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Know Your Customer (KYC) Policy
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1. PREAMBLE
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The objective of ‘Know Your Customer (KYC) Guidelines’ is to prevent housing finance
companies (HFCs) from being used, intentionally or unintentionally, by criminal
elements for money laundering activities. KYC procedures also enable HFCs to know/understand
their customers and their financial dealings better which in turn help them manage
their risks prudently.
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As per NHB guidelines on KYC policy, Deutsche Postbank Home Finance Limited (Hereinafter
referred as to Company) is required to have its KYC policy for its Indian Operations
in line with extant guidelines framed therein. This KYC policy is also framed keeping
in mind the same and has the following four key elements:
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i
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Customer Acceptance Policy;
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ii
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Customer Identification Procedures;
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iii
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Monitoring of Transactions; and
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iv
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Risk management.
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2. POLICY FUNDAMENTALS
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Definition of customer
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A Customer is:
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a person or entity that maintains an account and/or has a business relationship
with the Company
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ii
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one on whose behalf the account is maintained (i.e. the beneficial owner);
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iii
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beneficiaries of transactions conducted by professional intermediaries, such as
stock brokers, chartered accountants, solicitors, etc. as permitted under the law,
and
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iv
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any person or entity connected with a financial transaction which can pose significant
reputational or other risks to the Company, say, a wire transfer or issue of a high
value demand draft as a single transaction.
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3. Customer Acceptance Policy (CAP)
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(1) The Customer Acceptance Policy will ensure the following aspects of customer
relationship
i. No account is opened in anonymous or fictitious/benami name(s);
ii. The Company shall define the risk perception in terms of the location of customer
and his clients and mode of payments, volume of turnover, social and financial status,
etc. which shall enable the Company to categorize the customers into low, medium
and high risk; Customers requiring very high level of monitoring, e.g. Politically
Exposed Persons will be given due consideration and may, if considered necessary
be categorized even higher.
iii. Documentation requirements and other information will be collected in respect
of different categories of customers depending on perceived risk and requirements
of Prevention of Money Laundering Act, 2003 and rule framed thereunder, from time
to time.
iv. Not to open an account or close an existing account where the Company is unable
to apply appropriate customer due diligence measures, i.e. the Company is unable
to verify the identify and /or obtain documents required as per the risk categorisation
due to non cooperation of the customer or non reliability of the data/information
furnished to the Company. Suitable built-in safeguards shall be provided to avoid
any harassment to customers.
v. Circumstances, in which a customer is permitted to act on behalf of another person/entity,
will be clearly spelt out in conformity with the established law and practices,
as there could be occasions when an account is operated by a mandate holder or where
an account may be opened by an intermediary in a fiduciary capacity; and
vi. Necessary checks before any loan disbursement will be carried out by the Company
and/or through any specialized agency so as to ensure that the identity of the customer
does not match with any person with known criminal background or with banned entities
such as individual terrorists or terrorist organizations, etc.
(2) The Company will prepare a profile for each new customer during the credit appraisal
based on risk categorization as mentioned in this policy. The customer profile will
contain information relating to the customer’s identity, social/financial status,
nature of business activity, information about his clients’ business and their location,
etc. The nature and extent of due diligence will depend on the risk perceived by
the Company. At the time of credit appraisal of the applicant the details are recorded
along with his profile based on meeting with the applicant (by the sales representative)
apart from collection of applicable documents; this will be as per our credit and
product norms which are incorporated in the credit manual and are in practice. However,
while preparing customer profile, the Company will seek only such information from
the customer which is relevant to the risk category and is not intrusive. Any other
information from the customer should be sought separately with his/her consent and
after opening the account.
The customer profile will be a confidential document and details contained therein
shall not be divulged for cross selling or for any other purposes.
(3) As per KYC policy, for acceptance and identification, customers are categorized
broadly into low risk, medium risk, and high risk categories.
(A) Low risk customers will be individuals (excluding high
Net Worth) and entities whose identities and sources of wealth can be easily identified,
have structured income and transactions in whose accounts by and large conform to
the known profile. In these cases, only the basic requirements of verifying the
identity and location of the customer have to be met. Illustrative examples of low
risk customers is as under
(i) Salaried employees with well defined
salary structures
(ii) People belonging to government departments,
regulators, statutory boidies
(iii) People working with government owned companies,
regulators and statutory bodies, etc.
(iv)People belonging to lower economic strata of
the society whose accounts show small balances and low turnover
(v) People working with Public Sector Units
(B) Customers that are likely to pose a higher than average risk
to the Company may be categorized as medium or high risk depending on customer’s
background, nature and location of activity, country of origin, sources of funds
and his client profile, etc. The Company shall 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. Examples
of high risk customers requiring higher due diligence may include:
(i) Nonresident customers,
(ii) High net worth individuals, without an occupational
track record of more than 3 years.
(iii)Trusts, charities, NGOs and organizations receiving
donations
(iv)Companies having close family shareholding or
beneficial ownership,
(v) Firms with 'sleeping partners',
(vi)Politically exposed persons (PEPs) of foreign origin, (vii)Nonface
to face customers,
(viii)Those with dubious reputation as per available public information,
etc.
In the event of an existing customer or the beneficial owner of an existing account
subsequently becoming a PEP, the Company will obtain senior management approval
in such cases to continue the business relationship with such person, and also undertake
enhanced monitoring as indicated and specified in Annexure I
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4. Customer Identification Procedure (CIP)
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1.
i. Customer identification means identifying the customer and verifying
his/ her identity by using reliable, independent source documents, data or information.
ii. As per Rule 9 of the Prevention of Money-Laundering (Maintenance of Records
of the nature and Value of Transactions, The Procedure and Manner of Maintaining
and Time for Furnishing information and Verification and Maintenance of Records
of the Identity of the Clients of the Banking Companies, Financial Institutions
and Intermediaries) Rules, 2005 (hereinafter referred to as PML Rules), requires
every HFC:
a. at the time of commencement of an account–based relationship,
identify its clients, verify their identity and obtain information on the purpose
and intended nature of the business relationship, and
b. in all other cases, verify identity while carrying out
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(i) transaction of an amount equal to or exceeding
rupees fifty thousand, whether conducted as a single transaction or several transactions
that appear to be connected, or
(ii) any international money transfer operations.
As per Rule 9, the Company shall identify the beneficial owner and take all reasonable
steps to verify his identity. The Company shall also exercise ongoing due diligence
with respect to the business relationship with every client and closely examine
the transactions in order to ensure that we are consistent with our knowledge of
the customer, his business and risk profile.
Therefore, the Company shall have Customer Identification Policy consisting of identification
procedure to be carried out at different stages, i.e. while establishing a relationship;
carrying out a financial transaction or when there is a doubt about the authenticity/veracity
or the adequacy of the previously obtained customer identification data.
(2) The Company will obtain sufficient information necessary to
establish, to our satisfaction, the identity of each new customer, whether regular
or occasional and the purpose of the intended nature of relationship. Rule 9 of
the PML Rules provides for the documents/information to be obtained for identifying
various types of customers i.e. individuals, companies, partnership firms, trusts,
unincorporated association or a body of individuals and juridical persons. Customer
identification requirements keeping in view the provisions of the said rule are
also indicated in Annexure I. An indicative list of the nature
and type of documents/information that may be relied upon for customer identification
is given in the Annexure II. The Company will frame internal guidelines
based on their experience of dealing with such persons/entities, normal prudence
and the legal requirements.
(3) The Company will formulate and implement a Client Identification
Programme to determine the true identity of its clients keeping in view the above
in view.
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5. Monitoring of Transactions
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Ongoing monitoring is an essential element of effective KYC procedures. However,
the extent of monitoring will depend on the risk sensitivity of the account. The
Company would pay special attention to all complex, unusually large transactions
and all unusual patterns which have no apparent economic or visible lawful purpose.
The Company may prescribe various methods for calculating the threshold limits for
a particular category of accounts and pay particular attention to the transactions
which may exceed these limits.
Transactions that involve large amounts of cash inconsistent with the normal and
expected activity of the customer would particularly attract the attention of the
Company. High-risk accounts have to be subjected to intensified monitoring. The
Company will set key indicators for such accounts, taking note of the background
of the customer, such as the country of origin, sources of funds, the type of transactions
involved and other risk factors. The Company should put in place a system of periodical
review of risk categorization of accounts and the need for applying enhanced due
diligence measures.
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6. Risk Management
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The Management under the supervision of the Board of Directors of the Company will
ensure that an effective KYC programme is put in place by establishing appropriate
procedures and ensuring their effective implementation. It will cover proper management
oversight, systems and controls, segregation of duties, training and other related
matters. Responsibility will be explicitly allocated within the Company for ensuring
that the housing finance companies’ policies and procedures are implemented effectively.
The Company will devise procedures for creating Risk Profiles of their existing
and new customers and apply various Anti Money Laundering measures keeping in view
the risks involved in a transaction, account or business relationship
The Company’s Internal Audit and Compliance functions will evaluate and ensure adherence
to the KYC policies and procedures. As a general rule, the compliance function will
provide an independent evaluation of the Company’s own policies and procedures,
including legal and regulatory requirements. The Management under the supervision
of Board / Audit Committee will ensure that the audit function is staffed adequately
with skilled individuals. Internal Auditors will specifically check and verify the
application of KYC procedures at the branches and comment on the lapses observed
in this regard. The compliance in this regard will be put up before the Audit Committee
of the Board along with their normal reporting frequency.
The Company will have an ongoing employee training programs so that the members
of the staff are adequately trained in KYC procedures. Training requirements will
have different focuses for frontline staff, compliance staff and staff dealing with
new customers so that all those concerned fully understand the rationale behind
the KYC policies and implement them consistently
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7. Customer Education
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The Company will educate the customer on the objectives of the KYC programme so
that customer understands and appreciates the motive and purpose of collecting such
information. The Company will prepare specific literature/ pamphlets, etc. so as
to educate the customer about the objectives of the KYC programme. The front desk
staff needs to be specially trained to handle such situations while dealing with
customers
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8. INTRODUCTION TO NEW TECHNOLOGIES
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The Company will pay special attention to any money laundering threats that may
arise from new or developing technologies including online transactions that may
favour anonymity, and take measures, if needed, to prevent their use in money laundering.
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9. APPLICABILITY TO BRANCHES AND SUBSIDIARIES OUTSIDE INDIA
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The above guidelines will also apply to the branches and majority owned subsidiaries
located abroad, especially, in countries which do not or insufficiently apply the
FATF Recommendations, to the extent local laws permit as and when the Company opens
overseas branches. When local applicable laws and regulations prohibit implementation
of these guidelines, the same will be brought to the notice of National Housing
Bank and RBI.
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10. APPOINTMENT OF PRINCIPAL OFFICER
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The Company will designate a senior employee as ‘Principal Officer’ who will be
located at our head/corporate office and will be responsible for monitoring and
reporting of all transactions and sharing of information as required under the law.
He will maintain close liaison with enforcement agencies, HFCs and any other institution
which are involved in the fight against money laundering and combating financing
of terrorism.
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11. MAINTENANCE OF RECORDS OF TRANSACTIONS
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The Company will maintain proper record of the transactions as required under Section
12 of the PMLA read with Rules 3 of the PML Rules as mentioned below:
i. All cash transactions of the value of more than rupees one million or its equivalent
in foreign currency, though by policy the Company do not accept cash deposits in
foreign currency.
ii. All series of cash transactions integrally connected to each other which have
been valued below rupees one million or its equivalent in foreign currency where
such series of transactions have taken place within a month.
iii. All transactions involving receipts by non-profit organizations of rupees ten
lakhs or its equivalent in foreign currency.
iv. All cash transactions where forged or counterfeit currency notes or bank notes
have been used as genuine and where any forgery of a valuable security has taken
place; any such transactions; and
v. All suspicious transactions whether or not made in cash and by way of as mentioned
in the Rule 3 (1) (D) An Illustrative List of suspicious transaction pertaining
to Housing Loan is given in Annexure III A & III B
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12. RECORDS TO CONTAIN THE SPECIFIED INFORMATION
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The Records referred to above in Rule 3 of PMLA Rules to contain the following information:
i. the nature of the transactions;
ii. the amount of the transaction and the currency in which it was denominated;
iii. the date on which the transaction was conducted; and
iv. the parties to the transaction.
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13. MAINTENANCE AND PRESERVATION OF RECORDS
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Section 12 of PMLA requires every housing finance company to maintain records as
under:
(a) records of all transactions referred to in clause (a) of Sub-section (1) of
section 12 read with Rule 3 of the PML Rules is required to be maintained for a
period of ten years from the date of transactions between the clients and the housing
finance company.
(b) records of the identity of all clients of the housing finance company is required
to be maintained for a period of ten years from the date of cessation of transactions
between the clients and the housing finance company.
The Company will take appropriate steps to evolve a system for proper maintenance
and preservation of information in a manner (in hard and soft copies) that allows
data to be retrieved easily and quickly whenever required or when requested by the
competent authorities.
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14. REPORTING TO FINANCIAL INTELLIGENCE UNIT INDIA
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The Principal Officer will report information relating to cash and suspicious transactions
if detected to the Director, Financial Intelligence Unit India (FIUIND) as advised
in terms of the PMLA rules, in the prescribed formats as designed and circulated
by NHB at the following address:
Director, FIU - IND,
Financial Intelligence Unit India,
6th Floor, Hotel Samrat,
Chanakyapuri
New Delhi 110021
The employees of the Company shall maintain strict confidentiality of the fact of
furnishing/ reporting details of suspicious transactions.
Note: FIU-IND does not accept NIL Cash/Suspicious Reports if no such transaction
occurred during a particular period.
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15. GENERAL
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The Company will ensure that the provisions of PML Act, 2002, Rules framed thereunder
and the Foreign Contribution and Regulation Act, 1976, wherever applicable, are
adhered to strictly.
Where the Company is unable to apply appropriate KYC measures due to nonfurnishing
of information and /or non-cooperation by the customer, the Company may consider
closing the account or terminating the business relationship after issuing due notice
to the customer explaining the reasons for taking such a decision. Such decisions
will be taken by GM or above level senior person.
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Annexure I
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CUSTOMER IDENTIFICATION REQUIREMENT
(INDICATIVE GUIDLINES)
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Trust/Nominee or Fiduciary Accounts
1. There exists the possibility that trust/nominee or fiduciary accounts can
be used to circumvent the customer identification procedures. HFCs should determine
whether the customer is acting on behalf of another person as trustee/nominee or
any other intermediary. If so, HFCs may insist on receipt of satisfactory evidence
of the identity of the intermediaries and of the persons on whose behalf they are
acting, as also obtain details of the nature of the trust or other arrangements
in place. While opening an account for a trust, HFCs should take reasonable precautions
to verify the identity of the trustees and the settlors of trust (including any
person settling assets into the trust), grantors, protectors, beneficiaries and
signatories. Beneficiaries should be identified when they are defined. In the case
of a 'foundation', steps should be taken to verify the founder managers/directors
and the beneficiaries, if defined. If the HFC decides to accept such accounts in
terms of the Customer Acceptance Policy, the HFC should take reasonable measures
to identify the beneficial owner(s) and verify his/her/their identity in a manner
so that it is satisfied that it knows who the beneficial owner(s) is/are.
Accounts of companies and firms
2. HFCs need to be vigilant against business entities being used by individuals
as a ‘front’ for maintaining accounts with HFCs. HFC should verify the legal status
of the legal person/ entity through proper and relevant documents. HFC should verify
that any person purporting to act on behalf of the legal/ juridical person/entity
is so authorized and identify and verify the identity of that person. HFCs should
examine the control structure of the entity, determine the source of funds and identify
the natural persons who have a controlling interest and who comprise the management.
These requirements may be moderated according to the risk perception, e.g. in the
case of a public company it will not be necessary to identify all the shareholders.
Client accounts opened by professional intermediaries
3. When the HFC has knowledge or reason to believe that the client account opened
by a professional intermediary is on behalf of a single client, that client must
be identified. HFCs may hold 'pooled' accounts managed by professional intermediaries
on behalf of entities like mutual funds, pension funds or other types of funds.
Where the HFCs rely on the 'customer due diligence' (CDD) done by an intermediary,
they should satisfy themselves that the intermediary is regulated and supervised
and has adequate systems in place to comply with the KYC requirements. It should
be understood that the ultimate responsibility for knowing the customer lies with
the HFC.
Accounts of Politically Exposed Persons (PEPs) resident outside India
4. Politically exposed persons are individuals who are or have been entrusted with
prominent public functions in a foreign country, e.g. Heads of States or of Governments,
senior politicians, senior government/judicial/military officers, senior executives
of state-owned corporations, important political party officials, etc. HFCs should
gather sufficient information on any person/customer of this category intending
to establish a relationship and check all the information available on the person
in the public domain. HFCs should verify the identity of the person and seek information
about the sources of funds before accepting the PEP as a customer. The decision
to open an account for PEP should be taken at a senior level which should be clearly
spelt out in Customer Acceptance Policy. HFCs should also subject such accounts
to enhanced monitoring on an ongoing basis. The above norms may also be applied
to the accounts of the family members or close relatives of PEPs.
Accounts of non-face-to-face customers
5. In the case of non-face-to-face customers, apart from applying the usual customer
identification procedures, there must be specific and adequate procedures to mitigate
the higher risk involved. Certification of all the documents presented may be insisted
upon and, if necessary, additional documents may be called for. In the case of cross-border
customers, there is the additional difficulty of matching the customer with the
documentation and the HFC may have to rely on third party certification/introduction.
In such cases, it must be ensured that the third party is a regulated and supervised
entity and has adequate KYC systems in place
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Annexure II
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CUSTOMER IDENTIFICATION PROCEDURE
FEATURES TO BE VERIFIED AND DOCUMENTS THAT MAY BE OBTAINED FROM CUSTOMERS
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Features
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Documents
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Individuals
Legal name and any other names used
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(i) Passport
(ii) PAN card
(iii) Voter's Identity Card
(iv) Driving license
(v)Identity card (subject to the HFC's satisfaction)
(vi) Letter from a recognized public authority or public servant verifying the identity
and residence of the customer to the satisfaction of company.
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Correct permanent address
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(i)Telephone bill
(ii)Account statement
(iii) Letter from any recognized public authority
(iv) Electricity bill
(v) Ration card
(vi)Letter from employer (subject to satisfaction of the company)
(any one document which provides customer information to the satisfaction of the
Company will suffice ) One recent passport size photograph except in case of transactions
referred to in Rule 9(1)(b) of the PML Rules
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Companies
- Name of the company
- Principal place of business
- Mailing address of the company
- Telephone/Fax Number
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(i)Certificate of incorporation and Memorandum & Articles of Association
(ii) Resolution of the Board of Directors to open an account and identification
of those who have authority to operate the account
(iii) Power of Attorney granted to its managers, officers or employees to transact
business on its behalf
(iv) an officially valid document in respect of managers, officers or employees
holding an attorney to transact on its behalf
(v) Copy of PAN allotment letter
(vi) Copy of the telephone bill
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Partnership Firms
-Legal name
-Address
-Names of all partners and their addresses
-Telephone numbers of the firm and partners
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(i) Registration certificate, if registered
(ii) Partnership deed
(iii) Power of Attorney granted to a partner or an employee of the firm to transact
business on its behalf
(iv) Any officially valid document identifying the partners and the persons holding
the Power of Attorney and their addresses
(v) Telephone bill in the name of firm/partners
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Trusts & Foundations
- Names of trustees, settlers, beneficiaries and signatories
-Names and addresses of the founder, the managers/directors and the beneficiaries
-Telephone/fax numbers
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(i)Certificate of registration, if registered (ii)Trust Deed
(iii)Power of Attorney granted to transact business on its behalf
(iv) Any officially valid document to identify the trustees, settlers, beneficiaries
and those holding Power of Attorney, founders/ managers/ directors and their addresses
(v) Resolution of the managing body of the foundation/association
(vi) Telephone bill
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Unincorporated association or a body of individuals
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(i) Resolution of the managing body of such association or body of individuals (ii)
power of attorney granted to him to transact on its behalf
(iii) an officially valid document in respect of the person holding an attorney
to transact on its behalf
(iv) and such other information as may be required by Company to collectively establish
the legal existence of such as association or body of individuals.
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*‘Officially valid document’ is defined to mean the passport, the
driving license, the permanent account number card, the Voter’s Identity Card issued
by the Election Commission of India or any other document as may be required by
the Company .
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Annexure III A
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SUSPICIOUS TRANSACTIONS PERTAINING TO HOUSING LOANS
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(ILLUSTRATIVE LIST)
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a) Customer is reluctant to provide information, data, documents;
b) Submission of false documents, data, purpose of loan, details of accounts;
c) Refuses to furnish details of source of funds by which initial contribution is
made, sources of funds is doubtful etc;
d) Reluctant to meet in person, represents through a third party/Power of Attorney
holder without sufficient reasons;
e) Approaches a branch/office of a HFC, which is away from the customer’s residential
or business address provided in the loan application, when there is HFC branch/office
nearer to the given address;
f) Unable to explain or satisfy the numerous transfers in the statement of account/
multiple accounts;
g) Initial contribution made through unrelated third party accounts without proper
justification;
h) Availing a top-up loan and/or equity loan, without proper justification of the
end use of the loan amount;
i) Suggesting dubious means for the sanction of loan;
j) Where transactions do not make economic sense;
k) There are reasonable doubts over the real beneficiary of the loan and the flat
to be purchased;
l) Encashment of loan amount by opening a fictitious bank account;
m) Applying for a loan knowing fully well that the property/dwelling unit to be
financed has been funded earlier and that the same is outstanding;
n) Sale consideration stated in the agreement for sale is abnormally higher/lower
than what is prevailing in the area of purchase;
o) Multiple funding of the same property/dwelling unit;
p) Request for payment made in favour of a third party who has no relation to the
transaction;
q) Usage of loan amount by the customer in connivance with the vendor/builder/developer/broker/agent
etc. and using the same for a purpose other than what has been stipulated.
r) Multiple funding / financing involving NGO / Charitable Organisation / Small
/ Medium Establishments (SMEs) / Self Help Groups (SHGs) / Micro Finance Groups
(MFGs)
s) Frequent requests for change of address;
t) Overpayment of installments with a request to refund the overpaid amount
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Annexure III B
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II. SUSPICIOUS TRANSACTIONS PERTAINING TO BUILDER/PROJECT LOANS
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(ILLUSTRATIVE LIST)
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a) Builder approaching the HFC for a small loan compared to the total cost of the
project;
b) Builder is unable to explain the sources of funding for the project;
c) Approvals/sanctions from various authorities are proved to be fake;
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