Know Your Customer (KYC)/Customer Due Diligence (CDD) Policy
This policy is formulated to assist the management of Dalal Securities (Pvt.) Limited [DSL] to manage / counter the Compliance, Risk & provide a safe path for its growth & glory in the local market.
The Compliance Risk can be described as the risk of imposition of legal or regulatory sanctions, financial loss or loss to reputation of the entity arising out of its failure to comply with applicable laws of land /regulations governing financial institution, prudential regulations and circulars issued by the regulator i.e. Securities & Exchange Commission of Pakistan & Pakistan Stock Exchange Limited. Compliance with laws, rules and regulation helps DSL to maintain its reputation and meet the expectations of its stakeholders, customers, the markets and society as a whole.
In order to protect the DSL from Compliance Risk and to clearly disassociate from the increasing danger of organized activity and money laundering, DSL has developed a clearly laid down Policy for “KNOW YOUR CUSTOMER” (KYC) & Anti Money Laundering (AML). The main emphasize of the policy is to provide onsite guidelines against the opening of fictitious accounts and to protect the DSL from non compliance threats.
The policies, procedures and controls outlined in this KYC & AML Policy are minimum mandatory compliance requirements and have been designed to be a current document, subject to on-going revisions and updates.
The purpose of this policy is to safeguard DSL against involvement in money laundering activities, terrorist financing and other illegal trades and to guide the employees in the effective and efficient discharge of their duties to ensure compliance with the rules and regulations.
The Board of Directors is over-all responsible for development, adoption implementation, and regular monitoring of this policy statement. It is the responsibility of the employees pertinently of Marketing and Sales department to ensure that they are fully aware of the contents of this policy.
DSL shall acquire due diligence information pertaining to the customers/clients and the legitimacy of their business/transactions so as to prevent from the potential risks. Due diligence shall be done to identify Company’s Customers and ascertain their relevant information, as detailed as possible.
The Company shall verify that the customers are not on any Sanction List of known fraudsters, terrorists or money launderers from all over the world. Besides sanctions lists, there may be other lists of third party vendors that track links between individuals regarded as high-risk owing to negative reports in the media or in public record. The KYC policy does not merely require name matching with the sanction lists but also monitoring of transactions of the customers against their recorded profile and history in the account(s) and with peers.
Customers shall be identified using due diligence in order to prevent the identity theft/concealment, fraudulent transactions, money laundering, terrorist financing and other suspicious/illegitimate transactions/activities and do the legitimate and ethical business/financial transactions with the all the customers / clients whether newly introduced or otherwise.
Customer services and knows your customers
KYC Standards and anti-money laundering Measures would enable DSL to understand its customers, the beneficial owners in case of non-individual entities, the principals behind customers who are acting as agents and their financial dealings. This will help to manage its risks prudently.
The main components of the internal control process are:
- Reputation and integrity of operations will be protected by reducing the likelihood of becoming a vehicle/means for or a victim of financial crime and suffering consequential reputation damage. For this purpose, all measures will be taken to perform an effective due diligence of the customer.
- Appropriate risk management and compliance methodologies shall be followed by providing the basis for identifying, limiting and controlling risk exposures in assets and liabilities, including assets under management.
- The employees shall take reasonable steps to be aware of any unusual transaction activity or activity that is disproportionate to the customer’s known business.
- As a general rule, DSL shall not establish a business relationship until the identity of the potential customer is satisfactorily established. If a potential customer refuses to produce any of the requested information, the relationship shall not be established. Likewise, if the potential customer is not forthcoming with requested follow-up information, any relationship already begun shall be terminated.
KYC is based on five key elements
Following are the five crucial elements of the KYC process:
§ Risk classification
§ Minimum Information / Documents Required
§ Verification of Documents
§ On-going Monitoring Processes
Other Anti Money Laundering (AML) Measures are:
§ Customer education and awareness
§ Channel partner education and awareness
§ Staff education and awareness
The procedures to address the five key elements of KYC process are explained in provided in the succeeding paragraphs.
The level of Money Laundering (ML) risks that the Company is exposed to by an investor relationship depends on:
§ Type of the customer and nature of business.
§ Type of product / service availed by the customer
§ Country where the Customer is domiciled.
Based on the above criteria, the customers may be classified into two Money laundering Risk levels viz., High Risk and Low Risk.
a). High Risk Customers
DSL will conduct enhanced due diligence when;
i. Dealing with high risk customers, business relationship or transaction including the following;
§ Non-resident customers;
§ Non-Legal persons or arrangement including non-governmental organizations (NGOs) / not for profit organizations (NFPs) and trusts / charities;
§ Customers belonging to countries where CDD / KYC and anti-money laundering regulations are lax;
§ Customers with links to offshore tax heavens;
§ High Net-worth customers with no clearly identifiable source of income; and
§ Customers dealing in high value items.
ii. There is a reason to believe that the customer has been refused by another financial institution.
iii. Dealing with politically exposed persons (including foreigners) or customers holding public or high profile positions. For politically exposed persons or holders of public or high profile positions, enhanced due diligence should include the following:
§ Relationship should be established and / or maintained with approval of senior management including when an existing customer becomes holder of any public office or high profile position.
§ Appropriate risk management evaluation will be made to determine whether a potential customer, existing customer or the beneficial owner, is a politically exposed person, holder of public office or the holder of high profile position. The sources of wealth / funds of such customers shall be monitored on regular basis.
iv. Establishing business relationship or transactions with counterparts from or in countries not sufficiently applying Financial Action Task Force (FATF) recommendations.
b). Low Risk Customers
Where there are low risk and information on the identity of the customer and the beneficial ownership of a customer is publicly available, or where adequate checks and controls exist, DSL may apply simplified or reduced customer due diligence. This will be done in following cases:
Financial institutions provided they are subject to requirements to combat money laundering and terrorist financing consistent with the FATF recommendations and are supervised for compliance with those requirements.
Public listed companies that are subject to regulatory disclosure requirements, Government administration/entities etc.
Download the KYC/CDD form images from below