AOF-KYC-TP- Risk Rating in Account Opening

AOF-KYC-TP-Risk Rating in Account Opening, Entries of A/C Account Opening and Closing Register

Compiled by:
Muhammad Hossain Akhter
AVP and FM

Generally banking is the business activities of accepting and safeguarding money owned by other individuals and entities, and then invest this money in order to earn a profit. Banks draw surplus money from the people who are not using it at the time and invest to those who are in a position to use it for productive purposes.

Every bank has certain terms and conditions apply to and regulate the operation of the Savings Account Opening of an account binds the banker and customer into a contractual relationship. Every person who is competent to contract can open an account with a bank.

When a ‘customer’ opens an account with a bank, he fills in and signs the Account Opening Form (AOF). By signing the form he enters into an agreement/contract with the bank. The account opening form contains a declaration that the terms and conditions have been read and understood or has been explained

Account Opening Form

Account Opening Form (AOF)” means, in relation to an Account or Accounts, an account opening form addressed to the Bank signed by the Client in a form specified by the Bank from time to time.

Major traits of Account Opening Form

SL No.	Items
1	Title of Account
2	Type of Account
3	Currency
4	Operating Instruction
5	Other Accounts of the Customer (if any)
6	Introducing Information
7	Initial Deposit
8	Documents to be submitted of the opening A/c:Private Individual (Single/Joint), Private Firm (Partnership), Private Limited Company, Public Limited Company, Club/Association/ Societies/Educational Institutions, Illiterate Person(s)/ Pardanshin Ladies/ Trustee Accounts/ Minor’s Account/ Banks, Government Officials and Military Funds.
9	Nominee’s Details
10	Declaration and Signature
11	Personal Information
12	Transaction Profile (Format)
13	Sources of Fund
14	Signature
15	KYC Profile Form (Format)  .. Risk Score

 

Transaction Profile (TP)

Every Business and individual has normally certain kind of transactions in line with their business/ individual needs, which is declared in the Transaction Profile (TP) of the customer. The Transaction Profile (TP) is mandatory for a client to understand his/her transactions. If needed, the TP must be updated at the client’s consent.

Table:

Account or Reference No…….

Transaction Profile:

Type of Transaction	No. of Transaction (Monthly)	Maximum  Transaction Amount(Each Transaction)	Total Amount (Monthly)
Deposit:
Cash Deposit (inclusive of Online Transactions)
Transfer /deposit by Instruments
Foreign Remittance Receivable
Export Revenue Receivable
Others(Specify)
Total Deposit (Approx.)

 

Type of Transaction	No. of Transaction (Monthly)	Maximum  Transaction Amount(Each Transaction)	Total Amount (Monthly)
Withdrawal:
Cash withdrawal (inclusive of Online Transactions and ATM)
Transfer /payment by Instruments
Foreign Remittance withdrawal
Settlement of Import expenses
Others(Specify)
Total withdrawal (Approx.)

Sources of Fund: …………………….

I /We the undersigned hereby acknowledge that the transactions limit is my /our organization’s usual transactions. I/ We do hereby acknowledge that if necessary I/we will change/update the transaction profile.

 

Signature of the Applicant with date, seal (where applicable).

Signature of the Applicant with date , seal (where applicable).

 

• Transaction Profile :

 TRANSACTION  MONITORING PROCESS

There are systems and controls in place to monitor on an ongoing basis the relevant activities in the course of the business relationship. The nature of this monitoring will depend on the nature of the business. The purpose of this monitoring is for the Bank to be vigilant for any significant changes or inconsistencies in the pattern of transactions. Inconsistency is measured against the stated original purpose of the accounts i.e. the declared Transaction Profile (TP) of the Customer. Possible areas to monitor could be:

Transactions inconsistent with the declared TP will be considered unusual. All officials of the Bank must be alert to transactions that are inconsistent with the customer’s KYC information.

If any unusual transaction is found, then the employees who have noticed it should follow the procedures to determine whether a STR should be filed or not.

STR Reporting: 4 steps

1. Identification of suspicious activity
2. Investigation through appropriate questioning
3. Evaluation against previous account activity
4. Disclosure –If doubt/ suspicious, report to BFIU of Bangladesh Bank through CCU.

Procedures:

Comparing

Suspicious Transaction

Abnormal Transaction

Finding

Inconsistent

Normal/ Expected Transaction

Consistent

·   Information provided in AoF ·   Transaction Profile ·   KYC Profile ·   Other relevant Documents

Procedures:

Detect unusual transaction/ activity (any officer or BAMLCO)

Evaluate by BAMLCO

Finding

Suspicious

Suspicious

Findings

Send to CCU & keep record

Normal/ Expected Transaction

Evaluate by CCU

Not suspicious

Closed with proper records

Findings

Closed with proper records

Not suspicious

 

KNOW YOUR CUSTOMER (KYC)

KYC policy holds financial institutions accountable for their ongoing Know Your Customer selection and initial customer selection. Financial institutions such as banks perform due diligence in verifying the identities of potential clients and keep detailed records of the process used. In the case that your institution does accidentally fund terrorists, proof of ongoing due diligence can potentially mitigate the degree of any civil or criminal charges levied against you.

Essential elements of any KYC:

• Must ensure that customer/entity is using their real name and not involved in terrorism or other illegal activities.
• Identify and verify all customers’ identities and purposes (using reliable, independent data, information, and/or source documents) to the bank’s satisfaction.
• Effective KYC procedures require continuous monitoring of your customer base and its normal behavior to reduce risk. High-risk accounts classified based on sources of fund or activities such as complex or unusually large transactions should undergo extra scrutiny. Banks can set thresholds for transaction amounts that deserve enhanced due diligence/carefulness.

KYC policY

Customer Acceptance Policy (CAP)   : [No account is opened in anonymous of fictitious / benami name .Parameters of risk perception are clearly defined in terms of the nature of business activity, location of customer, mode of payment, the volume of turn over, social and financial status etc. to enable categorization of customers into low, medium and high risk.]

Customer Identification Procedures (CIP)      [Customer identity means identifying the customer and verifying his/her identity by using reliable, independent source documents, data or information (name, address/ location, recent photograph).  (CDD or EDD to be observed.]

• Monitoring of transactions ;
• Risk Management,
• Training programme
• Internal Control Systems
• Record Keeping
• Evaluations of KYC guidelines by Internal Audit
• Duties / Responsibilities and Accountabilities.
• KYC is the Primary data base.

Definition of Beneficial Owner : means the natural person who ultimate owns or controls a client and or the person on whose behalf a transaction is conducted, and includes a person who exercise ultimate effective control over a judicial person.

• CTR = Cash Transaction Report.
• STR = Suspicious Transaction Report
• CDD = Customer Due Diligence
• EDD = Enhance Due Diligence   (i.e. bank is unable to verify the identity and / or obtain documents requires as per risk categorization due to non cooperation of the customer or non-reliability of the data/ information furnished to the bank.)
• Structuring
• Monthly Assessment

2. Thus the Bank’s effort to combat money laundering and terrorist financing largely focuses on the process where the launderer’s activities are more susceptible to recognition and therefore concentrates to a large extent on the deposit taking procedures i.e., the placement stage.
3. Branches must keep transaction records that are comprehensive enough to establish an audit trail. Such records can also provide useful information of the people and organizations involved in laundering schemes.
4. Anti-Money Laundering Department & Training Institute of the Bank also deal with employees training programs which are designed to make awareness about money laundering techniques and tools etc so as to combat money laundering and terrorist financing.

KYC Format:

Sl.	Category’/Nature of business	Risk Level	Score	Sl.	Category’/Nature of business	Risk Level	Score
1	Jewellery/Gems Trade	High	5	10	Share/ Stock Broker	High	5
2	Money Changer/Courier Service Agent	High	5	11	Manpower Export Business	High	5
3	Real Estate Agent	High	5	12	Operations in Multiple Locations	High	5
4	Construction Project Promoter	High	5	13	Film Producer/Distributor	High	5
5	Offshore Corporation	High	5	14	Arms Dealer	High	5
6	Art/Antique Dealers	High	5	15	Mobile Phone Operator	High	5
7	Restaurant/Bar/ Night Club/Hotel & Motel Owner	High	5	17	Travel Agent	High	5
8	Import/Export Agent	High	5	18	Transport Operator	Medium	3
9	Investor (monthly Tk. 25.00 Lac)	High	5	19	Auto Dealer (Reconditioned cars)	Medium	3
20	Non-Banking Financial Institute(NBFI)	Medium	3	29	Business-Agent	Low	2
21	Freight/ Shipping/Cargo Agent	Medium	3	30	Small Trader (Turnover less than Tk. 50.00 Lac per annum)	Low	2
22	Insurance /Brokerage Agent	Medium	3	31	Self Employed Professional	Low	2
23	Religion Institute/Organization	Medium	3	32	Corporate Customer	Low	2
24	Entertainment Organization/ Amusement Park	Medium	3	33	Construction Material Business	Low	2
25	Motor Parts Business	Medium	3	34	Computer/ Mobile Phone Dealer	Low	2
26	Tobacco & Cigarette Business	Medium	3	35	Software Business	Low	1
27	Auto Primary (New Car)	Low	2	36	Manufactures (other than arms)	Low	1
28	Shop Owner (Retail)	Low	2	37	Retired from service	Low	0
39	Student	Low	0	38	Service	Low	0
40	Housewife	Low	0	41	Farmer	Low	0
				42	Others	Low	0

The account was opened in which way: Type(s) Risk Level Risk Rating Relationship Manager/ Branch Low 0 Direct Sales Agent Medium 1 Internet High 3 Walk-in/ Willingness High 3

Net worth of the Customer:

Amount(Taka)	Risk Level	Risk Rating
0-50 Lac	Low	0
50 Lac to 2 Crore	Medium	1
Above 2 Crore	High	3

 

Expected Monthly Transactions: Transaction in AWCA (Figure in Lac) Transaction in Mudaraba Savings Account  (Figure in Lac) Risk Level Risk Rating 0-10 0-5 Low 0 10-50 5-10 Medium 1 >50 >20 High 3

Expected  monthly Cash Transactions: Transaction in AWCA (Figure in Lac) Transaction in Mudaraba Savings Account  (Figure in Lac) Risk Level Risk Rating 0-10 0-2 Low 0 10-15 2-7 Medium 1 >25 >7 High 3

Expected number of monthly Cash  Transactions: Transaction in AWCA (Figure in Lac) Transaction in Mudaraba Savings Account  (Figure in Lac) Risk Level Risk Rating 0-15 0-5 Low 0 15-30 5-10 Medium 1 >30 >10 High 3

Expected number of monthly Transactions: Transaction in AWCA (Figure in Lac) Transaction in Mudaraba Savings Account  (Figure in Lac) Risk Level Risk Rating 0-100 0-20 Low 0 100-250 20-50 Medium 1 >250 >50 High 3

 

Total Risk Rating	Risk Assessment
Low	0
Medium	1
High	3

Risk Rating in A/c Opening

We see in the KYC format that there are different cells in the different tables containing risk category (High Risk Customers, Medium Risk Customers and Low Risk Customers). This arrangement is made with a view to categorize the customers in the light of risk rating and to avert possibility of money laundering, terrorist financing and fraudulent activities.

 If the risk scoring is more that 14 it would indicate a high risk/sensitive customer (below 14 is low risk). KYC profile and transaction profile must be updated and re approved at least annually for all the high risk/sensitive customers.

Low Risk

Individuals (other than High Net Worth) and entities whose identities and sources of wealth can be easily identified and transactions in whose accounts by and large conform to the known profile may be categorized as low risk.

 Medium Risk

Customers that are likely to pose a higher than average risk to the bank may be categorized as medium or high risk depending on customer’s background, nature and location of activity, sources of funds and his client profile etc.

High Risk: The branches may apply enhanced due diligence measures based on the risk assessment, thereby requiring intensive ‘due diligence’ for higher risk customers, especially those for whom the sources of funds are not clear. The examples of customers requiring higher due diligence may include

a)Non Resident Customers,

b)High Net worth individuals

c)Trusts, charities, NGOs and organizations receiving donations,

d)Companies having close family shareholding or beneficial ownership

e)Firms with ‘sleeping partners’

f)Politically Exposed Persons (PEPs) of foreign origin

 

The following points to be noted:

1. it is an offence to knowingly or have reasonable ground to believe that someone who has benefited from corruption, drug trafficking or other serious crimes to assist him in dispersing such moneys;
2. it is also an offence not to report clean funds which are intended to be used in connection with drug trafficking or other serious crimes;

iii. Hard evidence is not required. As money laundering is not intended to be obvious, you should use your professional judgment, gut feelings or instinctive doubts;

1. Reporting to the authority will be strictly confidential and WILL NOT jeopardized you or your customer. The authority will only monitor the situation to determine if there is any evidence of such activity;
2. Do not tip off. You should not alert the customer to the fact of the disclosure, as to do so would constitute a “tipping-off offence punishable by law.

Account Opening and Closure Register Form:

Sl No.	Account No.`	Customer ID	Account Title	Introducer	State	Term	Opening Date	Opening	Current Balance
1	2051090202711009	1090106476905	Md. Abdul  Karim	M A Shaheb Ali	Regular	Term	01/01/2014	1500	17400

Account Closing Register:

Account No.`	Account Title	Account Type	State	Opening Date	Closing Date	Closing Amount
2051090202711009	Md. Abdul  Karim	MSA	Regular	01/01/2014	1500	17400

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