BF130-LECTURE 4;

ACCOUNT OPENING;

Lecture outline;

 Types of accounts;
 Types of account holders;
 Dormant and inactive accounts
 Closing of customers’ accounts

Introduction:

 From our first lecture we established that one of the primary functions of a bank is
accepting deposits. In this lecture we discuss how banks accept deposit through
opening of accounts for different customers, and how banks deal with dormant or
inactive accounts. Furthermore, we will also discuss the circumstances under which a
customer’s bank account can be closed.
 By opening an account the customer enters into a relationship with a Bank to
operate a savings account, current account, a deposit account, or a loan account
and includes transmission of money and investment of funds.

1. SAVINGS ACCOUNT

A Savings Account is a deposit account of which the balance earns interest and can
be withdrawn on demand or through electronic means such as an automated teller
machine (ATM).

Savings account features

- Payable on demand.
- Operation of the account is by way of Debit card or Savings Passbook
- Deposits and withdrawals can be performed at all branches
- Inter-branch transfers of funds between Savings and Current Account as well as inter-
branch transfer of accounts
- Easy access to account through branches nationwide, ATMs & digital banking
platforms

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 - A copy of the General Terms & conditions of Accounts must be given to the account
holder upon opening the account. Account holder is advised to read and understand
the Terms and Conditions.
- Saving Account are entitled to interest at the rate determined by the Bank. Interest is
computed and calculated on a daily basis. The system automatically credits the
accrued daily interest to the customer’s account every monthly or semi-annually or as
agreed with the bank (semi-annual payments will be paid on the 30thJune and
31stDecember of each year)
- Statement on the affairs of the account can be obtained from the bank or through
digital banking platforms

2. CURRENT ACCOUNT

A current account is an account maintained with a commercial bank on which

cheques are drawn and into which money, cheques and other negotiable instruments
are deposited. Current account allows the account holder to issue cheques which is a
very convenient and safe method for making payments.

Current Account features;

- Cheque book will be issued to the customer. The bank will honour the cheques issued
subject to availability of funds in the account.
- Withdrawal may be by cheque encashment or through ATM
- Statement of account will be sent monthly, quarterly, or semi-annually or per
customer’s request.
- Pay utility bills any time through the ATMS or online/mobile banking services
- Stop payment orders or instruction can be sent to the Banker to stop payment
providing details on cheque number, amount, date and payee’s name. On receipt of
the instruction, the officer will: Verify the signature, Place date and time of receipt
and initial, Input instruction into the system. In some cases, a service charge will be
charged.
- Inter-Branch Encashment of Cheques
- Overdraft Facility-Overdraft is a facility granted under a Current Account whereby
the customer is authorised to draw on the account up to an approved limit. The
overdraft is issued against security.

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USAGE OF A CURRENT ACCOUNT
A customer can start using their current account once it is approved by the bank.
- Withdrawals from the account (subject to the available balance in the account) can be
made either through cheques or ATM cards (issued to individual accountholders only)
or by electronic means.
- There is need to maintain the initial deposit amount i.e. the minimum amount required
to open the account, once your account is in operation. No interest is earned on the
balance on the current account.

SIGNATORIES AND CHANGES OF SIGNATORIES

- When a customer opens a current account (or any account), the bank will require
specimen of the customer’s signature. The bank will compare the signature on the
cheque issued by you against this specimen signature. If the signature is different, the
bank will refuse to pay the cheque and return the cheque on the ground that “signature
differs”.
- For a joint current account, all the account-holders’ signatures must be provided
together with specific instructions as to who can operate the joint account.
- For current accounts operated by a business/company, specimen signature(s) of
person(s) authorized to sign cheques on behalf of the business/company and the extent
of their authority, must be provided in the form of a mandate or resolution. Any
changes to the signatories must be conveyed to the bank immediately in writing by the
accountholder.
- In addition, an extract copy of the Board/Committee Resolution stipulating the
change, effective date of change and signed in accordance with the conditions of the
account must be given to the bank.
- The Resolution must be certified by the company secretary and signed by the quorum
of directors as provided for in the memorandum & articles of association.

- DEFINITION OF 1ST & 3RD PARTY

- First party (1st party)-Authorised signatory of the account.
- Third party (3rd party)-Any party other than the authorised signatories of the account.

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3. FIXED DEPOSIT ACCOUNT

A Fixed Deposit or a Term Deposit as it is sometimes called is a fixed sum of money,

placed by the customer for a fixed period of time bearing a fixed rate of interest. A
depositor must have opened a Fixed Deposit Account before the placement of fixed
deposits. One or more fixed deposits may be place in the Fixed Deposit Account.

- A Fixed Deposit is not negotiable or transferable.

- A Fixed Deposit can be placed by individuals and non-individuals.
- A Fixed Deposit Receipt (FDR) is normally issued when funded have been
deposited into the account. The receipt is an acknowledgement of and represents
each placement of fixed deposit
- Note the requirements for opening a fixed deposit are the same as for a Savings
Account.

Operation of a fixed deposit account;

Terms of deposit;

i. Minimum amount varies from bank to bank. It could be the minimum amount for
deposit is k500 for one (1) month fixed. Or the minimum amount for deposit is k5,000
for 2 months.
ii. Terms-Placement of fixed deposits shall be for periods of one (1) month and thereof
up to a period of 60 months
iii. Effective Date-The effective date is dependent on the mode of placement.
iv. Backdating-A fixed deposit may be backdated for a maximum 29 calendar days.
Backdating is only allowed under the following circumstances:
- Placements made via ATM
- Placements made during prolonged offline, backdating dependent on the mode of
placement
- Delays /oversight by branch to act on depositor’s instruction
- Errors made by branch when processing placements as wrong amount or tenure
v. Maturity; Calendar month is the basis for determining the maturity date
vi. Interest rate-the interest rates for 1 to 12 months are to be displayed prominently at
the bank premises. Branches shall accept deposit for these tenures at theses whereby
the announced rates are applicable.

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WHO CAN OPEN AN ACCOUNT?

Different banks have different criteria for opening accounts. Generally, banks would only
consider the application if the applicant is:
- 18 years old or above
- A minors account for those below the age of 18 can be opened by the parents or
guardian
- not a bankrupt and of sound mind and has the mental and physical capacity to operate
the account properly
- For business owners and professional entities, they must ensure that they are properly
registered with the relevant authorities. However, a bank has the discretion to accept
or decline an application to open the account.

REQUIREMENTS TO OPEN AN ACCOUNT

- A customer must be physically present at the bank.
- A customer needs an introducer (normally a reference letter) acceptable to the bank.
This is to enable the bank to obtain references on you. Normally, the introducer is an
existing customer or someone known to the bank.
- A customer needs to provide certain identification documents such as your identity
card or driving licence to substantiate your identity. As well as utility bill as proof or
residence. This is part of the KYC policy requirements for new and existing account
holders.
- A customer needs to put an initial deposit as specified as specified by the bank.
- In addition, for a society / club / association / professional registered with professional
bodies (e.g. Patents and Companies registration agency- PACRA or Registrar of
Societies), the customer needs to provide the business registration, board resolution,
memorandum and articles of association, list of current board/committee members
(for society account).
- For a Business or Corporate body (registered companies) the Bank shall verify the
legal existence of all business entities desiring to open account/s and identify the
principal persons, directors, the beneficial owners and the management of such
business entities and relevant documents must be submitted to the bank.

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TYPES OF ACCOUNT HOLDERS;

1. Individuals (personal) who have attained the age of 18 years and above (residents and
non-residents)
2. Joint Personal or Joint Account
3. Blind
4. Executor/Administer
5. Trust
6. Registered societies, clubs, & associations
7. Parastatals and NGOs
8. School/church/medical institution
9. Sole proprietor
10. Partnerships
11. Companies
12. Bureau de change & financial institutions
13. Staff Accounts

1. PERSONAL ACCOUNT;

The individual must have attained the age of 18. However, exception is given to payroll
customers aged between 12 to 18 years old (with valid identity card) and working full
time, and children.

A personal current or savings account can be operated by one person aged 18 years and
above. Requirements for opening the account;

- Identity card i.e. national registration card, or valid Passport (non-resident)

- Two (2) Passport size photos.
- Utility bill or recent council rates not older than 3 months.
- Reference letter from a professional, employer or an existing customer of the bank.

Minors Account-School pupils and university students below 18 years can open a
savings account provided the following minimum criteria for opening student
accounts is followed:

- The pupil/student desiring to open an account shall be required to obtain a written

consent from the parent/guardian;

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- The learning institution will be required to endorse the letter from the
parents/guardian by stamping it with the official date stamp of the school/institution;
- The authorised representative of the institution shall be required to sign the
endorsement indicating the grade/level of study of the pupil/student at the
school/institution as confirmation that the applicant is a bonafide pupil/student;
- The bank shall be required, upon receipt of such letters, to confirm them with both the
school/institution authorities as well as with the parents/guardians; and
- Where the applicant for a basic banking account has attained majority age, the bank
shall also be required to retain a certified copy of the National Registration Card
(NRC) as part of the KYC documentation.

2. JOINT PERSONAL ACCOUNT

A joint account can be opened by two or more persons. It is allowed for one or more
individuals to be added to the account provided all parties consent to it in writing. The
new party(s) to the account must have attained the age of 18 and be properly
identified.

Instructions on the manner of operating the account must be clearly stated and
agreed by all the joint account holders in writing. And the rules for operating the joint
account must be clear. The constitution of the account will have to be changed from
“Personal” to “Joint Personal” if the holder of the personal account adds another
person to the account.

While opening the account, an account-opening form should be signed by all the
account holders, instructions for operating the account may be any one of the
following:

(a) Either or survivor- Any one of the accountholders to operate the account (e.g., for
an account opened by A and B, either A or B is required to sign)
(b) Both jointly-All accountholders are needed to operate the account (e.g., for an
account opened by A and B, both A and B are required to sign)

Requirement for opening & operating an individual–Personal or Joint account

are the same as opening an individual/personal savings account.

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 However, note that for a joint account it is operated by two or up to a maximum
of 4 persons aged 18 years and above.

All required documents are to be produced in the original form for verification.
Photocopies of the originals to be kept for future reference must bear the “original
sighted” notation against which the attending staff is required to date and sign.

3. BLIND PERSON

In addition to the normal procedures stated above for opening and operation of the
account, the following requirements must be complied with:

- A blind person must be accompanied by a close friend or relative of his choice.

Their presence is required to minimise the possibility of the blind person making
allegations of fraud or negligence against the bank.

4. EXECUTOR/ADMINISTOR
- An executor is a person who has been appointed by will or codicils to administer
the estate of the deceased person (the testator) and to carry into effect the
provisions of the will. The mere naming of a person as executor in a will does not
bind him to accept the duty.
- An administer is appointed by the Court to administer the estate of a deceased
person. The Court may appoint one or more administrators.

Requirements for opening savings account run by an executor/administer;

- Two (2) Passport size photos.

- A certified copy of the appointment document such a Will or a Court order or other
equivalent document
- Satisfactory evidence of identity of all signatories to the account such as national
registration card, driver’s license or valid Passport (non-resident)

5. TRUSTS

A trust is an obligation annexed (takeover) to the ownership of a property, arising out

of the confidence reposed in and accepted by one person for the benefit of another, or
of another owner. The person who reposes or declares confidence is called the author
of the trust.

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 The person who accepts the confidence is called the trustee. The person for whose
benefit, the confidence is accepted is called the beneficiary.

The instrument by which the trust is created is called the ‘Trust Deed’.

Requirements for opening and operation a Trust Account

i. Copy of the Trust deed is to be examined to ascertain the powers and functions of the
trustees
ii. A certified copy of the resolution of the Trust authorising the account signatories, type
of account and mode of operation.
iii. In case of two or more trustees, unless specifically stated in the trust deed, all the
trustees will operate the account jointly.
iv. On the death of one or more trustee(s), the authority will be vested in the remaining
trustees. When all the trustees are dead or retired, new trustees will be appointed by
the court.
v. The insolvency of the trustee is not the insolvency of the trust.
vi. Trustee(s) cannot delegate his/their powers, unless specifically authorised by the Trust
Deed.
vii. Satisfactory evidence of the identity of the trustees/signatories to the account and that
of the beneficial owner/s of the trust as stated above.
viii. Charitable trusts are required, to be registered with the Land Registry or High Court.
A copy of the registration certificate should first be obtained, before opening such an
account.

6. ASSOCIATIONs/CLUBs/SOCIETIEs/NGOs

An association/Club/Society/NGO is an organisation of people who are interested in a

particular activity or belonging to a particular occupation or having the same interest
or aim. However, the purpose of the organisation is not for any business of making
money.

Requirements for opening & operating the Associations/Societies/Clubs Savings

account;

- Certificate of Registration issued by the registrar of societies

- Rules & regulations governing the Association/society/club or constitution.
- Resolution passed by the Board of Committee members to open an account with Bank
and persons authorised to operate the account.
- Identity card of authorised signatories

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- Society/association/club-operated by the committee of the society, association or
club.
- A resolution to open a bank account should be availed, with the signatures of three
persons, including the president, secretary, and treasurer. Out of these three,
signatures of the president and one of the others are essential.

7. PARASTATALS/GOVERNMENT BODIES
- Central government transactions are governed by the Accountant General’s Office.
- The Accountant General normally issues directives on the opening and maintenance
of all government accounts.
- Every year the government approves banks for this purpose through a bidding
process. The main function of banks in conducting government business consists of
paying, receiving, collecting and remitting money on behalf of the government
departments.
- Banks, while opening accounts of government and public bodies, should also obtain a
copy of the letter of authority issued by the competent authority for opening the
account.

8. SCHOOL/CHURCHES/MEDICAL INSTITUTIONS
- Public schools can open a saving account in the name of the school. On the other hand
Private schools may or may not be excluded as they may be registered as a business
enterprise and are not allowed to open a savings account.
- For opening an account, the following documents are required:
- Identification documents of the authorised signatories
- A written letter from the Ministry or Diocese concerned giving approval for the
school/church/medical institution to open an account with the Bank.
- Minutes of Meeting /Resolution from the School Board of Governors or relevant
board in charge of the school, church or medical institution.

9. SOLE PROPRIETOR/TRADER
Sole propriety concerns are various businesses and economic activities conducted
by a single person, and which are registered under the Registration of Business
Names Act, Chapter 389 of the Laws of Zambia.

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 In the eyes of the law, there is no distinction between the assets and liabilities of the
person and the business conducted in the name of the sole proprietor.
Requirement for opening & operating a Current Account by Sole proprietor;
i. The proprietor must call in person and be identified as in opening accounts of
individuals.
ii. Certification of Registration issued by the Registrar for purposes of Business
Names Registration Act.
iii. Trading Licence AND other requirements as per (1) above
iv. Proof of ownership

10. PARTNERSHIP FIRM ACCOUNT

- Section 2 of the registration of business Names Act, defines a partnership as an
unincorporated relationship subsisting between two or more individuals, or one or
more individuals, and one or more corporations, or two or more corporations, who
have agreed to share the profits of a business carried on by all, or any of them acting
for all.

Requirements for opening and opening a partnership account;

i. Certificate of Registration issued by the Registrar for purposes of Business Names

Registration Act
ii. Statement of Particulars of partners (Form II)
iii. Partnership Deed / Mandate for Partnership AND other requirements as per above.

11. COMPANIES/BUSINESSES
- Submission of all information and documents as mentioned is a MUST before the
Bank allows opening of the account.in addition corporate bodies are to submit the
following documentation
a) Certificate of Incorporation or equivalent, details of registered office and the place
of business
b) Articles of Association and Memorandum of associations
c) share allotment form and list of directors and secretary (for company account) or
d) Details of the nature of the corporate body's business, the reason for the account
being opened, an indication of the expected turnover, the source of funds, and a
copy of the last available account, where applicable

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 e) A certified copy of the resolution of the Board authorising the account signatories,
type of the account and mode of operations
f) Certified copy of power of attorney, or any other authority, affecting the operation
of the account, given by the directors in relation to the corporate body AND
g) Satisfactory evidence of the identity of all the signatories to the account [i.e. other
documents as per (1) above] Note: Documents under (a) and (c) are a MUST even
when conducting a specific transaction with a Bank other than where the corporate
body maintains its regular account/s.
For a business/company or corporate body, the current account will be in the
name of the business and it is operated by nominated signatory(ies).

12. BUREAU DE CHANGE , FINANCIAL INSTITUTIONS,

- Other financial institutions and bureau de change can open accounts with the bank.
- In addition to the other requirements needed a Copy of Registration certificate issued
by the Regulators (who regulates) must be submitted.

13. STAFF ACCOUNTS;

- Employees of a company or a bank can open and operate an account of their choice.
- Requirements for opening an account are the same as for individual or personal
accounts.

DUTIES AND RESPONSIBILITIES OF AN ACCOUNTHOLDER

Some of your duties and responsibilities as an accountholder are:
 Keep your account numbers confidential and keep your account statements in a safe
and secure place.
 Safeguard and keep confidential any Personal Identification Numbers (PINs) issued
and linked to your account for ATM facilities, phone banking and/or internet banking.
 Always destroy or shred cancelled cheques.
 Inform the bank immediately of :
- Any change of address
- Any change of telephone number
- Loss of any cheque / cheque book
- Any discrepancy in your bank statement

CHECKING & SEARCHES FOR ACCOUNT OPENING;

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 - The bank personal tasked to open accounts has to verify the information that he/she
has received and also conduct a background check on the customer. Banks have soft
wires that enable the check a potential customer’s financial status by keying in the
customer ID (NRC/PASSPORT) into the system, the system will automatically
conduct a search with the credit rating agency to check and if the ID number matches
in the Bankruptcy Listing, the message ‘Customer’s ID number matches Bankruptcy
Listing’ will be displayed.
- If the customer’s name is confirmed blacklisted, the bank should not open the account
for the customer.

DORMANT/INOPERATIVE ACCOUNTS/UNCLAIMED FUNDS

Where an account(s) remains inoperative, i.e. when there are no transactions, except bank
charges, done for a period ranging from six months to one year (depending upon rules of
individual banks and/or product type), the customer’s account will be marked as a
dormant or an inoperative account(s).

- The bank’s tariff guide provides the customer with information on charges
payable/recoverable from when the account is dormant/inoperative.
- Any funds or other personal property removed from a safe deposit box or any other
safekeeping facility on which the bailment period has expired due to the non-payment
of rental charges or by reason of some other default by the bailor or any surplus
amounts arising from the sale of the property in accordance with the law, that have
been unclaimed by the owner for more than ten years from the date on which the
bailment period expired shall be regarded as abandoned.
- The bank guides the customer on the procedures to be followed and/or additional
documents to be submitted, if any, for reviving the status of the safe custody account
or other deposit account(s) to normal/operative account.
- By law, the bank is required to transfer to the Bank of Zambia funds or safe custody
items that the customer could have deposited with the bank, which have been left
untouched and not reclaimed for a period of 10 years or more.
- Prior to the transfer of funds, the bank would have given the customer notice in writing sent
by prepaid registered post to the last known address that the customer had provided the bank
with and if no response is received, the bank will effect the transfer.

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- If such funds or property are transferred to Bank of Zambia, you may claim them from the
Bank of Zambia by following laid down procedures and the bank will extend necessary help
to you.

CLOSING YOUR ACCOUNT

Subject to the terms and conditions of any relevant banking service, the bank

a. Will, at the customer’s request, close an account of yours that is in credit; the
accountholder must provide a written request and return any unused cheque leaves
for cancellation (i.e. for a current account).
b. may close an account of the customer that is in credit by giving the customer notice
that is reasonable in all the relevant circumstances and paying him/her the amount of
the credit balance;
c. will close the customer’s account at any time if it is conducted contrary to the terms
and conditions of the account, in breach of applicable legislation, or in a manner
likely to comprise the safety and security of our operations; and
d. May charge the customer an amount that is our reasonable estimate of the costs of
closure.
e. On discretion of the bank – your bank may close your account if you regularly issue
dishonoured cheques or if your account is inactive (dormant account). In such cases,
the account will only be closed after sufficient notices have been given in writing to
the accountholder. A notification letter will also be sent to the accountholder once the
account is closed.
- Reasonable notice of our intention to close your account will be issued prior to
effecting the closure to the last known address that the customer provided to the
bank.
- The bank reserves the right to protect their interests should they have to act against
the customer for defaulting/misconduct on the customer’s account or in the event of
fraud or suspected fraud on the account.

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KNOW YOUR CUSTOMER;

As part of the account opening procedure banks ask customers for different documents
as part of their KYC policy.

Q. What is KYC?
Know Your Customer - KYC enables banks to know/ understand their customers and their
financial dealings to be able to serve them better and manage its risks prudently.

Q. Why KYC?
To establish the identity of the client : This means identifying the customer and verifying his/
her identity by using reliable, independent source documents, data or information. For
individuals, bank will obtain identification data to verify the identity of the customer, his
address/ location and also his recent photograph. This will be done for the joint holders and
mandate holders as well. For non-individuals, bank will obtain identification data to:

- verify the legal status of the legal person/ entity

- verify identity of the authorized signatories and
- verify identity of the Beneficial owners/ controllers of the account
- To ensure that sufficient information is obtained on the nature of employment/ business
that the customer does / expects to undertake and the purpose of the account.

Q. Are KYC requirements new?

No, KYC requirements have always been in place and Banks have been taking KYC
documents in accordance with the guidelines issued by Bank of Zambia (BOZ). The banks
are obliged to implement the financial Action Task Force (FATF) standards on Anti Money
Laundering and Combating Financing of Terrorism (AML/CFT) so that they adequate
controls and procedures to know the customers with who banks are dealing with.

Q. Is KYC mandatory?
Yes. It is both a regulatory and legal requirement that KYC is conducted.

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Q. When does KYC apply?
KYC will be carried out at the following stages:

- Opening a new account.

- Opening a subsequent account where documents as per current KYC standards not been
submitted while opening the initial account.
- Opening a Locker Facility where these documents are not available with the bank for
all the Locker facility holders.
- When the bank feels it necessary to obtain additional information from existing
customers based on conduct of the account.
- When there are changes to signatories, mandate holders, beneficial owners etc
- KYC will also be carried out in respect of non-account holders approaching the bank
for high value one-off transactions.

Q. Who is my contact point in the Bank for KYC purposes?

Your contact point in the Bank will be the Relationship Manager or the officer who opens
your account and who is in touch with you for your transactions.

Q. What will happen if I do not provide the required KYC information / documents to
the Bank?
The Bank will be entitled to refuse to open the account (if you are a prospective customer) or
discontinue its relationship with you citing non-providing of KYC information / documents
(if you are an existing customer). 

The end.

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