PREAMBLE:

The Reserve Bank of India (RBI) has issued comprehensive ‘Know Your Customer’ (KYC) Guidelines to all Non-Banking Financial Companies (NBFCs) in the context of the recommendations made by the Financial Action Task Force (FATF) and Anti-money Laundering (AML) Standards and Combating Financing of Terrorism (CFT) Policies as these being used as the International Benchmark for framing the stated policies, by the regulatory authorities. In view of the same, Vadakkemuriyil Finance Company (India) Limited (“Company”)/(VM Finance) has adopted the said KYC guidelines with suitable modifications depending on the activity undertaken by it. The Company has ensured that a proper policy framework on KYC and AML measures are formulated in line with the prescribed RBI guidelines and duly approved by its ‘Loan & Risk Committee’ (“Committee”).

OBJECTIVES, SCOPE AND APPLICATION OF THE POLICY:

The objective of KYC guidelines is to prevent the Company from being used intentionally or unintentionally, by criminal elements for money laundering activities or terrorist financing activities. KYC procedures shall also enable the Company to know and understand its Customers and its financial dealings better which in turn will help it to manage the risks prudently.

Thus, the KYC policy has been framed by the Company for the following purposes:

• To prevent criminal elements from using Company for money laundering activities;
• To enable Company to know and understand its Customers and their financial dealings better which, in turn, would help the Company to manage risks prudently;
• To put in place appropriate controls for the 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 KYC Policy is applicable to all branches/offices of the Company and is to be read in conjunction with related operational guidelines issued from time to time.

The Company is framing hereunder its KYC Policy, incorporating the following four key elements:

1. Customer Acceptance Policy (CAP)
2. Customer Identification Procedures
3. Monitoring of Transactions
4. Risk Management

Customer Acceptance Policy (CAP)

VM Finance ‘Customer Acceptance Policy’ lays down explicit criteria for acceptance of customers, ensures the following aspects of the customer relationship:

1. No account is opened in anonymous or fictitious/benami name(s);
2. Customers are all assessed for location of residence, business if any including type of clients and also the mode of transactions and payments.
3. Volume of turnover, social and financial status, etc. to enable categorisation of customers into low, medium and high risk (these customers will require very high level of monitoring).
4. Documentation requirements and other information collected in respect of different categories of customers depending on perceived risk and keeping in mind the requirements of PML Act, 2002 and guidelines issued from time to time.
5. VM Finance will not open an account where it is unable to apply appropriate customer due diligence measures, i.e. where VM Finance is unable to verify the identity and /or obtain documents required as per the risk categorisation due to non-co-operation of the customer or non-reliability of the data/information furnished.
6. Checks against any notified list of the RBI, before accepting a customer, 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 organisations, etc.
7. VM Finance will prepare a profile for each new customer, which contains 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 VM Finance. However, while preparing the customer profile, VM Finance will seek only such information from the customer which is relevant and is not intrusive. The customer profile will be a confidential document and details contained therein will not be divulged for cross selling or any other purposes.
8. It is important to bear in mind that the adoption of Customer Acceptance Policy and its implementation will not result in denial of VM Finance services to the general public.
9. Customer Acceptance Policy requires all customers to fill in KYC Form to capture the relevant data for all categories of customers and provide supporting documents as a part of customer identification process/KYC.

Customer Identification Procedure

1. The policy clearly spells out the Customer Identification Procedure to be carried out at different stages i.e. while establishing a business relationship; carrying out a financial transaction or when the Company has a doubt about the authenticity/veracity or the adequacy of the previously obtained customer identification data. Customer identification means identifying the customer and verifying the identity by using reliable, independent source documents, data or information. VM Finance will obtain sufficient information necessary to establish, to its satisfaction, the identity of each new customer, whether regular or occasional and the purpose of the intended nature of business relationship. Being satisfied means that the Company must be able to satisfy the competent authorities that due diligence was observed based on the risk profile of the customer in compliance with the extant guidelines in place.Such risk based approach is considered necessary to avoid disproportionate cost to Company and a burdensome regime for the customers.
2. Besides risk perception, the nature of information/ documents required would also depend on the type of customer (individual).
3. For customers that are natural persons, the Company will obtain sufficient identification data to verify the identity of the customer, his address/location, and also his recent photograph.
4. VM Finance shall accept any one or more of the following original documents to establish the identity of the client i.e. legal name or any other names used. The original documents shall be presented by the prospective clients along with a photocopy for identification/Verification.

• Passport
• PAN card
• Voter’s Identity Card
• Driving license
• Aadhar Monitoring of Transactions

1. Ongoing monitoring is an essential element of effective KYC procedures. VM Finance can effectively control and reduce risk by having an understanding of the normal and reasonable activity of the customers. However, the extent of monitoring will depend on the risk sensitivity of the account. Since VM Finance being a Non Deposit Accepting NBFC will not have any deposit accounts, this situation will hardly arise, but VM Finance will in any case pay special attention to all complex, unusually large transactions and all unusual patterns which have no apparent economic or visible lawful purpose, or transactions that involve large amounts of cash inconsistent with the normal and expected activity of the customer.
2. VM Finance will put in place a system of periodical review of risk categorisation of accounts and the need for applying enhanced due diligence measures. VM Finance will ensure that a record of transactions in the accounts is preserved and maintained as required in terms of section 12 of the PML Act, 2002 (and the Amended Act, 2009). It will also ensure that transactions of suspicious nature and/or any other type of transaction notified under section 12 of the PML Act, 2002 (and the Amended Act, 2009), is reported to the appropriate law enforcement authority.

Risk Management

1. The Board of Directors of VM Finance has ensured that an effective KYC program is in place and has established appropriate procedures and is overseeing its effective implementation. The program covers proper management oversight, systems and controls, segregation of duties, training and other related matters. Responsibility has been explicitly allocated to ensure that VM Finance‟s policies and procedures are implemented effectively.
2. There will be risk profile prepared for each customer and enhanced due diligence measures will be applied on higher risk customers. VM Finance should take steps to identify and assess their ML/FT risk for customers, countries and geographical areas as also for products/services/ transactions/delivery channels as prescribed.
3. No deviations or exemptions shall normally be permitted in the documents specified for account opening. In case of any extreme cases of exceptions, concurrence of Policy section should be obtained duly recording the reasons for the same.
4. The NBFC must be able to satisfy the competent authorities that due diligence was observed based on the risk profile of the customer in compliance with the extant guidelines in place.
5. VM Finance‟s Board through Audit Committee and Asset Liability Management Committee will directly evaluate and ensure adherence to the KYC policies and procedures, including legal and regulatory requirements.
6. VM Finance has already ensured that the Sales, Operational and Credit staff are aware that no loan accounts will be created unless the KYC procedures are adhered to completely.
7. Periodical review of risk categorisation of customer accounts will be carried out. VM Finance will have a system of periodical up-dating of customer identification data (including photograph/s) after the account is opened.

Review of Policy

The policy shall be reviewed in the normal course once in two years. However, the policy may be reviewed in between subject to changes if any announced by RBI or based on the internal need or experience of VM Finance.