Version Control Information: “KNOW YOUR CUSTOMER (KYC) & ANTI MONEY LAUNDERING (AML) POLICY INCLUDING PROCEDURE”

1. introduction:
   • This KYC & AML policy is based on RBI/DOR/2025-26/291 DOR.AML.REC.No. 210/ 14.01.006/2025-26 November 28, 2025 Reserve Bank of India (Urban Co-operative Banks – Know Your Customer) Directions, 2025 issued by RBI.
   • RBI has been issuing guidelines with regard to Know Your Customer (KYC) standards to be followed by banks and measures to be taken in regard to Anti Money Laundering (AML) and Combating Financial Terrorism (CFT).
   • Obligations cast on banks under the Prevention of Money Laundering Act (PMLA), 2002
   • KYC norms, Anti-Money Laundering (AML) / Combating of Financing of Terrorism (CFT) under PMLA, 2002
   • Recommendations made by the Financial Action Task Force (FATF) on AML standards and CFT.
   • Paper issued on Customer Due Diligence (CDD) for banks by the Basel Committee on Banking Supervision.
   • Banks are required to put in place a comprehensive policy framework, duly approved by the Board of Directors, in this regard. This policy document has been prepared in line with the RBI guidelines and incorporates the Bank’s approach to KYC, AML and CFT issues.
2. OBJECTIVE, SCOPE AND APPLICATION OF THE POLICY:
   • The primary objective of the Policy is to prevent the Bank from being used, intentionally or unintentionally, by criminal elements for money laundering or terrorist financing activities. Purposes proposed to be served by the Policy are:
   • To prevent criminal elements from using the Bank for money laundering activities.
   • To enable the Bank to know/understand the customers and their financial dealings better this, in turn, would help the Bank to manage risks prudently.
   • To put in place appropriate controls for detection and reporting of suspicious activities in accordance with applicable laws/laid down procedures.
   • To comply with applicable laws and regulatory guidelines.
   • To ensure that the concerned staff are adequately trained in KYC/AML/CFT procedures.

This Policy is applicable to our H.O.branch and is to be read in conjunction with related operational guidelines issued from time to time.

3. DEFINITION OF MONEY LAUNDERING:
   • Section 3 of PMLA has defined the “offence of money laundering” as under:
   • “Whosoever directly or indirectly attempts to indulge or knowingly assists or knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime and projecting it as untainted property shall be guilty of offence of money laundering”
   • Money launderers use the banking for cleansing ‘dirty money’ obtained from criminal activities with the objective of hiding/disguising its source. The process of money laundering involves creating a web of financial transactions so as to hide the origin and true nature of these funds.
   • For the purpose of this document, the term money laundering would also cover financial transactions where the end use of funds goes for terrorist financing irrespective of the source of the funds.

4. OBLIGATIONS UNDER PREVENTION OF MONEY LAUNDERING (PML) ACT 2002:
   • Section 12 of PMLA places certain obligations on every banking company, financial institution and intermediary, which include:
   • Maintaining a record of prescribed transactions.
   • Furnishing information of prescribed transactions to the specified authority.
   • Verifying and maintaining records of the identity of its clients.
   • Preserving records in respect of (i), (ii) and (iii) above for a period of ten years from the date of cessation of transactions with the clients.
   • These requirements have come into effect from the 1^st July, 2005 i.e. the date on which PMLA was notified by the Government of India and rules framed there under.

5. RISK PERCEPTION:
   • Non compliance with KYC standards, use of the portals of the Bank for Money Laundering/financing terrorism activities expose the Bank to various risks, such as Operational Risk, Reputation Risk, Compliance Risk and Legal Risk etc.

   [i] Low Risk Perception :

   Individuals (other than High Net Worth) and entities whose identities and sources of wealth can be easily identified will be categorized as low risk, such as, salaried employees, accounts with small balances and low turn over, Govt. departments, statutory bodies.  In such case only identity and location will be verified.

   [ii] Medium Risk Perception:

   Customers that are likely to pose a higher than average risk to the bank will 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 clients’ profile etc., Such as Small Businessmen and Borrowers like Retail Traders.

   [iii] High Risk Perception :

   Bank will apply enhanced due diligence measures for higher risk customers especially those for whom the sources of funds are not clear, such as, high Net Worth individuals, Trusts, Charities, NGOs and organizations receiving donation, companies having close family shareholding or beneficial ownership, firms with sleeping partners, Politically Exposed Persons, Non-face-to-face customers, those with dubious reputation as per public information available.

6. DEFINITION OF CUSTOMER:
   • For the purpose of KYC policy, a ‘Customer’ is defined as:
   • A person or entity that maintains an account and/or has a business relationship with the bank;
   • One whose behalf the account is maintained (i.e. the beneficial owner);
   • Beneficiaries of transactions conducted by professional intermediaries, such as Stock Brokers, Chartered Accountants, Solicitors etc. as permitted under the law, and
   • Any person or entity connected with a financial transaction which can pose significant reputational or other risks to the bank, say, a wire transfer or issue of a high value demand draft as a single transaction.

7. KEY ELEMENTS OF THE KYC POLICY:
   • The KYC Policy of the Bank has the following key elements:
   • Customer Acceptance Policy
   • Customer Identification Procedures
   • Monitoring of Transactions and
   • Risk Management

While the Policy directions are given in this document, the detailed operating guidelines are being issued separately which should be referred to for effective implementation of the Policy.

8. CUSTOMER ACCPTANCE POLICY:

9. CUSTOMER IDENTIFICATION PROCEDURES (CIP):
   • Bank’s Customer Acceptance Policy (CAP) lays down the criteria for acceptance of customers. The guidelines in respect of the customer relationship in the Bank broadly are:
   • No account is to be opened in anonymous or fictitious/benami name(s)/entity (ies). ID Proof should be taken. Photo of the customer should scan through Web Camera.
   • Accept customers only after verifying their identity, as laid down in Customer Identification Procedures.
   • Classify customers into various risk categories and, based on risk perception, apply the acceptance criteria for each category of customers. Parameters of risk perception are clearly defined in terms of the nature of business activity, location of customer and his clients, mode of payments, volume of turnover, social and financial status etc. to enable categorization of customers into low, medium and high risk (banks may choose any suitable nomenclature viz. level I, level II and level III). Customers requiring very high level of monitoring, e.g. Politically Exposed Persons (PEPs) may, if considered necessary, be categorized even higher:
   • A profile of each customer will be prepared based on risk categorization. The customer profile may contain information relating to 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 risk perceived by the bank. However, while preparing customer, which is relevant to the risk category and is not intrusive. The customer profile is a confidential document and details contained therein will not be divulged for cross selling or any other purposes.
   • Documentation requirements and other information to be collected, as per PMLA and RBI guidelines/instructions, to be complied with
   • Identity of a new customer to be checked so as to ensure that it does not match with any person with known criminal background or banned entities such as individual terrorists or terrorist organizations etc.
   • The decision to open an account for Politically Exposed Person (PEP) will be taken at a senior level.
   • Not to open an account or close an existing account, where identity of the account holder cannot be verified and/or documents/information required could not be obtained /confirmed due to non-cooperation of the customer or non reliability of the data/information furnished to the bank. It is, however, necessary to have suitable built in safeguards to avoid harassment of the customer. For example, decision by bank to close an account should be taken at a reasonably high level after giving due notice to the customer explaining the reasons for such a decision;
   • 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 practice of banking as there could be occasions when an account is operated by a mandate holder or where an account is opened by an intermediary in fiduciary capacity.
   • Implementation of CAP will not become too restrictive and result in denial of banking services to general public, especially those who are financially or socially disadvantaged.

• Customer identification requires identifying the customer and verifying his/her identity by using reliable, independent source documents, data or information. Thus, the first requirement of Customer Identification Procedure (CIP) is to be satisfied that a prospective customer is actually who he/she claims to be. The second requirement of CIP is to ensure that sufficient information is obtained on the identity and the purpose of the intended nature of the banking relationship. This would enable risk profiling of the customer and also to determine the expected or predictable pattern of transactions. Identification data, as under, would be required to be obtained in respect of different classes of customers:
• For customers that are natural persons:
• Address/location details
• Recent Photograph
• For customers that are legal persons:
• Legal status of the legal person/entity through proper and relevant documents.
• Verification that any person purporting to act on behalf of the legal person/entity is so authorized and identity of that person is established and verified.
• Understand the ownership and control structure of the customer and determine who are the natural persons those ultimately control the legal person.

• Wherever applicable, information on the nature of business activity, location, mode of payments, volume of turnover, social and financial status etc. will be collected for completing the profile of the customer.
• Customer will be classified into three risk categories namely High, Medium and Low based on the risk perception. The risk categorization will be reviewed periodically.
• The Customer Identification Procedures are to be carried out at the following stages:
• While establishing a banking relationship:
• When the bank feels it is necessary to obtain additional information from the existing customers based on the conduct or behavior of the account.
• Customer identification data (including photograph/s) should be periodically updated after the account is opened. Such verification should be done at least once in five years in case of low risk category customers and not less than once in two years in case of high and medium risk customers.
• Customer Identification will also be carried out in respect of non-account holders approaching bank for high value one-off transaction as well as any person or entity connected with a financial transactions which can pose significant reputational or other risks to the Bank.
• Small Deposit Accounts (BSBDA Account) : With a view to ensuring financial inclusion such that persons, especially those belonging to low income group both in urban and rural areas, who are not able to produce such documents required by the Bank to satisfy about their identity and address, are not denied banking services, branch may open small deposit accounts, for natural persons only, with relaxed KYC standards, as detailed in the operating guidelines. Persons desirous of opening such accounts can keep aggregate balances not exceeding Rs. 50,000/- (Rupees fifty thousand only) in all their accounts taken together and the total credit, again in all accounts taken together, should not exceed Rs. 1,00,000/- (Rupees one lakh only ) in a year.
• If at any point, the balances in all his/her accounts with the Bank (taken together) exceeds Rs.50, 000/- (Rupees fifty thousand only) or total credit in all accounts taken together exceeds Rs. 1,00,000/- (Rupees one lakh only) in a year, no further transactions will be permitted until full KYC procedure is completed. Bank would notify the customers when the balances reach Rs. 40,000/- (Rupees forty thousand only) or total credit in a year reaches Rs. 80,000/- (Rupees eighty thousand only) so that appropriate documents, for complying with full KYC requirements are submitted well in time to avoid blocking of transactions in the account.
• With a view to ensuring that existing small account holders are not inconvenienced and the KYC procedures is completed in time, it has been decided that application of KYC procedure may be limited to the existing accounts where the credit or debit summation for the financial year ended March 31, 2015 is more than lakh.

10. MONITORING AND REPORTING OF TRANSACTIONS (PREVENTION OF MONEY LAUNDERING ACT, 2002 AND RULES 2005 THEREUNDER):

• Monitoring of transactions will be conducted taking into consideration the risk profile of the account. Special attentions will be paid to all complex, unusually large transactions and all unusual patterns, which have no apparent economic or visible lawful purpose. Transactions that involve large amounts of cash inconsistent with the normal and expected activity of the customer will be subjected to detailed scrutiny.
• System supported monitoring transactions will be done by the AML team under the Principal Officer, based on alerts thrown up by the in house developed software by the Bank and on the basis of feedback/inputs from the branch. Simultaneously, however, branch will maintain oversight over the transactions with a view to identifying suspicious transactions and bringing them to the notice of the Principal Officer.
• After due diligence at the appropriate level in the Bank, transactions of suspicious nature and/or any other type of transaction notified under PMLA (Suspicious Transaction Report- STR) will be reported within seven days by the Principal Officer to Financial Intelligence Unit – India, The Director (FIU-IND), New Delhi the appropriate authority. It is to be reported on monthly basis. A record of such transactions will be preserved and maintained for the period as prescribed in PMLA.
• Transactions in the account will also be monitored with a view to timely submitting, the Cash Transaction Report (CTR) in respect of cash transactions of Rs.10,00,000/- (Rupees ten lakh only) and above undertaken in an account either singly or in an integrally connected manner. The Cash Transaction Report (CTR) for each month will be submitted to The Director, FIU-IND, New Delhi by 15^th of the succeeding month.
• Transactions (Cash, Clearing & Transfer) in the accounts of Non-Profit Organisations will be monitored with a view to timely submitting and reporting NTRs to FIU-IND, New Delhi for Receipt of Rs.10 lakh and above (Cash, Clearing & Transfer) in Non-Profit Organisations by the Principal Officer to Financial Intelligence Unit – India, The Director (FIU-IND), New Delhi the appropriate authority by 15^th of the succeeding month. It is to be reported on monthly basis. If it is NIL in entire month then also NIL is to be reported. A record of such transactions will be preserved and maintained for the period as prescribed in PMLA.
• All cash transactions, where forged or counterfeit Indian currency notes have been used, shall also be reported immediately by the branch, by way of Counterfeit Currency Reports (CCRs) to the Principal Officer, through proper channel, for onward reporting to The Director, FIU-IND, New Delhi. It is to be reported on monthly basis. A record of such transactions will be preserved and maintained for the period as prescribed in PMLA.
• The Bank will report NTR on monthly basis to The Director, FIU-IND, New Delhi
• Bank will put in place a system of periodical review of risk categorization of accounts and the need for applying enhanced due diligence measures. Such review of risk categorization of customers will be carried out at a periodicity of not less than once in six months.

11. CLOSURE OF ACCOUNTS:

• Where the appropriate KYC measures could not be applied due to non-furnishing of information and/or non-cooperation by customer, the account can be considered for closure or terminating the banking/business relationship. Before exercising this option, all efforts will be made to obtain the desire information and, in the event of failure, due notice, will be given to the customer explaining the reasons for taking such a decision. In all cases, the controlling authority at the branch / Head Office shall be the competent authority to permit closure of such accounts.

12. RISK MANAGEMENT:

• While the Bank has a risk-based approach to the implementation of this Policy, it is necessary to establish appropriate framework covering proper management oversight, system, controls and other related matters.
• Bank’s Internal Audit of compliance with KYC/AML Policy will provide an independent evaluation of the same including legal and regulatory requirements. Concurrent/Internal Auditors shall specifically check and verify the application of KYC/AML procedures at the branch and comment on the lapses observed in this regard. The compliance in this regard will be placed before the Audit Committee of the Board at quarterly intervals.
• The Principal Officer designated by the Bank in this regard will have overall responsibility for maintaining oversight and coordinating with various functionaries in the implementation of KYC/AML/CFT policy. However, primary responsibility of ensuring implementation of KYC/AML/CFT Policy and related guidelines will be vested with the Branch. Suitable checks and balances in this regard will be put in place at the time of introducing new product/procedures as also at the time of review of existing products/procedures for overall risk and compliance management. For this purpose, bank will designate an official as Money Laundering Reporting Officer (MLRO) who would ensure proper implementation and reporting, as per provisions of this Policy, to the Principal Officer.

13. INTRODUCTION OF NEW TECHNOLOGIES:

• The bank will pay special attention to the money laundering threats arising from new or developing technologies and take necessary steps to prevent its misuse for money laundering activities. Bank will ensure that appropriate KYC procedures are duly applied to the customers using new technology driven products.

14. CDD Procedure and sharing KYC information with Central KYC Records Registry (CKYCR):

“Central KYC Records Registry” (CKYCR) means an entity defined under Rule 2(1) (aa) of the Rules, to receive, store, safeguard and retrieve the KYC records in digital form of a customer.

• The bank shall capture the KYC information for sharing with the CKYCR in the manner mentioned in the Rules, as required by the revised KYC templates prepared for ‘individuals’ and ‘Legal Entities’ as the case may be. Government of India has authorized the Central Registry of Securitization Asset Reconstruction and Security Interest of India (CERSAI), to act as, and to perform the functions of the CKYCR vide Gazette Notification No. S.O. 3183(E) dated November 26, 2015.

15. EMPLOYEE TRAINING:

• All employee training programs will have a module on KYC standard/AML/CFT measures so that the staffs are adequately trained in KYC/AML/CFT procedures. The training will be done on need basis.

16. RECRUITMENT/HIRING EMPLOYEES:

• KYC norms/AML standards/CFT measures have been prescribed to ensure that criminals are not allowed to misuse channels of the Bank. Bank will put in place necessary and adequate screening mechanism as an integral part of its recruitment/hiring process of personnel.

17. CUSTOMER EDUCATION:

• The Bank recognizes the need to spread awareness on KYC, Anti Money Laundering measures and the rationale behind them amongst the customers and shall take suitable steps for the purpose. The front desk staff has trained to handle such situation while dealing with customers.

18. KYC FOR THE EXISTING ACCOUNTS:

• While the KYC guidelines will apply to all new customers, the same would be applied to the existing customers on the basis of materiality and risk. However, transactions in existing accounts would be continuously monitored for any unusual pattern in the operation of the accounts. On the basis of materiality and risk the existing accounts of companies, firms, trusts, charities, religious organizations and other institutions are subjected to minimum KYC standards which would establish the identity of the natural/legal person and those of the ‘beneficial owners’. Similarly, the Bank will also ensure that term/ recurring deposit accounts are subject to revised KYC procedures at the time of renewal of the deposits on the basis of materiality and risk.

19. MAINTENANCE AND PRESERVATION OF RECORD:

• The bank will maintain the following information in the respect of transactions referred to in Rule 3:
• The nature of the transactions:
• The amount of the transaction and the currency in which it was denominated:
• The date on which the transaction was conducted: and
• The parties to the transaction
• The bank will take appropriate steps to evolve a system for proper maintenance and preservation of account information in a manner that allows data to be retrieved easily and quickly whenever required or when requested by the competent authorities. Further, bank will maintain for at least ten years from the date of cessations of transaction between the bank and the client, all necessary records of transactions, both domestic or international, which will permit reconstruction of individual transactions (including the amounts and types of currency involved if any) so as to provide, if necessary, evidence for prosecution of persons involved in criminal activity.
• The bank will pay special attention to all complex, unusual large transactions and all unusual patterns of transactions, which have no apparent economic or visible lawful purpose. The background including all documents/office records / memorandums pertaining to such transactions and purpose thereof will, as far as possible, be examined and the findings at branch as well as Principal Officer will be properly recorded. Such records and related documents will be made available to help auditors in their day-to-day work relating to scrutiny of transactions and also to Reserve Bank/other relevant authorities. These records are required to be preserved for ten years as is required under PMLA, 2002.

20. PRINCIPAL OFFICER:

• The Board has nominated the Principal Officer (Compliance) from time to time for KYC/AML/CFT matters who shall be responsible for implementation of and compliance with this policy. The followings are illustrative duties of him but not limited to the same:
• Overall monitoring of the implementation of the Bank’s KYC/AML/CFT policy.
• Monitoring and reporting of transactions, and sharing of information, as required under the law.
• Interaction with branch for ensuring full compliance with the Policy.
• Timely submission of Cash Transaction Reports (CTRs), Suspicious Transaction Reports (STRs), NTRs for Non-Profit Organisation and Counterfeit Currency Reports (CCRs) to, The Director, FIU-IND, New Delhi.
• Maintaining liaison with the law enforcement agencies, banks and other institutions, which are involved in fight against money laundering and combating financing of terrorism
• Ensuring submission of periodical reports to the Top Management/Board.

21. GENERAL:

• Information collected from the customers for KYC compliance would be relevant to the perceived risk, not intrusive and would be treated as confidential. The same is not to be used/divulged for cross selling or any other such purpose.
• Any remittance of funds by way of demand drafts, mail/telegraphic transfer or any other mode like RTGS/NEFT and issue of travelers’ cheques for value Rs.50,000 and above is effected only by debit to customer’s account or against cheques/drafts and not against cash. Interbank transfers and settlements where both the originator and beneficiary are banks or financial institutions would be exempted from the said requirements.
• Provisions of Foreign Contribution (Regulation) Act, 1976, as amended from time to time, wherever applicable, will be strictly adhered to.

22. KYC PROCEDURE:

• BASIC AND GENERAL
• Under the guidelines and norms of the RBI’s Prevention of Money Laundering Act, 2002, every bank has to adhere and fulfill the norms and rules regarding the Know Your Customer (KYC) policies and its guidelines.
• The above KYC norms are applicable for all the customers of the bank viz., Loan Account holders, guarantors, demat account holders, locker holders, deposit account holders etc.
• For the purpose of the same, the major guidelines are divided into four major steps :
• Customer Acceptances
• Customer Identification
• Risk of transactions
• Monitoring of transactions
• CUSTOMER ACCEPTANCES:
• The bank should not open the account for those customer(s) :
  • whose identity cannot be proved or;
  • such customers who cannot provide sufficient details as required to fulfill for the KYC compliances or;
  • Such customers who are directly or indirectly associated with any association or group which is involved in the activities of terrorism, drugs dealing, bank fraud etc.
• For the detailed procedure, the staff and the officers should adhere to and follow the guidelines / circulars issued by RBI and circulars / policies of the H.O.
• However, care must be taken that the KYC compliance procedure should not be so strictly followed that the genuine and need based customers, particularly socially and economically backward class people suffer because of it.
• CUSTOMER IDENTIFICATION:
• For the purpose of customer identification, it is necessary to obtain and analyze, all the details regarding the identification of the customer before entering into any transaction with the customer.
• For adherence to the KYC norms, the guidelines / circulars issued by RBI and circulars / policies of the H.O. should be followed from time to time and every time.
• Such procedures include identification of the individual accounts, its proof for identification and address, N.R.E. accounts, minor accounts, accounts of company or firm or association of persons or body of individuals or HUF or clubs or trusts etc.
• RISK OF TRANSACTIONS:
• For the purpose of dealing with the customers and risk associated with the business transaction with the customers and its analysis, all accounts should be classified into high risk, medium risk and low risk accounts.
• Extreme care should be taken that such above classification should in no way affect the customers and that the customer should not be made aware of this classification.
• Thereafter, the bank should adhere to the procedures and norms related to these accounts based on the classification.
• For the purpose of such classification and procedures to be followed thereafter, the guidelines / circulars issued by RBI and circulars / policies of the H.O. should be followed from time to time and every time.
• MONITORING OF TRANSACTIONS:
• Even after the opening of the accounts, the KYC procedures do not end. A strict careful watch must be kept on the transactions in the accounts. Following are few of them:
  • Complicated transactions of very huge amount.
  • Any abnormal transactions.
  • Transactions involving very high amount as compared to other normal transactions of the same customer.
• For the purpose of such monitoring of transactions, the guidelines / circulars issued by RBI and circulars / policies of the H.O. should be followed from time to time and every time.
• OTHER POINTS
• The bank has, from time to time, issued various circulars regarding KYC compliance and the procedure to be followed.
• The following are some of the general points to be taken care of:
• Doubtful activities / transactions such as huge amount of cash deposit or withdrawal, frequent internal transfers between two or more accounts, transactions other than the business transaction in such account, oppose by customers for providing proper details/information, incomplete details, etc.
• Doubtful transactions involving transfers of funds etc. such as deposits / withdrawals from any country outside India, deposits of huge amounts from different places through telegraphic transfer or draft etc.

23. REVIEW OF THE POLICY

As a policy matter, we will review the policy every year and revise suitably as and when fresh instructions / guidelines are issued by RBI.

For, THE UDAIPUR MAHILA URBAN CO-OPERATIVE BANK LTD.

CEO CHAIRMAN