Module 5-Miscellaneous

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Objectives

AML/KYC
Dos and Don’ts for POS Person
Grievance redressal mechanism

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What is money laundering?
Money Laundering is moving illegally acquired cash through financial systems, so that it appears to be legally
acquired.
There are three common stages of money laundering:

Placement-Physical disposal of cash proceeds derived from

illegal activity

Layering-Separating illegal proceeds from their source by

creating complex layers of financial transactions
designed to disguise the source of money, subvert the
audit trail to provide anonymity

Integration –Creating the impression of apparent

legitimacy to criminally derived wealth

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AML regime in India & BALIC AML Norms
The Prevention of Money Laundering Act 2002, which is brought into force with effect from 1st July 2005 deals
with the aspects related to money laundering.
Accordingly the Insurance Regulatory and Development Authority of India (IRDAI) has issued Anti Money
Laundering (AML) program for Insurance Companies through various circulars.
As per IRDAI directives, the Company has accordingly passed AML policy and incorporated the norms to be
adhered by the Company.

 The Company has appointed a Designated Director and Principal Compliance Officer to ensure
implementation of AML Program.
 The Company has put in place “Know Your Customer (KYC) norms” which all employees, intermediaries and
business partners must adhere to.
 The Company has also put in place systems and controls to identify, assess and manage the money
laundering risks.
 The Designated Director for AML is the Company’s MD & CEO, Mr. Tarun Chugh, and the Principal
Compliance Officer for AML is Mr. Anil PM – Head Legal & Compliance

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What is KYC?

KYC refers to the process of determining the true identity of all customers through various methods like:

Obtaining various documents of the Conducting a background verification

customer (List of accepted of the customer by collecting
documents shall be discussed in information from all relevant sources
forthcoming slides)

Conducting higher due diligence for such

customers who appear to be of high risk (High
risk category is defined in forthcoming slides)

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When should KYC be done?

KYC is to be done at the following stages:

At the time of issuance of a new policy At the time of policy servicing

At the time of claims payout stage When top-up remittances are inconsistent with
Customer’s known profile

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Whose KYC should be done?

KYC of all customers should be carried out. The term customer refers to:

The proposer, policyholder, premium payer, Where a client is a juridical person, verification of
the beneficiaries ,the beneficial owners and identity is required to be carried out on persons
the assignee purporting to act and is authorized to act on
behalf of a client

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Why is KYC important?
The objective of the KYC guidelines is to prevent the Company being used intentionally or unintentionally by criminal elements for money
laundering activities.

It helps to ensure that the true identity of the person with whom the Company is dealing with is identified and necessary documentations
regarding same is collected.

KYC norms have been made mandatory by law. According to Provisions of Sec 4 of the Prevention of Money Laundering Act 2002,
whoever commits money laundering shall be punished with rigorous imprisonment for a period not less than three years, which may
extend for a period of 7 years and shall also be liable to a fine which may extend to five lakh rupees.

Defying KYC norms shall also attract the Regulatory reprimands.

Hence KYC procedures must be adhered to strictly in order to ensure that the BALIC is compliant with the AML guidelines.

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Documents to be accepted for KYC
KYC for verification of proof of identity and address of the customer shall be required to
be carried out in all applicable cases.

Aadhaar and PAN/ Form 60 shall be mandatory in all cases irrespective of the premium.
Except where exemption is allowed as per prevailing laws and regulations.

Officially valid document would be applicable in certain cases. Kindly refer to the BALIC
AML policy for the list of officially valid documents.

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Documents to be accepted for KYC – Conti.

Recent Photograph PAN Card/Form 60 Aadhaar Number

A recent photograph of the

customer shall be collected for KYC. Aadhaar Number submission is now
PAN/ Form 60 submission is now mandatory
mandatory
The IC/SM must ensure that
photograph provided is recent and
also belongs to the customer only.

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Documents to be accepted for KYC – Conti.
Income Proof
For all cases wherever the annual premium exceeds
Rs 5 lakhs or as per the Underwriting requirements,
the income proof shall be collected.
Income Proof may be asked in case of lower premium.
The income proof shall be duly seen and verified from
the original by an authorized person of BALIC.
The list of accepted documents for proof of income is
laid down in BALIC AML policy.
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Residence Proof
If the address furnished is different from the address
mentioned in the Aadhar, then copy of an officially valid
document shall also be submitted for KYC.
The document shall be duly seen and verified from the
original by an authorized person of BALIC.
The list of accepted documents for proof of address is
laid down in BALIC AML policy.
Document collection & verification for KYC

Original Seen & Verified

 Documents submitted by the customer is to be attested as ‘Original Seen & Verified’

(OSV) on the copies only after actual physical verification of the original documents as
per Company process.

 The person attesting the documents as OSV on behalf of the Company shall be held
personally liable for misconduct in case if it is found that the OSV is incorrect.

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Submission of PAN/ Form 60

• For all collections, PAN is Mandatory.

• For all cases wherever the customer is not required to have a PAN (for example: NRI Customers,
Persons with Agricultural Income etc.), FORM 60 is required to be obtained mandatorily.

• PAN or Form 60 must be collected for the individual/ entity paying/ funding the premium/
proposal deposit.

• Once a customer declares that s/he does not have PAN at the time of issuance and submits Form
60, s/he is required to submit a fresh Form 60 at the time of any further transaction (renewal, top-
up etc.) unless the PAN is provided and registered in the records.

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Payment – to Third Party

• Third party payouts are not allowed except in case of superannuation/gratuity accumulation and
payments in case of death benefit to the legal heirs, after due verification.

• Claim amount is paid (by the Company) only through electronic payment methods such as ECS,
NEFT systems or any other mode as approved by the Reserve Bank of India from time to time.

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Cash Acceptance Norms

As per the Sec. 269ST of the Income Tax Act,

Cash payment for Rs.2 Lakh or more is NOT ALLOWED

(a) in aggregate from a person in a day; or

(b) in respect of a single transaction; or
(c) in respect of transactions relating to one event or occasion from a person,

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Low Risk Customer Category

Individuals (other than High Net-worth) & entities whose identities & sources of wealth can
be easily identified and transactions in whose accounts by and large conform to the known
profile may be categorized as low risk.

For example:
a. Salaried employees whose salary structures are well defined,
b. People belonging to lower economic strata of the society,
c. Government departments and government owned companies,
d. Regulators and statutory bodies etc.

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High Risk Customer Category
Individuals high risk profile customer include:
Customers who are Non-Residents (NRI), PIO (Person of Indian Origin)/ OCI (Overseas Citizen of India)
High net worth individuals,
Trusts, charities, NGO’s and organizations receiving donations,
Companies having close family shareholding or beneficial ownership,
Firms with sleeping partners,
Politically exposed persons (PEPs),
Those with dubious reputation as per public information available.
Unregistered firms
Registered Private companies

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High Risk Customer Category
 High Net-worth Individuals (HNI) – Individual policyholders who pay a premium above Rs. 10 lakhs
per annum on all classes of insurance are classified as High Net-worth Individuals

 For such cases higher due diligence must be carried out like frequent reviews of the customers
activities/profile/transactions, gathering information from publicly available sources, review of
the proposal/contract by a senior official of the insurance company etc.

 all such customers who belong to the politically exposed persons group, are high risk customers.
Requirement of verifying the identity (through recent photograph and identity proof) and
location (through address proof) of the customer are to be met.

 The Insurance Consultant/Sales Manager being the first line underwriters must report if they are
aware or suspect that a customer is a politically exposed person.

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Beneficial Ownership

 Beneficial Ownership shall be identified in all key man policies, partnership

policies, HUFs, trusts, employer- employee polices etc. in the nature of
individual business.

 The KYC documents, as applicable and income proof shall be collected & verified.

The following is exempted

 Listed companies or subsidiary of such a listed company.

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Important Note

The individual profile & product profile plays an important role for deciding the extent of due diligence to
be done.

a. Detailed due diligence to be performed in cases where annual premium is Rs.5 lakh and above.
b. Detailed due diligence should also be confirmed for all high risk customers.

Insurance premiums received by third party must be looked into to establish insurable interest and a
reasonable explanation thereto must be provided.

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Important Note – Conti.

 The ICs/ SMs/ SPs/ QPs must ensure that customer information from all relevant sources is collected
and is made part of the Confidential Report or Moral Hazard Report.

 If the ICs/ SMs/ SPs/ QPs are aware of any known criminal background of the customer, the same must
be disclosed in the Confidential Report or Moral Hazard Report. The Company shall not enter into
contract with any person who has a known criminal background.

 Any adverse media reports on customer, should be disclosed in the ICs/ SMs/ SPs/ QPs Confidential
Report or Moral Hazard Report.

 The ICs/ SMs/ SPs/ QPs must also ensure that the exact employment details of the applicant/
customer is provided to the Company.

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Important Note – Conti.

 Customer’s source of funds should be established, i.e. from which sources the premium is being paid.

 The Company is also required to conduct detailed due diligence while taking insurance risk exposure to the
individuals/ entities connected with the countries identified as having deficiencies in their Anti Money
Laundering/ Counter Finance Terrorism regime, e.g., Iran, Pakistan etc.

 Special attention should be paid to the transactions & the business relationships, especially those which do
not have apparent economic or visible lawful purpose.

 In all such cases, the background and purpose of such transactions will, as far as possible, have to be
examined and written findings maintained for assisting the competent authorities.

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Role of Employees/ Agents/ Intermediaries/ Business Partners
 Money laundering & terrorist financing are illegal activities and punishable under law. The Company does not tolerate
money laundering or terrorist financing in any form.

 All employees, intermediaries and business partners must honour KYC & AML norms of the Company and report any
case of suspicion as all of them are duty bound to disclose anomalies.

 Report any violations of the AML policy/ guidelines by another employee / agent / intrermediaries/ independent
contractor to the Principal Compliance Officer Mr. Anil PM (Please write to anil.pm@bajajallianz.co.in or
complianceofficer.balic@bajajallianz.co.in)

 Employees are prohibited from disclosing the fact that a Suspicious Transactions Report or related information of
policyholder/ prospect is being reported or provided to the FIU-Ind.

 Strict action shall be taken against anyone found to be involved in money laundering or terrorist financing.

 Please note even silence on an activity known to any person; which activity is subsequently found to be suspicious of
an attempt of money laundering or terrorist financing shall be prima facie sufficient for initiation of strict disciplinary
action.

 Please adhere to the procedures set for KYC & due diligence and thereby ensure that the BALIC is compliant with AML
& CFT norms.

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Dos & Don’t
 POSP should strictly adhere the guidelines given by the
IRDAI on ‘Guidelines on POS’
 POSP should sell only the basic underwriting products
such as Term plan with or without return of premium,
non-linked, non-participating endowment plan and
immediate annuity plan.
 POSP should follow the AML / KYC guidelines
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 POSP shouldn’t start the business before completing
15 hrs. training & clarifying the examination.
 POSP shouldn’t sell complex underwriting products
such as ULIP or participating endowment plan.
 POSP shouldn’t encourage unethical business practice
such as liberal which accepting documentation from
high risk customer or accepting cash above certain
limit given in the KYC guidelines
Grievance redressal mechanism
• BALIC has an effective grievance redressal mechanism in place to address the complaints of the policyholders efficiently and
within the time frame specified by IRDAI.

• BALIC also is connected with the Integrated Grievance Management System (IGMS) maintained by IRDAI to facilitate the
registering / tracking of complaints registered online by the policyholders.

• IGMS is Central repository of insurance grievances / complaints registered by any policyholders across the insurance industry
and is a tool for monitoring grievance redressal in the industry.

 Policyholders can register on this system with their policy details and lodge their complaints. Complaints are then forwarded
to the respective insurance companies.

 The complaints can be registered at the following URL:

http://www.policyholder.gov.in/Integrated_Grievance_Management.aspx

• BALIC also maintains dedicated telephone lines for registering the complaints from policyholders at _____________ (provide
the relevant telephone numbers)

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Grievance redressal mechanism
The policyholders who are not satisfied with the resolution given by BALIC have an
option to take up the matter before the following authorities:
(a) Consumer dispute redressal forums constituted under The Consumer Protection
Act, 1986 which are established in each district and state and at national level

(b) Insurance Ombudsman of competent jurisdiction or consumer

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Grievance redressal mechanism
The Consumer dispute redressal forums under Consumer Protection Act, 1986
National Commission
Established by central
government by notification
Entertains: complaints, where
value of the goods or services
and compensation, is any,
claimed exceeds Rs. 1 Crores
and appeals against the order
of any StateCommission
State Commission
Established by state government
by notification
Entertains: complaints where the
value of goods/services and
compensation, if any, claimed
exceeds Rs. 20 lakhs but does
not exceed Rs. 100 lakhs and
appeals against the order of any
district forum within the state
District Forum
Established by state
government in each district
Entertains: complaints, where
value of the goods or services
and the compensation claimed
is up to Rs.20 lakhs
The Insurance
Ombudsman

 The Ombudsman, by The complainant had made a previous written representation to the insurance company and the
insurance company had: Rejected the complaint or The complainant had not received any reply
mutual agreement of within one month after receipt of the complaint by the insurer

the insured and the

insurer can act as a
The complainant is not satisfied with the reply
mediator and given by the insurer
counsellor within the Complaints can
be made to the
terms of reference Ombudsman if:

 The decision of the The complaint is made within one year from the date of rejection by the insurance company

Ombudsman,
whether to accept or
reject the complaint, The complaint is not pending in any court or
consumer forum or in arbitration
is final

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 Disclaimers
This module belongs to Bajaj Allianz Life Insurance Company Ltd.
Presentation is meant for Training and any unauthorized use, reprint or circulation is prohibited.
All illustrations and figures used therein are purely for representation purpose, and may not reflect facts.

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