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KYC Norms and Anti Money Laundering

  • Introduction

  • Money laundering has become a pertinent problem worldwide threatening the stability of various regions by actively supporting and strengthening terrorist networks and criminal organizations. The links between money laundering, organized crime, drug trafficking and terrorism pose a risk to financial institutions globally. 

    The Reserve Bank of India (RBI) has instructed banks to follow ‘KYC Guidelines’, in terms of Prevention of Money Laundering Act 2002, wherein certain personal information of the customer is obtained. The objective of doing so is to enable the Bank to have identification of its customers. This in also in the interest of customers to safeguard their hard earned money.

  • What is Money Laundering and Terrorist financing?

  • Money laundering refers to conversion of money illegally obtained to make it appear as if it originated from a legitimate source. Money laundering is being employed by launderers worldwide to conceal criminal activity associated with it such as drugs /arms trafficking, terrorism and extortion. Terrorist financing is the financing of terrorist acts, and of terrorists and terrorist organizations. Money launderers send illicit funds through legal channels in order to conceal their criminal origin while those who finance terrorism transfer funds that may be legal or illicit in original in such a way as to conceal their source and ultimate use, which is to support Terrorist financing.

  • How this affect you as a customer?

  • A key defense against money laundering is to prevent accounts being opened in false identities. Anyone wishing to open an account will therefore be asked for latest photo, proof of their identity and current address. These documents have to be essentially obtained irrespective of the type of account to be opened and the purpose for which the account is opened for.

    The fact that these documents are asked for opening of account does not mean that you are suspected of money laundering. Criminals try to appear to be normal law-abiding citizens, for example they may try to open a number of accounts using small amount of money. Hence it is necessary to identify all prospective account holders. Anybody including a criminal could falsely use your identity, if these identity documents are not obtained.   

  • What is KYC?

  • KYC is an acronym for “Know your Customer” a term used for Customer identification process. It involves making reasonable efforts to determine, the true identity and beneficial ownership of accounts, source of funds, the nature of customer’s business, reasonableness of operations in the account in relation to the customer’s business, etc which in turn helps the banks to manage their risks prudently. The objective of the KYC guidelines is to prevent banks being used, intentionally or unintentionally by criminal elements for money laundering.

  • Whether KYC is mandatory?

  • Yes. It’s a regulatory and legal requirement.

    Regulatory: In terms of the guidelines issued by the Reserve Bank of India (RBI) on 29 November, 2004 on Know Your Customer (KYC) Standards - Anti Money Laundering (AML) measures, all banks are required to put in place a comprehensive policy framework covering KYC Standards and AML Measures.

    Legal: The Prevention of Money Laundering Act, 2002 (PMLA) which came into force from 1st July, 2005 (after “rules” under the Act were formulated and published in the Official Gazette) also requires Banks, Financial Institutions and Intermediaries to ensure that they follow certain minimum standard of KYC and AML as laid down in the ACT and the “rules” framed thereunder.  

  • What is KYC Policy?

  • As per RBI guidelines issued vide their circular dated 29/11/2004 and as amended from time to time, all banks are required to formulate a KYC Policy with the approval of their respective boards. The KYC Policy consists of the following four key elements.

    • Customer Acceptance Policy
    • Risk Management
    • Customer Identification Procedures (CIP)
    • Monitoring of Transactions
  • Who is a Customer?

  • For the purpose of KYC policy a ‘customer” may be defined as:

    • A person or entity that maintains an account and/or has a business relationship with the bank;
    • One on whose behalf the account is maintained (i.e. the beneficial owner);
    • Beneficiaries of transactions conducted by professional intermediaries, such as Stock
    • Brokers, Chartered Accountants, Solicitors etc as permitted under the law, and
    • Any person or entity connected with a financial transaction which can pose significant reputational or other risks to the bank, say a wire transfer or issue of high value demand draft as a single transaction.
  • What is a Customer Acceptance Policy?

  • Customer Acceptance Policy refers to the general guidelines followed by banks in allowing customers to open accounts with them. Generally the guidelines stipulate that no accounts shall be opened in anonymous or fictitious names or when the identity of the customer matches with any person with known criminal background or banned entities. Similarly accounts should not be opened when the bank is unable to verify the identity and/or obtain documents required as per the bank’s policy.

  • What is the Customer Identification Procedure?

  • Customer identification means identifying the customer and verifying his/her identity through reliable and independent documents, data and information. Banks would need to satisfy to the competent authorities that due diligence was observed in accordance with the requirements of existing laws and regulations.

  • What documents required to be obtained from customers?

  • Features

    Documents

    Accounts of individuals

    - Legal name and any other names used

     

     

     

    In the event the current address is not updated in the Aadhaar database obtain one of the Officially Valid Document for current residential address

     

     

     

     

     

     

     

     

     

    • Aadhaar Number
    • Permanent Account Number/Form 60

     

    Officially Valid Document

    • Passport
    • Voter’s ID card
    • Driving License
    • Letter issued by National Population Register containing details of name, address
    • Job card issued by NREGA duly signed by an officer of the State Government
    • officially valid document presented by a foreign national does not contain the details of address, then documents issued by the Government departments of foreign jurisdictions and letter issued by the Foreign Embassy or Mission in India shall be accepted.

     

    Additional Documents for current address

    Provided that in case of officially valid document furnished by the customers does not contain updated address, the following documents shall be deemed to be officially valid documents for the limited purpose of proof of address. However the customer shall submit updated Officially Valid Document with current address within a period of three months of submitting the following documents.

    (a)  utility bill which is not more than two months old of any service provider (electricity, telephone, post-paid mobile phone, piped gas, water bill);

    (b)  property or Municipal tax receipt;

    (c)  pension or family pension payment orders (PPOs) issued to retired employees by Government Departments or Public Sector Undertakings, if they contain the address;

    (d)  letter of allotment of accommodation from employer issued by State Government or Central Government Departments, statutory or regulatory bodies, public sector undertakings, scheduled commercial banks, financial institutions and listed companies and leave and license agreements with such employers allotting official accommodation;

    NRIs and residents in the States of Jammu and Kashmir, Assam or Maghalaya who do not submit PAN are required to submit (i) one certified copy of an OVD, (ii) photograph and (iii) such other document including in respect of the nature of business and financial status.

    Accounts of companies

    Certified copies of each of documents shall be obtained

     

     

     

    • Certificate of Incorporation
    • Memorandum & Articles of Association
    • Resolution of the Board of Directors and power of attorney granted to its managers, officers or employees to transact on its behalf
    • Identification information as mentioned under Clause 3.1.2 (b) (iv) in respect of managers, officers or employees holding an attorney to transact on its behalf.

    Accounts of partnership firms

    Certified copies of each of documents shall be obtained

    • Registration certificate;
    • Partnership deed; and
    • Identification information as mentioned under Clause 3.1.2 (b) (iv) in respect of managers, officers or employees holding an attorney to transact on its behalf.

    Accounts of trusts and foundations

    Certified copies of each of documents shall be obtained

     

    • Registration certificate;
    • Trust deed; and
    • Identification information as mentioned under Clause 3.1.2 (b) (iv) in respect of managers, officers or employees holding an attorney to transact on its behalf.

    Accounts of Unincorporated association or body of individuals (incl. Unregistered trusts/partnership firms), Societies

    Certified copies of each of documents shall be obtained

     

    • Resolution of the managing body of such association or body of individuals;
    • Power of attorney granted to him to transact on its behalf;
    • Identification information as mentioned under Clause 3.1.2 (b) (iv) in respect of managers, officers or employees holding an attorney to transact on its behalf.
    • Such information as may be required by the SBICPSL to collectively establish the legal existence of such an association or body of individuals.

    Accounts of Government or its Departments, societies, universities and local bodies like village panchayats (not covered above)

    Certified copies of each of documents shall be obtained

    • Document showing name of the person authorised to act on behalf of the entity
    • Aadhaar/ PAN/ Officially valid documents for proof of identity and address in respect of the person holding an attorney to transact on its behalf and
    • Such documents as may be required by the SBICPSL to establish the legal existence of such an entity/juridical person.

     

    Note: 

    For Jammu & Kashmir, Meghalaya and Assam customers, only above listed certified copy of officially valid document for current residence address proof and identity proof are applicable along with one recent passport size photograph. 

    For NRI or individuals who are not eligible to be enrolled for an Aadhaar Card can submit a copy of Permanent Account Number Card (PAN)/Form 60, recent photograph and certified copy of Officially Valid Documents with identity and current address proof. Further, a declaration is required to the effect that the individual is not eligible to enroll for an Aadhaar Card. 

    ** For Driving Licences issued in states where it is specifically mentioned that the document cannot be used as address proof, the same will not be acceptable as a KYC document.

    Important points to remember:

    • Documents should be valid on current date
    • Each document should be self-attested

    For Existing Customers:

    You may submit the requisite self-attested documents to us through any of the following modes:

    • E-mail the scanned copies to kyc.renewal@sbicard.com from your registered e-mail id
    • Log in to your account on www.sbicard.com and upload the documents by clicking ‘Submit KYC documents’ under the ‘My Accounts’ section’
    • Send the hardcopies of the documents to the below mentioned address:

    SBI Card - KYC Renewal
    SBI Cards & Payment Services Pvt. Ltd.
    DLF Cyber City, Tower-C, Block 2, 12th Floor
    Building 3, DLF Infinity Towers, Gurgaon-122002 (Haryana)

  • When does KYC apply?

  • KYC will be carried out for the following but is not limited to:

    • Opening a new account.(deposit/ borrowal)
    • Opening a subsequent account where documents as per current KYC standards not submitted while opening the initial account.
    • When the Company feels it is necessary to obtain additional information from existing customers based on the conduct of the account.
    • After periodic intervals based on instructions received from RBI.
    • When there are changes to signatories, mandate holders, beneficial owners, etc.
  • What will happen if you do not provide the required KYC information/documents to the Bank?

  • The Company will be entitled to refuse to open the account (if you are a prospective customer) or discontinue its relationship with you citing non-providing of KYC information/documents (if you are existing customer).