Why Banks do KYC?
The KYC procedure is used when bank customers open accounts. ... The
purpose of KYC is to reduce the risk of identify theft, money laundering,
financial fraud, and the financing of criminal organizations. KYC helps
manage risks and helps to understand customer behaviors.
What is the basic understanding of KYC?
KYC” refers to the steps taken by a financial institution (or business) to:
Establish customer identity. Understand the nature of the customer's
activities (primary goal is to satisfy that the source of the customer's funds is
legitimate
What all documents you see for KYC?
As part of the KYC process you will also need to request as verification copies of these KYC
documents: Certificate of Incorporation (for Companies, LLP, Trusts) GST/company tax number.
Confirmation of company address (Telephone bill/Electricity Bill) Passport/Driver's License of
Primary Contact and Directors.
What is AML and how it impacts the financial institution?
Anti-Money Laundering (AML) is a set of policies, procedures, and
technologies that prevents money laundering. It is implemented within
government systems and large financial institutions to monitor potentially
fraudulent activity.
What all basic you see that AML is correct or Not?
Inherent BSA/AML risk falls into three main categories: (1) products and services, (2) customers
and entities, and (3) geographic location.
What type of risks do we have under KYC?
“KYC” guidelines require classification of a/cs under “High Risk”,
Medium Risk” and “Low Risk” depending on the risk factors underlying
customer profile. This enables monitoring of the transactions on a regular
basis and make necessary enquiries clarifying the doubts.
Do you know the 3 types of Risk ratings are given for customers? (High,
Medium & Low).
Classification of the customers is done under three risk
categories viz. ... low, medium and high. Customer's identity, Social/financial
status, Nature of business activity, Information about the client's business and
their location etc.
Do you know what is CDD & EDD? Why does this come into KYC aspect?
CDD aims at collecting data about customers' identity and contact
information as well as measuring their risk. EDD is used for high-risk
customers, aka those who are more likely to implement related to money
laundering and terrorism financing activities due to the nature of their
business or transactions.
Whenever u have low customer profile then we do basic KYC check,
mid risk customer we do customer due diligence on them, high risk
customer we do Enhance due diligence.
Who comes under EDD framework? . What is your understanding of
Money Laundering?
EDD is used for high-risk customers, aka those who are more likely to implement related to money
laundering and terrorism financing activities due to the nature of their business or transactions.
Enhanced Due Diligence means an advanced KYC due diligence process that provides further risk
investigation. EDD is designed to handle high-risk customers and large transactions. Risky
customers and transactions pose a greater risk to the financial sector and cannot be detected by
CDD procedures.
OFAC, FATCA, and Different recommendations FATCA has?
In general, the regulations that OFAC administers require banks to do the following:
Block accounts and other property of specified countries, entities, and individuals.
Prohibit or reject unlicensed trade and financial transactions with specified countries, entities, and
individuals.
The Office of Foreign Assets Control ("OFAC") of the US Department of the Treasury administers and
enforces economic and trade sanctions based on US foreign policy and national security goals
against targeted foreign countries and regimes, terrorists, international narcotics traffickers, those
engaged in activities.
The Foreign Account Tax Compliance Act (FATCA) is a US law, designed to prevent tax evasion by
US citizens using offshore banking facilities. It requires FIs outside the US to provide information to
the US tax authorities regarding financial accounts held by US nationals.
The 3 stages of Money Laundering are in the same order or in the other
order also?
Methods and Stages of Money Laundering
There are three stages involved in money laundering; placement, layering and integration.
Placement –This is the movement of cash from its source. On occasion the source can be easily
disguised or misrepresented. This is followed by placing it into circulation through financial institutions,
casinos, shops, bureau de change and other businesses, both local and abroad. The process of
placement can be carried out through many processes including:
1.
Currency Smuggling – This is the physical illegal movement of currency and monetary
instruments out of a country. The various methods of transport do not leave a discernible audit
trail FATF 1996-1997 Report on Money Laundering Typologies.
2.
Bank Complicity – This is when a financial institution, such as banks, is owned or controlled by
unscrupulous individuals suspected of conniving with drug dealers and other organised crime
groups. This makes the process easy for launderers. The complete liberalisation of the financial
sector without adequate checks also provides leeway for laundering.
3.
Currency Exchanges – In a number of transitional economies the liberalisation of foreign
exchange markets provides room for currency movements and as such laundering schemes can
benefit from such policies.
4.
Securities Brokers – Brokers can facilitate the process of money laundering through structuring
large deposits of cash in a way that disguises the original source of the funds.
5.
Blending of Funds – The best place to hide cash is with a lot of other cash. Therefore, financial
institutions may be vehicles for laundering. The alternative is to use the money from illicit
activities to set up front companies. This enables the funds from illicit activities to be obscured
in legal transactions.
6.
Asset Purchase – The purchase of assets with cash is a classic money laundering method. The
major purpose is to change the form of the proceeds from conspicuous bulk cash to some
equally valuable but less conspicuous form.
Layering – The purpose of this stage is to 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.
The known methods are:
1.
Cash converted into Monetary Instruments – Once the placement is successful within the
financial system by way of a bank or financial institution, the proceeds can then be converted
into monetary instruments. This involves the use of banker’s drafts and money orders.
2.
Material assets bought with cash then sold – Assets that are bought through illicit funds can be
resold locally or abroad and in such a case the assets become more difficult to trace and thus
seize.
Integration – This is the movement of previously laundered money into the economy mainly through
the banking system and thus such monies appear to be normal business earnings. This is dissimilar to
layering, for in the integration process detection and identification of laundered funds is provided
through informants. The known methods used are:
1.
Property Dealing – The sale of property to integrate laundered money back into the economy is
a common practice amongst criminals. For instance, many criminal groups use shell companies
to buy property; hence proceeds from the sale would be considered legitimate.
2.
Front Companies and False Loans – Front companies that are incorporated in countries with
corporate secrecy laws, in which criminals lend themselves their own laundered proceeds in an
apparently legitimate transaction.
3.
Foreign Bank Complicity – Money laundering using known foreign banks represents a higher
order of sophistication and presents a very difficult target for law enforcement. The willing
assistance of the foreign banks is frequently protected against law enforcement scrutiny. This is
not only through criminals, but also by banking laws and regulations of other sovereign
countries.
4.
False Import/Export Invoices – The use of false invoices by import/export companies has proven
to be a very effective way of integrating illicit proceeds back into the economy. This involves the
overvaluation of entry documents to justify the funds later deposited in domestic banks and/or
the value of funds received from exports
What do you understand about Regulators and Regulations?
The primary purpose of AML regulations is to prevent money
laundering. Regulators publish a series of procedures to achieve this goal.
Companies have to follow these procedures. One of these procedures is the
"Know Your Customer." Regulators require companies to learn more about
their customers.
Are you aware of any international regulators and any specific
regulations?
US Regulatory authorities:
-OFAC
-FIU
-FinCEN
SEC (security nd exchange commission)
UK:
FCA- financial conduct authority
International org:
FATF
BASEL
EGMONT
EUROPEAN UNION DIRECTIVES
IMF
WORLD BANK
What is FINRA? What do they do?
The Financial Industry Regulatory Authority (FINRA) is an independent,
nongovernmental organization that writes and enforces the rules governing
registered brokers and broker-dealer firms in the United
States. ... FINRA provides resources, such as BrokerCheck, that help to
protect investors.
What is your understanding of Sanctions?
Sanctions are an important tool of governance in the global financial industry.
Most countries have used sanctions or had sanctions placed against either
them or their citizens. States increasingly use sanctions to fight economically,
rather than physically, and as such, sanctions have become a common tool in
foreign relations, peacekeeping and conflict resolution.
Who imposes the Sanctions?
Sanctions can be imposed by the UN Security Council, the European Union (EU) and individual states. In
practice, sanctions are usually first instituted by the Security Council and later adopted by the EU in the
form of Council decisions and regulations. On occasion, however, the EU will impose sanctions on its
own without any prior action on the part of the UN - for example, in connection with the situation in
Syria. In certain cases, the Netherlands will institute sanctions, without any prior action by either the UN
or the EU. In these cases, the target of the sanctions is often an individual connected with terrorism in
the Netherlands.
The purpose of the sanctions is often:
5.
6.
7.
to change undesirable behaviour (e.g. Syria);
to limit opportunities for undesirable behaviour (e.g. Iran, extensive restrictions on
technology/knowledge in the nuclear sector);
to deter other countries from choosing an undesirable course of action.
Can you give an example of Sanction Countries?
As of Aug. 2020, sanctioned countries (either unilaterally or in part) include the
Balkans, Belarus, Burundi, Central African Republic, Cuba, Democratic Republic
of Congo, Hong Kong, Iran, Iraq, Lebanon, Libya, Mali, Nicaragua, North Korea,
Somalia, Sudan, South Sudan, Syria, Ukraine/Russia, Venezuela, Yemen, and
Zimbabwe.
What is secured purpose?
What is a Pvt Ltd Company and Proprietor?
A Private Limited implies a company that offers Limited Liability or legal
Protection to its shareholder. In a Private Limited Company, the liability of a
shareholder is limited to the extent of capital invested by him. A
Sole Proprietorship Firm, on the other hand, is owned, controlled and
managed by a single person.
What is PEP and do you consider Politician as PEP? And do you consider
Politician's close relative as PEP?
A Politically Exposed Person (PEP) is an individual with a prominent public
post or a public function. Members of Parliament, State Assemblies, Judges,
Governors and senior government officers would come within
the PEP category along with their close relatives (people in direct contact).
close associate means a Person who is widely and publicly known to maintain an unusually close
relationship with a senior political figure, including a Person in a position to conduct substantial
domestic and international financial transactions on behalf of such figure
Give an example where we can consider you as a good learner?
Tell me about yourself and your experience.
. What should prompt us to give you this job?
Tell me about your work experience and your educational background
What are the registries which you use?
Foreign entity registration is the process of registering your business in one state to do business in
another state. The only state that your business is not foreign to is the original state you registered
your business in.
SOS(Secretary of State)
Company House
The U. S. Securities and Exchange Commission (SEC) has a three-part mission: Protect investors.
Maintain fair, orderly, and efficient markets. Facilitate capital formation.
The Securities and Exchange Commission is a federal agency that regulates securities markets in
the United States. The SEC is responsible for enforcing securities laws, regulating the securities
markets and related entities and working to ensure investors are treated fairly.
The SEC uses the tools of Registration, Rules Making, Investigation, Monitoring, Enforcements and
Compliance to ensure that all market participants play according to the rules. – Protecting the
integrity of the securities market against all forms of abuses including insider dealing.
Registering your business with SEC is mandatory not only to legitimize its juridical entity but also to
enable it to legally engage in business, issue receipts, trade financial assets, and be entitled to
certain rights under the country's corporate and investment laws.
Tell me about the clubs, do all clubs need to register and where they
will be registered.
What does the Article of Association and Memorandum say or contain?
In short, the memorandum contains the names of all the subscribers (the people who were there at
the founding point of the company e.g. initial shareholders) and the Articles of Association are a set
of rules that govern how the company is run.
The Memorandum
Every company must have a memorandum in place, they will all be in the same format and contain
the same information. This includes:
8.
9.
10.
11.
12.
13.
Company name
Date of incorporation
Type of company
Act under which the company is registered
Names and signatures of all subscribers (original shareholders or guarantors)
Limited liability of shareholders or guarantors
Any person who adds their name to the memorandum during incorporation will become a member of
the company, and will continue to be members until they decide to leave. Details of members will be
made public on the Companies House website under the company details.
The Articles of Association
Most limited companies will use the Model Articles, but it is possible to change them if needed.
These Articles will set out how the company is run, governed and owned by the members. The
Articles can put restrictions on the company's power - which can be useful if the shareholders and
directors do not agree and try pulling the company in different directions. This Model Articles cover
the following:
14.
15.
16.
17.
18.
19.
Directors' powers, responsibilities, decision making, appointment and removal, indemnity
and insurance
Shares, distribution of shares and Dividends
Capitalisation of profits
Shareholders
General meetings
Voting Rights
If you want to change these articles in any way, such as issuing different classes of shares or adding
or removing shares, then you can. However you will have to notify Companies House when applying
to incorporate the company so that they can be reviewed to ensure they are acceptable.
You can do this as part of the incorporation process with Company Wizard. Just select that you wish
to supply your own custom articles when incorporating.
Can I change the Articles after Incorporating?
It is possible to change the Articles after incorporation, however, they must be changed via a special
resolution. In order to do this, the members have to pass the special resolution agreeing to the
changes and the final document (as altered) must be submitted to Companies House within 15
days of the resolution being passed.
What tools are used for screening purpose and how the discounting is
done.
These processes include collection, verification and record keeping of Personally Identifiable
Information (PII); and screening customers against sanctions and Politically Exposed Persons (PEP)
lists, and adverse news to assess the risks associated with each customer.
Name Screening helps you to manage the complexity of sanctions requirements and rapidly
changing lists by automatically screening databases of individuals and entities (e.g. companies and
organisations) against sanctions, Politically Exposed Persons (PEP), Relatives and Close Associates
(RCA), Sanctions Ownership
The 3 steps of a KYC compliance framework
20. Customer Identification. Before checking a customer's identification documents, it's
necessary to verify their and scrutinise all available information for any inconsistencies. ...
21. Customer Due Diligence (CDD) ...
22. Enhanced Due Diligence (EDD)