ADDITIONAL GUIDELINES LAID DOWN BY FIU DIRECTIVE NO.11 ON KNOW YOUR CUSTOMER (KYC) AND CUSTOMER DUE DILIGENCE (CDD) RULES
Maintenance of Accounts:
- Unless and until adequate identity of the prospective client is obtained no account should be opened. If any discrepancy in information is detected subsequently the account should be suspended until the veracity of such information is confirmed.
- The general customer information recorded at the outset should include details of customer’s business/profession, level of income, economic profile, business associates and other connections, source of funds, and the purpose for which the account is opened.
- Copies of all identification and address verification documents should be retained in terms of the law.
- Where the permanent address given in the application is at a location far away from that of the branch which receives the account opening request, the request must be discouraged/turned down and the prospective client should be requested to open the account at the closest branch to his residence or his business, unless an acceptable and a valid reason is given. Such exceptions should be recorded in file. If change of address is made after the opening of the account, the account should be transferred to the nearest branch of the Company.
- When two or more accounts are opened in the same branch/Company, the specific purpose for which the accounts are opened may be recorded to assist continued due diligence of all accounts.
- Check whether the prospective customers appear on any list of any known suspected terrorist list or alert list issued by national/government authorities such as the Controller of Immigration, Customs, Central Bank etc.
- When instructions are received from clients to transfer funds from one account to another both account numbers should be recorded internally to aid future reference.
- When Foreign Currency Accounts and temporary rupee accounts are opened for non- nationals/foreign passport holders who are resident in Sri Lanka, a local address should be obtained as their permanent address during their stay in the Island. A copy of the passport, visa with validity period, foreign address and the purpose for which the account is opened should be made available in the file. On the expiry of the visa, the account should cease to operate unless and otherwise appropriate instructions are received. On leaving the Island the account should either be closed or be converted into a non-resident account. The Company must ensure that a valid visa is held at all times by the clients during the continuation of the account with them.
- When Rupee Accounts are opened and maintained for non-residents (foreign passport holders), the foreign address may be used as the permanent address and for all correspondence. The reason for choosing to open the account in a foreign jurisdiction should be recorded in the file.
- All rupee accounts for resident non-nationals should carry a Sri Lankan address. A foreign address may be used temporarily until the account holder is resident abroad. Company must ensure to update the address on the client’s return, under the ongoing due diligence. In the case of joint accounts a foreign address may be used only when all parties are domiciled abroad. If any one party remains in the Island, the local address needs to be maintained.
- Company accounts for charitable and aid organizations and Non Government Organizations (NGO)s should be opened only with the registration of the regulatory authority empowered to regulate charitable and aid organizations, non governmental organizations and non profit organizations for the time being and with other appropriate credentials. Due regard should be paid to specific directions governing their operations i.e. issued by the Department of Bank Supervision and Department of Supervision of Non Banking Financial Institutions of the Central Bank and the Controller of Exchange.
- Opening of accounts for ‘Politically Exposed Persons’ (PEP) should have authorization of senior management. PEPs are defined as “individuals in Sri Lanka or abroad who are, or have been, entrusted with prominent public functions” e.g. Heads of State or of government, senior politicians, senior government, judicial or military officials, senior executives of State owned corporations, important political party officials. Business relationships with family members or close associates of PEPs involve reputational risks similar to those with PEPs themselves. The definition is not intended to cover middle ranking or more junior officials in the foregoing categories.
- All cash deposits made into savings and current accounts over Rs.200,000/= by third parties should have on record, the identity of the depositor. The required details are, the name, address, Identification number of a valid identification document, purpose and the signature. However, clerks, accountants and employees of business houses who are authorized to deal with the accounts do not come within the definition of ‘third parties’.
- When outward remittances/wire transfers are made out of Foreign Currency accounts it is mandatory that a complete application be forwarded to the bank incorporating important and meaningful originator information such as name, address, account number, identification number together with a brief account of the purpose for such transfers. This is applicable to domestic wire transfers as well.
- In the event foreign currency brought into the country is accepted to the credit of any foreign currency account the Company should be satisfied of the acceptance of same is in accordance with then prevailing regulations and the source of funds.
- Financial institutions must ensure that account activities are consistent with the customer profile on record. Any inconsistency should be inquired into and the correct position recorded. All unexplainable activities should be reported to the Company’s Compliance Officer for appropriate action.
- When introducing new technologies, the Company should pay special attention
to any money laundering threats that may arise from new or developing technologies, including internet transactions, that might favour anonymity and take measures, if needed, to prevent their use in money laundering schemes. The Company should be mindful of a variety of Electronic Cards that are used by customers for buying goods and services, drawing cash from ATMs and for the electronic transfer of funds. Pre-loading of credit cards in particular can be resorted to, inter-alia, for money laundering and terrorist financing purposes and should not be permitted, as to do so would be tantamount to the abuse of credit cards.
- Additional KYC and CDD on existing and new credit card merchant bases with a special focus on the nature of business of credit card merchants, should be undertaken and appropriate measures taken in terms of the provisions of the FTRA against any customer, transaction or merchant involved in any unlawful activity. Payments made through the internet by credit card customers in particular warrant very close attention to ensure that payments are not made for unlawful activities;
- When applications for opening of accounts are received by mail or e-mail due care should be exercised to record the true identity of the client prior to opening the accounts or activating them. In no case should the Company short-circuit the required identity procedures just because the prospective client is unable to present himself in person.
- When maintaining accounts for money changers/money remitters the Company needs to be aware that such clients are engaged exclusively in lawful business in compliance with the terms and conditions of the any permit issued to them. Since money changers are covered by the provisions of the Prevention of Money Laundering Act (PMLA) and the Financial Transactions Reporting Act (FTRA), it is the duty of the Company to ensure that they fully comply with the requirements of law. Any unauthorized illegal engagement in financing transactions should be brought to the notice of the Compliance Officer for appropriate action.