier declaration in case of review)

Analysis regarding purpose of account opening (Purpose for which the account was used in the review period in case of review)

Analysis regarding source & purpose of the amount to be credited in the Account (Source & purpose for which the amount was credited in the review period in case of review):

Analysis regarding purpose of payment to be made from the Account (Purpose for which the payment was made in the review period in case of review):

Details regarding source of wealth/fund of the customer:

Any other relevant information/details:

Document related to source of fund/ wealth obtained & satisfied? Yes No

If Yes, type of document & If no, reason…………………..

Proof of Identity (minor identity card in case of minors) of all the family members obtained? Yes No

If no, reason…………………..

Are you satisfied with the information/documents obtained? Yes No

Note: In case of review, if the customer activity / transactions seem suspicious, the same shall have to be reported. Even if request for new Account is rejected for the reason of non-fulfillment of Customer Identification Procedure and/ or Customer Acceptance Policy of the Bank by the customer, same should also be reported as Suspicious Activity/ Transaction.

……………………..……………………. …………………………………… ……………….……………

Staff Designated for Account Opening KYC Compliance Officer/MLRO Branch Manager

Date: Date: Date:

Annexure E

Indicative List of Unusual/suspicious Activity/ Transactions

The list of suspicious activity/ transactions furnished here is not exclusive and staff members would always be expected to monitor transactions of all types which pass through their desks. However, it may be one that is inconsistent with a client’s known business, profession or activity/trade he/she carries on amount of judgment and vigilance over and above the normal precautions they would take for completing transactions. The understanding of customer’s identity vis-à-vis his stated norms of dealings, services, etc. would also have a bearing on transactions before they are viewed as suspicious transactions. The key to detect such suspicious activity/ transactions is to knowing sufficiently about client to recognize that a transaction/or series of them is unusual. Reasonable grounds to suspect is determined more by reasonable circumstances, including normal business practices and systems than automated system depending on the industry. It may vary from business to business, Customer to Customer, place to place, and system to system.

1. Availing exchange for business trips which is disproportionate to the duration of stay and not befitting the status of the business executive of the company.

2. Cash being tendered for availing foreign exchange by corporate customers.

3. Customers who receive various remittances frequently from centers abroad and make various remittances frequently abroad.

4. Frequent visits to same destinations by a large number of officials who draw disproportionately high amount of exchange.

5. Receipt of international remittances from services irrelevant to customer’s business/profession or from destinations in countries which are known for money laundering e.g. tax havens and countries which do not have anti money laundering legislations.

6. Money activities in accounts of customers, which show sudden and disproportionate growth in volumes.

7. Customer or his representative reluctant to give information relating to customer’s activities.

8. Customer’s account exhibiting large deposits through tender of currency bearing the labels of other banks.

9. A single cash deposit of substantial amount comprising of large component of high/low denomination notes.

10. Unlimited applications/requests for drafts/pay orders against cash.

11. Customers requiring exchange of small denominations of notes for larger denominations and vice versa.

12. Several cash deposits/withdrawals below a specified threshold limit to avoid filing a report. These may be necessary in case of transactions above the threshold level, i.e. initial splitting of transactions.

13. Individual/group that induces or attempts to induce the bank employee/s to avoid filing reports/or any other forms.

14. Depositing small amount of cheques but rare big withdrawals.

15. Request for wire transfers, out of country, financed by multiple banker’s cheques (just below threshold limit).

16. Customer receiving wire transfers and converting the balances in monetary instruments favoring third parties.

17. Cancellation of Banker’s cheques obtained for large amounts favoring Govt. Depts., under the pretext of cancellation of transaction/contract or request for cancellation of drafts/pay order of large sums obtained from the Bank after a lapse of substantial period of time.

18. A customer or a non-customer receives incoming telegraphic transfers “payable on proper identification” and/or to convert the funds to banker’s cheques and mail them to customer or non-customer when:

• The amount is very large, or just below the specified threshold limit decided by the Bank or legislation.

• Funds have been received from foreign country

• Transactions are repeated.

Employees need to be cautious if they encounter the following situations/ transactions and immediately report to the respective Authority:

i) Identification Documents

❖ Customer provides doubtful or vague information. ❖ Customer produces seemingly false identification or identification that appears to be

counterfeited, altered or inaccurate. ❖ Customer refuses to produce personal identification documents. ❖ Customer only submits copies of personal identification documents. ❖ Customer wants to establish identity using something other than his or her personal identification

documents. ❖ Customer’s supporting documentation lacks important details. ❖ Customer inordinately delays presenting corporate documents. ❖ All identification presented is foreign or cannot be checked for some reason. ❖ All identification documents presented appear new or have recent issue dates. ❖ Customer presents different identification documents at different times. ❖ Customer alters the transaction after being asked for identity documents. ❖ Customer presents different identification documents each time a transaction is conducted. ❖ Customer provides false information or information that is unreliable. ❖ Customer spells his or her name differently from one transaction to another.

ii) Identification Address

❖ Customer does not want correspondence sent to home address. ❖ Customer repeatedly uses an address but frequently changes the names involved. ❖ 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. ❖ Normal attempts to verify the background of a new or prospective Customer are difficult. ❖ Customer uses aliases and a variety of similar but different addresses. ❖ Customer hesitates to provide his easy address and contact.

iii) Cash Transactions ❖ Customer starts conducting frequent cash transactions in large amounts when this has not been a

normal activity for the Customer in the past. ❖ Customer frequently exchanges small bills for large ones. ❖ Customer uses notes in denominations that are unusual for the customer, when the norm in that

business is different. ❖ Customer presents notes that are packed or wrapped in a way that is uncommon for the

Customer. ❖ Customer deposits musty or extremely dirty bills. ❖ Customer makes cash transactions of consistently rounded-off large amounts.

❖ Customer consistently makes cash transactions that are significantly below the reporting threshold amount in an apparent attempt to avoid triggering the identification and reporting requirements.

❖ Customer presents uncounted funds for a transaction. Upon counting, the Customer reduces the transaction to an amount just below that which could trigger reporting requirements.

❖ Customer conducts a transaction for an amount that is unusual compared to amounts of past transactions.

❖ Customer frequently purchases foreign currency drafts or other negotiable instruments with cash when this appears to be outside of normal activity for the Customer.

❖ Customer asks the bank official to hold or transmit large sums of money or other assets when this type of activity is unusual for the Customer.

❖ Shared address for individuals involved in cash transactions, particularly when the address is also for a business location, or does not seem to correspond to the stated occupation (for example, student, unemployed, self-employed, etc.)

❖ Stated occupation of the Customer is not in keeping with the level or type of activity (for example a student or an unemployed individual makes daily maximum cash deposit or withdrawals at multiple locations over a wide geographic area).

❖ Cash is transported by a cash courier. ❖ Large transactions using a variety of denominations.

iv) Economic Purpose ❖ Transaction seems to be inconsistent with the Customer’s apparent financial standing or usual

pattern of activities. ❖ Transaction appears to be out of the normal course for industry practice or does not appear to be

economically viable for the Customer. ❖ Transaction is unnecessarily complex for its stated purpose. ❖ Activity is inconsistent with what would be expected from declared business. ❖ A business Customer refuses to provide information to qualify for a business discount. ❖ No business explanation for size of transactions or cash volumes. ❖ Transactions of financial connections between businesses that are not usually connected (for

example, a food importer dealing with an automobile parts exporter). ❖ Transaction involves non-profit or charitable organization for which there appears to be no logical

economic purpose or where there appears to be no link between the stated activity of the organization and the other parties in the transaction.

v) Physical Background and Personal behaviour

❖ Customer is nervous, not in keeping with the transaction. ❖ Customer has only vague knowledge of the amount of a deposit. ❖ Customer presents confusing details about the transaction or knows few details about its purpose. ❖ Customer appears to informally record large volume transactions using unconventional

bookkeeping methods or “off-the-record” books. ❖ Customer appears to be acting on behalf of a third party, but does not tell bank official. ❖ Customer is involved in activity out-of-keeping for that individual or business. ❖ Customer insists that a transaction be done quickly. ❖ Inconsistencies appear in the Customer’s presentation of the transaction. ❖ The transaction does not appear to make sense or is out of keeping with usual or expected

activity for the Customer. ❖ Customer attempts to develop close rapport with staff. ❖ Customer pays for services or products using financial instruments, such as money orders,

without relevant entries on the face of the instrument or with unusual symbols, stamps or notes.

vi) Criminal Background

❖ Customer admits or makes statements about involvement in criminal activities ❖ Customer is accompanied and watched. ❖ Customer is nervous, not in keeping with the transaction. ❖ Customer over justifies or explains the transaction. ❖ Customer is secretive and reluctant to meet in person. ❖ Information that a Customer is the subject of a money laundering or terrorist financing

investigation. ❖ Information that a Customer is suspected of being involved in illegal activity. ❖ A new or prospective Customer is known to bank official as having a questionable legal reputation

or criminal background. ❖ Customer offers money, gratuities or unusual favour for the provision of services that may appear

unusual or suspicious. ❖ Transaction involves a suspected shell entity (that is, a corporation that has no assets, operations

or other reason to exist).

vii) Transactions Involving Accounts

❖ Customer appears to have accounts with several financial institutions in one area for no apparent reason.

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

❖ Opening accounts when the Customer’s address is outside the local service area. ❖ Opening accounts in other people’s names. ❖ Opening accounts with names very close to other established business entities. ❖ Attempting to open or operating accounts under a false name. ❖ Account with a large number of small cash deposits and a small number of large cash

withdrawals. ❖ Funds are being deposited into several accounts, consolidated into one and transferred outside

the country. ❖ Customer frequently uses many deposit locations outside of the home branch location. ❖ Multiple transactions are carried out on the same day at the same branch but with an apparent

attempt to use different tellers. ❖ Activity far exceeds activity projected at the time of opening of the account. ❖ Establishment of multiple accounts, some of which appear to remain dormant for extended

periods. ❖ Account that was reactivated from inactive or dormant status suddenly sees significant activity. ❖ Reactivated dormant account containing a minimal sum suddenly receives a deposit or series of

deposits followed by frequent cash withdrawals until the transferred sum has been removed. ❖ Unexplained transfers between the Customer’s products and accounts. ❖ Large transfers from one account to other accounts that appear to be pooling money from

different sources. ❖ Multiple deposits are made to a Customer’s account by third parties. ❖ Deposits or withdrawals of multiple monetary instruments, particularly if the instruments are

sequentially numbered. ❖ Frequent deposits of bearer instruments in amounts just below the threshold. ❖ Unusually large cash deposits by a Customer with personal or business links to an area

associated with drug trafficking. ❖ Regular return of cheques for insufficient funds ❖ Correspondent accounts being used as “pass-through” points from foreign jurisdictions with

subsequent outgoing funds to another foreign jurisdiction. ❖ Multiple personal and business accounts are used to collect and then funnel funds to a small

number of foreign beneficiaries, particularly when they are in locations of concern, such as countries known or suspected to facilitate money laundering activities.

❖ Customer appears to have recently established a series of new relationships with different financial entities.

viii) Extra-territorial Transactions

❖ Customer and other parties to the transaction have no apparent ties to Nepal. ❖ Transaction crosses many international lines. ❖ Use of a credit card issued by a foreign bank that does not operate in Nepal by a Customer that

does not live and work in the country of issue. ❖ Cash volumes and international remittances in excess of average income. ❖ Excessive demand for migrant remittances from individuals or entities based on migrant worker

population. ❖ Transactions involving high-volume international transfers to third party accounts in countries that

are not usual remittance corridors. ❖ Transaction involves a country known for highly secretive banking and corporate law. ❖ Transactions involving any countries deemed by the Financial Action Task Force as requiring

enhanced surveillance. ❖ Foreign currency exchanges that are associated with subsequent wire transfers to locations of

concern, such as countries known or suspected to facilitate money laundering activities. ❖ Deposits followed within a short time by wire transfer of funds to or through locations of concern,

such as countries known or suspected to facilitate money laundering activities. ❖ Transaction involves a country where illicit drug production or exporting may be prevalent, or

where there is no effective anti-money-laundering system. ❖ Transaction involves a country known or suspected to facilitate money laundering activities.

ix) Transactions Related to Offshore Business Activity

❖ Accumulation of large balances, inconsistent with the known turnover of the Customer’s business, and subsequent transfers to overseas account(s).

❖ Frequent requests for foreign currency drafts or other negotiable instruments. ❖ Loans secured by obligations from offshore banks. ❖ Loans to or from offshore companies. ❖ Offers of multimillion-dollar deposits from a confidential source to be sent from an offshore bank or

somehow guaranteed by an offshore bank. ❖ Transactions involving an offshore “shell” bank whose name may be very similar to the name of a

major legitimate institution. ❖ Unexplained electronic funds transfer by Customer on an in-and-out basis. ❖ Use of letter-of-credit and other method of trade financing to move money between countries

when such trade is inconsistent with the Customer’s business. ❖ Use of a credit card issued by an offshore bank.

x) Miscellaneous

❖ Customer attempts to convince employee not to complete any documentation required for the transaction.

❖ Customer makes inquiries that would indicate a desire to avoid reporting. ❖ Customer has unusual knowledge of the law in relation to suspicious transaction reporting. ❖ Customer seems very conversant with money laundering or terrorist activity financing issues. ❖ Customer is quick to volunteer that funds are “clean” or “not being laundered.” ❖ Customer appears to be structuring amounts to avoid record keeping, Customer identification or

reporting thresholds. ❖ Customer appears to be collaborating with others to avoid record keeping, Customer identification

or reporting thresholds. ❖ Customer performs multiple cash transactions on the same day where each transaction is just

below the threshold. ❖ Customer shows uncommon curiosity about internal systems, controls and policies.

Annexure F

Nepal SBI Bank Ltd

General Information and Questionnaire for Correspondent Banking

PART I : ADMINISTRATIVE INFORMATION

1 Name of Institution:

2 Registration No. and date of registration/

incorporation certificate

3 Authority issuing registration /incorporation

certificate (with country)

4 Registered Address

5 Address of Head Office/ corporate office (if

different from registered address)

6 Contact No.

7 Website Address

9 Banking License Number, date & Issuing

authority

10 Legal Entity Identifier(LEI)

11 BIC Code/SWIFT Code

12 Principal Place of Business

13 Nature of business & principal Business

Activities

14 Number of Domestic and Foreign branches

and subsidiaries

15 Name and Website of regulatory bodies which

you are supervised and monitored by:

16 Name and address of your External Auditors

Part II: AML/CFT COMPLIANCE REPORTING OFFICER

1

Principal Officer responsible for KYC/AML/CFT implementation and reporting:

Name

Address

Contact No.

Fax No.

Email

2

Compliance Manager responsible for compliance function:

Name

Address

Contact No.

Fax No.

Email

Part III: OWNERSHIP STRUCTURE, MANAGEMENT & BOARD

1 Is your institution publicly held or privately owned?

2

Is your institution listed in any stock exchange? Yes No

If yes please provide the name of the Stock Exchange and your

symbol, If “No” attach a list of beneficial owners of the institution

(including their nominees, if their shares are held by nominees):

3

List the shareholders who hold 5% or more share of your institution (Top 2 shareholders if all of them hold

less than 5%), if publicly held and list all owners if privately owned.

Name No. of Shares %

Please provide the ultimate beneficial owner of such shareholders

along with main activities if anyone of the above is individual.

Please confirm whether your institution has performed an appropriate level of Due

Diligence with regard to your principal owners?

Yes No

4

Please provide us the list of Board of Directors:

Name Designation PP No. Date of Birth Nationality

5.

Please provide us the list of your top management:

Name Designation PP No. Date of Birth Nationality

6

Please confirm whether any of the principal owners or members of the Board,

Management, Business Group Heads of your institution are among those enlisted in

UNSTR/OFAC list or categorized as Politically Exposed Person?

Yes No

If Yes, please advise if your institution has conducted appropriate Due Diligence as per

internal best practices?

Yes No

PART IV: GENERAL AML POLICIES, PRACTICES AND PROCEDURES

1 Does your bank maintain physical presence in the licensing country? Yes No

2 Has the Country in which you are located established laws designed to prevent money

laundering? Yes No

3 Has the country in which you are located established a Central Reporting Agency for the

purpose of collecting and assessing suspicious transaction reports? If yes Please provide

the name of the agency:

Yes No

4 Is your country member of FATF or FATF-style regional bodies? Yes No

5 Have necessary laws been established in your country to prevent money laundering and

financing of terrorism according to FATF standards and controls? Yes No

6 Does your country adhere to the 40 anti-money laundering recommendations revised with

9 special recommendations of FATF?

Yes No

7 Has your institution developed written policies documenting the processes that they have

in place to prevent, detect and report suspicious transactions' that has been approved by

senior management/ board of Financial Institution?

Yes No

8 In addition to inspections by the government supervisors/regulators, does the Financial

Institution have an internal audit function or other independent third party that assesses

AML policies and practices on a regular basis?

Yes No

9 Does your institution have an established audit and compliance review function to test the

adequacy of AML and terrorist financing procedures? Yes No

10 Does the Financial Institution have a legal and regulatory compliance program that

includes a designated officer that is responsible for coordinating and overseeing the AML

framework?

Yes No

11 Does the Financial Institution have a policy prohibiting accounts/relationships with shell

banks? (A shell bank is defined as a bank incorporated in a jurisdiction in which it has no

physical presence and which is unaffiliated with a regulated financial group.)

Yes No

12 Does the Financial Institution have record retention procedures that comply with

applicable law? If Yes, how long?.......... Yes No

13

Has your institution been subject to any investigation, indictment, conviction or civil

enforcement action related to money laundering and terrorism financing in the past five

years? If yes please provide a detailed explanation on the penalty imposed and the

measures taken by the institution to improve the

position……………………………………………….

Yes No

14 Does the Financial Institution’s AML policies and practices being applied to all branches

and subsidiaries of the Financial Institution both in the home country and in locations

outside of that jurisdiction?

Yes No

15 Does your institution have policies that cover relationship with sensitive customers

including Politically Exposed Persons (PEPs), their relatives and close associates (RCA),

which is in line with International standards?

Yes No

16 Does your institution ensure effective Anti-money laundering and Counter Terrorism

Controls on new products and technologies when you are dealing with non-face to face

interactions or through intermediaries?

Yes No

17 Is your institution required to comply with any Economic Sanctions or Trade embargo programs imposed by UN/ OFAC etc?

Yes No

18 Does your Compliance programme include established policies, procedures and

processes for managing Economic & Trade sanctions imposed by among others UN

/OFAC?

Yes No

19

Does your institution operate (by the way of Subsidiary/Associate Company/rep. Office or appointment of agent) in a country identified by FATF in its list of ‘Non Co-operative Countries and territories’ in the global fight against Money Laundering? If Yes, provide details…….

Yes No

20 Does your bank comply with FATF special recommendations VII – to include complete and meaningful originator information in fund transfers?

Yes No

21 Does the Financial Institution have a risk-based assessment of its customer base and

their transactions? Yes No

22

Does the Financial Institution determine the appropriate level of enhanced due diligence

necessary for those categories of customers and transactions that the Financial Institution

has reason to believe pose a heightened risk of illicit activities at or through the Financial

Institution?

Yes No

PART V: KNOW YOUR CUSTOMER, DUE DILIGENCE AND ENHANCED DUE DILIGENCE

1

Has your institution implemented systems for identification of its clients while establishing

business relation including account opening by obtaining all required information, details

and documents of natural person as well as legal entities and their beneficial owners that

is sufficient for customer due diligence and risk assessment ?

Yes No

2 Does your institution have procedures to establish a record for each client noting their

respective identification documents and “Know your Customer” information? Are copies of

identification documents retained in your possession securely for reference?

Yes No

3 Does the financial Institution collect information and access its Customers as per its AML

Policies or practices?

Yes No

4 Does your institution take steps to understand the normal and expected transactions of its

customers based on its risk assessment?

Yes No

5 Does the Financial Institution have process to review and, where appropriate, update

customer information relating to the customer based on risk assessment? Yes No

6 Does your bank maintain accounts relating to high risk as that of jewelries, MSB’s,

Charities, Trusts, Casinos etc.? If Yes, how frequently is Enhanced Due Diligence

done?................................

Yes No

7 Does your institution have anonymous numbered accounts? Yes No

8 Do you search your customer account database for persons and entities named under a

particular sanction programme?

Yes No

PART VI :TRANSACTION MONITORING & REPORTABLE TRANSACTIONS

1 Does the financial Institution have a monitoring program for suspicious or unusual activity

that covers funds transfers and monetary instruments (such as traveler’s checks, money

orders, etc.)?

Yes No

2 Does your institution verify the identity of all customers including occasional customers prior to providing transfer services involving more than USD 1000?

Yes No

3

Do you filter your international telegraphic transfers (e.g. International Wire transfers) for the persons and entities named under a particular sanction programme? If yes please state the types of payments and/or messages to which the filtering process applies:

• Inbound payments & Messages:

• Outbound Payments & Messages:

• Both Inbound Payments and Outbound Payments.

Yes Yes Yes

No No No

4

Does your Institution handle any transaction pertaining to OR provide services to

individuals or entities which are residents of OR provide services to other FIs or

customers who have dealing or hold accounts of individuals and entities resident in

sanctioned jurisdictions (i.e. Cuba, Iran, North Korea, Sudan, Syria, Crimea etc?, If yes

please give details……………………

Yes No

5 Does your bank do any business involving Money Laundering or Terrorist Financing

related activities? Yes No

6 Does your institution screen transactions for clients or transactions, the financial

institutions deems to be of significantly high risk and special attention to such customer or

transactions is necessary prior to completing any such transaction?

Yes No

7 Is your institution required to report Threshold Transactions to competent authority? Yes No

8 Does your institution have policies for the identification and reporting of transactions that

are required to be reported to the authorities such as Suspicious Transaction? Yes No

9 Does your institution have procedures to identify transaction structured to avoid large

cash reporting requirements?

Yes No

10 Does your institution have policies to reasonably ensure that they will not operate with or

on behalf of shell bank throughout any of its account?

Yes No

PART VII : AML TRAINING

1

Does your institution provide AML/CFT training to your employees that include

identification and reporting of transactions that must be reported to government

authorities, examples of different forms of money laundering involving the bank products

and services, internal policies on AML/CFT, sanction programs and its compliance etc?

Yes No

2 Does the FI retain records of its training sessions including attendance records? Yes No

3 Does your institution communicate new AML related laws or changes to existing AML

related policies or practices to employees? Yes No

4

Does the Financial Institution employ agents to carry out some of the functions of the

Financial Institution?

Yes No

If Yes, does the Financial Institution provide AML training to relevant agents that include

identification and reporting of transactions that must be reported to government

authorities, examples of different forms of money laundering involving the Financial

Institution's products and services and internal policies to prevent money laundering?

Yes No

PART VIII: CORRESPONDENT BANKING INFORMATION

1

Do you, by the following definition hold an offshore Banking license?

“License to conduct banking activities which as a condition of the license, prohibits the licensed entity from conducting activities with the citizens of, or with the local currency of, the country which issued the license.”

Yes No

2 Does your institution monitor international wire transfer? Yes No

3 Does your Bank allow direct use of your Correspondent accounts by your customers to transact business on their behalf ( i.e. Do you allow a payable through accounts) ?.

Yes No

4 Does your bank facilitate any TT’s/ International Payments on behalf of non-customers? If Yes, furnish details…………………………….

Yes No

5 Will any third party entities be using our Correspondent Banking Services (i.e. Do you provide Downward correspondent banking services (Nested Accounts) ?

Yes No

6 Has your institution provided a USA Patriotic Act Certification to Financial Institutions in the USA?

Yes No

7

As per Foreign Account Tax Compliance Act (FATCA), are you a Foreign Financial Institution (FFI)?

If Yes, please confirm if your FI is ‘ Participating Foreign Financial Institution’ (PFFI) or a ‘ ‘Registered Deemed Compliant FFI’ (RDCFF) ?

If Yes, please provide Global Intermediary Identification Number (GIIN):

Yes

Yes

No

No

PART X:DOCUMENTS TO BE ENCLOSED

1 Copy of Institution’s Certificate of Incorporation

2 Copy of Institution’s Banking License

3 Copy of Institution’s Memorandum of Association & Article of Association

4 Latest Audited Financial Statements of the Institution

5 Copy of Institution’s AML/CFT Policy/Guidelines

6 Copy of Institution’s USA Patriot Act certification

7 Copy of Institution’s FATCA declaration

8 Copy of Institution’s duly furnished Wolfsberg Anti Money Laundering Questionnaire

9 Identification document of Board of Directors and Top Management

I certify that I have read and understood the questionnaire and based on best of my knowledge and

belief, I have answered the statements made in the questionnaire considering the existing internal

controls of my financial institution and it presents accurate representation of the existing state of the

institution’s Anti-Money Laundering and Anti-Terrorist Financing internal controls and financial service

activities.

I am authorized to execute this questionnaire on behalf of …………………………………………(Name of

your Institution).

Name of Authorized Signatory

Position

Name of Financial Institution

Address

Telephone No.

Email

Signature & Stamp

Date

List of Predicate Offences Annexure G 1. Any offence under the prevailing laws

a. Participation in an organized criminal group and racketeering,

-s_ ;Ël7t ck/flws ;d"x / u}/sfg"gL jf w'Tof{Ok"j{ssf]

c;"nL -¥ofs]6l/Ë_ df ;xefuL x'g] ;DaGwL,

b. Disruptive (terrorist) act and terrorism, -v_ ljWj+;fTds sfo{ nufot cftÍjfb ;DaGwL,

c. Trafficking in human being and migrant smuggling in any form,

-u_ h'g;'s} k|sf/sf] dfgj a]rlavg tyf cf];f/k;f/ ;DaGwL,

d. Any kinds of sexual exploitation including the children, -3_ afn of}g zf]if0f nufot h'g;'s} k|sf/sf] of}g zf]if0f ;DaGwL

e. Illicit trafficking in narcotic drugs and psychotropic substances,

-ª_ nfu" cf}ifw tyf dgf]låks kbfy{sf] u}/sfg"gL cf];f/k;f/

;DaGwL,

f. Illicit trafficking in arms and ammunition, -r_ xftxltof/ v/vhfgfsf] u}/sfg"gL cf];f/k;f/ ;DaGwL,

g. Illicit trafficking in stolen and other goods, -5_ rf]/L ul/Psf] jf cGo j:t'sf] u}/sfg"gL cf];f/k;f/

;DaGwL,

h. Corruption and bribery, -h_ e|i6frf/ tyf 3'; ;DaGwL,

i. Fraud, -em_ 7uL ;DaGwL,

j. Forgery -`_ sLt]{ ;DaGwL,

k. Counterfeiting of coin and currency, -6_ vf]6f l;Ssf jf d'b|f ;DaGwL,

l. Counterfeiting and piracy of products, or imitation, illegal copy or theft of products,

-7_ gSsnL j:t'sf] pTkfbg tyf pTkfbgsf] u}/sfg"gL

k|ltlnlk jf rf]/L -kfO/];L ckm k|f]8S6;\_ ;DaGwL,

m. Environmental crime, -8_ jftfj/0f ;DaGwL,

n. Murder, grievous bodily injury, -9_ Hofg lng] tyf cËeË ;DaGwL,

o. Kidnapping, illegal restraint or hostage-taking, -0f_ ckx/0f, u}/sfg"gL y'gf jf z/L/ aGws ;DaGwL,

p. Theft or robbery, -t_ rf]/L jf 8s}tL ;DaGwL,

q. Smuggling (including custom, excise and revenue), -y_ t:s/L -eG;f/, cGtz'Ns tyf s/ ;lxt_ ;DaGwL,

r. Tax (including direct and indirect), -b_ s/ -k|ToIf jf ck|ToIf ;d]t_ ;DaGwL,

s. Extortion, -w_ cfk/flws nfe -PS:6;{g_ ;DaGwL,

t. Piracy, -g_ ;fd'lb|s 8s}tL -kfO/];L_ ;DaGwL,

u. Insider Trading and Market Manipulation in securities and commodities ,

-k_ lwtf]kq jf sdf]l8l6h ahf/nfO{ k|lts"n k|efj kfg]{ -

dfs]{6 Doflgk'n];g_ jf leqL sf/f]af/-OG;fO8/ 6«]l8Ë_ ;DaGwL,

v. Ancient monument conservation, -km_ k|frLg :df/s ;+/If0f ;DaGwL,

w. Forest, National park and wild animals, -a_ jg, /fli6«o lgs'~h tyf jGohGt' ;+/If0f ;DaGwL,

x. Money, banking, finance, foreign exchange, negotiable instruments, insurance, cooperatives,

-e_ d'b|f, a}+lsË, ljQLo, ljb]zL ljlgd]o, ljlgd]o clwsf/kq,

aLdf jf ;xsf/L;Fu ;DaGwL,

y. Black marketing, consumer protection, competition, supply -d_ sfnf]ahf/, pkef]Qmf ;+/If0f, k|ltikwf{ jf cfk"lt{ ;DaGwL,

z. Election, -o_ lgjf{rg ;DaGwL,

aa. Communication, broadcasting, advertising, -/_ ;~rf/, k|zf/0f, lj1fkg ;DaGwL,

bb. Transportation, education, health, medicine, foreign employment,

-n_ oftfoft Joj;fo, lzIff, :jf:Yo, cf}ifwL jf j}b]lzs

/f]huf/ 7uL ;DaGwL,

cc. Firm, partnership, company, association, -j_ kmd{, ;fem]bf/L, sDkgL jf ;+3 ;+:yf ;DaGwL,

dd. Real estate and property, -z_ 3/, hUuf / ;DklQ ;DaGwL, ee. Lottery, gambling, donation, -if_ lr7f, h'jf jf rGbf ;DaGwL, ff. Citizenship, immigration and passport. -;_ gful/stf, cWofudg jf /fxbfgL ;DaGwL .

2. Offence of terrorist financing as per Asset (Money) Laundering Prevention Act 3. Any other offence as designated by the Government of Nepal by publishing a notice in the Nepal Gazette, 4. An act or omission as stipulated/ referred above, committed in foreign state, if the same is considered offense under the law of foreign State.