AML KYC MOST IMPORTANT BASIC TOPICS

We are worked for the Netherlands clients and we are into the part of commercial Banking with
Remediation Profiles.

We are worked the Entities like: -

Foundation, Association, Private Limited Company (PLC) , General Partnership and Sole Trader

We are worked for the End-to-End KYC like: - Ownership Structure, Business Activity, On Boarding
and Screening and Transaction Monitoring and Source of funds and Source of wealth.

Whenever we received the Profile, we have to do the prechecks first.

Prechecks: - Prechecks in the sense we have to check that when the customer has been onboarded
to our bank.

Onboarding the sense: -It is the process of opening account with our bank for the first time.

Ownership Structure: - The ownership structure is known as we have to check that how persons are
there in the ownership structure so can identify the ownership structure based on the below things.

What is the required ownership threshold for carious risk clients...?

Low and Medium 25% or more and High is 10% or more

1.UBO Declaration form 2. Organogram Chart and other documents like AOA (Article of
Association) and MOA (Memorandum of Association)

There is the percentages is available in the UBO declaration form so that we can take the ownership
structure as “Based on the voting rights” or Non-Voting and strategic Decision Maker.

UBO is Known as the Ultimate beneficiary Owner.

The person who is gaing more than 25% he is known the UBO.

Business Activity section: - This section states about the business activity of the client so in our
process there is only website is available for the client so we can take the website and we can google
it and and we check what is the exact purpose of the business activity of the client.

Screening: - We are used the tool for the screening is RDC tool which is known as the (Regulatory
Data Corp)

The objectives of the screening is: -

• To Identify the PEP’s

• To Identify the Adverse Negative News
• To Identify the Sanction Negative News
• To Identify the fraud and Money Laundering News
• To Identify the regulatory fines and restrictions

Screening: - We need to perform the screenings on client and its connected parties like ( Controllers,
Shareholders, Directors, Authorized Signatures and other connected parties to know PEP status
Adverse negative news sanction news and other fraud news.
In screening there are Four Types: -

1.Name Mis-Match 2. Location Miss Match 3. DOB Miss Match and 4. Gender Miss Match.

Purpose of Name Screening: -

Name Screening is a valuable tool for the financial institutions and corporate to use for performing
know your customer checks when onboarding customers for verifying the parties involved mergers
and other transactions and for on-going customer due diligence (CDD).

A name Screening data base is usually obtained from reputable risk and compliance companies an a
subscription basis.

How do we Screen a PEP...?

Best practices for your PEP screening process

1.Focus on High Quality Data It is essential to focus on high quality data when conducting PEP
Screening.

2.Utilize a risk-based Approach.

3.Perform Supplemental due diligence checks.

4.Monitor the Relationship Consistency.

5.Provide Approach Trainings.

There are 3 Types of PEP’S (Political Exposed Person) ...?

*Foreign PEP’S *Domestic PEP’S and * International Organization PEP’S.

Why PEP is a high Risk…?

The most important reasons for the detecting PEP is that they are defined as high risk people
because they have more opportunities to earn illegal income such as money laundering terrorism
financing corruption and bribery.

Why do we do screening in KYC...?

To Performing KYC Screening allows your financial institution to pick up on your customers existing
legal sanctions their adverse media coverage and whether there is a politically person (PEP) in
involved.

Transaction Monitoring: - Transaction monitoring in the sense we have to check the Transaction
overview Report So in our process we can check the 14months of TO Report and we can check the
top 10 Credits and top 10 Debits so we can check each and every transaction and we can check the
transaction is logical to the business activity or not so in case the transaction is logical we can
proceed for the further and we close the profile.

Source Of Funds: - The source of the fund is that how the client is running the business (Working
Capital) day to day activities.
Source of Wealth: - Source of wealth is the initial capital to start a business.

Finally, we have to give the Risk rating for your entire profile based on the below parameters like

1.Product Risk 2. Industry Risk 3. Country Risk and 4. Entity Risk.

We can also do the CDD Part as well so CDD in the sense (Customer Due Diligence).

CDD- It is a process of Identifying and the verifying the client client details and accessing the risk of
the clients. i.e., It includes

1.Document Analysis 2. Screening and 3. Risk rating of the client.

IDD: - (Initial Due Diligence)

It is also called the gap analysis and analysing the initial documents available in the public source and
identify the gaps to complete the KYC Checks’

EDD: - (Enhanced Due Diligence)

This step is only required if the client risk rating turns as high. So, at that time we required to collect
some information or the additional documents from the client.

Onboarding: - Onboarding is the process of opening account with our bank for the first time.

Periodic Review: - Once the onboarding is completed periodic review will be started based on rating
and need to review all KYC documents once again for the existing clients.

*Low Risk Clients for (3 Years)

* Medium Risk clients (2 Years)

*High Risk Clients (Annually)

What are the various process steps under AML...?

KYC (Know your customer) 2. On- Boarding 3. Periodic review 4. Trigger events 5. Transaction
Monitoring and Suspicious activity report.

AML: - It is a process of preventing the money Laundering.

There are 3 stages of money Laundering

1. Placement 2. Layering and 3. Integration

 Placement: - Here the illegal money is introduced into the legitimate financial system

Layering: - Here money is moved around to create confusion sometimes by wiring or

transferring through the numerous accounts.

Integration: - Finally money is integrated into the financial system through additional
transitions until dirty money appears clean.

What is KYC...?

Know your customer or client. It is the process of identifying and verifying the client details.

2.Why KYC is required...?

To prevent the money laundering or terrorist financing or fraud related issues.

3.what is AML...?

Anti-Money Laundering it is a process of preventing the money Laundering.

4.What are the various process steps under AML...?

KYC – Know your customer

On-Boarding

Periodic Review

Trigger Events

Transaction Monitoring and Suspicious Activity Reporting.

5.What are the additional documents or info required for EDD.?

*Ownership threshold is 10% or more

*Source of funds of the client

*Source of wealth of the UBO’s

*Compliance approvals on KYC Checks.

6.What are the Key Parties in KYC teams...?

*Maker (Analyst/Senor Analyst)

*Checker (QC 4 Eye)

*SME (Subject Matter Expert)

* QA (Quality Assurance—6 Eye)

*Compliance

*Business unit/ FO (Front Office)

*RM (Relationship Manager)

7.What are the additional Documents or info required for the EDD?

*Ownership threshold is 10% or more

*Source of funds of the clients

* Source of wealth of UBO’S

* ID and Address Copies of UBO’s

*Compliance Approvals on KYC Checks.

8.What are the main common requirements to obtained from clients?

*Legal Forms

*Registered Address

*Registered number and Date

*Nature of Business

* Completed Ownership

*List of directors and Controllers

*Financial Data (Revenue and Assets)

*Tax related information etc.

9.What are the common connected parties to the client?

*Directors

* Controllers

*Share Holders

*Auditors

* Authorized Signatories

10.What are the connected parties to the Trust...?

Trustors, settlor or grantor, trustees, Beneficiaries, Directors, Auditors, Administrator etc.

11.What are the main required document for the trust...?

Trust Deed, Trust agreement, Regulation Proof (If regulated) etc.

12.What are the key risk indicators or risk deciding factors...?

*Country Risk

*Nature of business of the client

*Ownership Type

*Products and services provide by bank

*Negative News and Sanction News and PEP’s Etc.

13.List out few high-risk Industries?

*Money Services Business

*Pharma Industries

*Mining and Petroleum

*Real Estate

* Gold and Precious Metals etc.

14.How can you Identify a High-Risk Customers?

1.Customer linked to higher risk Countries

2.Customers from high-Risk business Sector

3.Unusual account activity

4.Lack of obvious economic or lawful purpose

5.politically Exposed person (PEP)

15.Sanctions: -

The sanctions are imposed by the OFAC which is known as the Office of Foreign Assets Control 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.

List of few sanctions’ countries...?

Iran, Syria, Cuba, North Koria and Venezula

The sanctions countries are the countries where we won’t do the business and it is the way to
financially isolate a target. I,e Country or a regime.

It can be imposed for a variety of reasons like political Military or Social Issues.

The main Purpose of the sanction is to change and limit the undesirable behaviour of a country like
Cuba, Syria, Iran, North Koria, Venezula and South Sudan.

16.What are the four pillars of KYC...?

1.Customer Acceptance Policy

2.Customer Identification Procedures

3.Monitoring of Transaction or on-going Due Diligence

4.Risk Management.