Sebon approves centralised KYC Service Operation Directive

 The capital market regulator today the Centralised KYC Service Operation Directive 2077.

After the approval from Securities Board of Nepal (Sebon), investors can now fill the ‘Know Your Customer’ (KYC) forms with their personal details from their homes through the authorised person or employee of the KYC registration representative.

The directive has made the KYC details accessible to all entities within the securities market, according to a press note issued by the Sebon. “It enables the customers to file their identification details with their stock brokers easily and safely amid the current coronavirus pandemic,” according to the directives, which was submitted to the board by CDS & Clearing Ltd. The Sebon approved the directives and returned it to the CDSC for implementation.

The directive also mentions the provision of eKYC representative registration, provision of the development of eKYC system and provision of eKYC registration for securities transactions or related services for the customers. The directives also includes the provisions related to the use of KYC details, refining and enforcing KYC details, confidentiality and security of customers’ KYC details, and legal action in case of misuse of KYC details, according to the Sebon.

The capital market regulator expects that the implementation of the guideline will help reduce the various complexities involved for customers while submitting the same details in many places to avail the service of the share market. “The new system is also expected to ease the process of securities trading for the investors and help in the overall development of the stock market.”

Fraud increasing in microfinance institutions

Fraud has increased in microfinance institutions due to weak monitoring and internal control, according to a senior microfinance expert.
Fraud has increased in microfinance institutions due to weak monitoring and internal control, said chair of the CSD Shankar Man Shrestha during the inaugural session of ‘Symposium on Fraud Control and Management’ organised by Centre for Self-help Development (CSD) here today.
“Fraud was unheard in microfinance till a couple of years back but risen to epidemic level in recent years,” he said, adding that the MFIs leader should be vigilant and make regular interaction with the client and field staff.
CSD – one of the pioneer institutions to launch microfinance in Nepal – organised the symposium, which saw various speakers in the panel session. In the panel discussions, experienced and senior chief executives of microfinance institutions focused on the steps to tackle fraud in microfinance. The panelist outlined that monitoring and supervision is a key towards eradicating fraud. The CEO’s should have both KYC of clients and staff. They further said that CEO’s should be aware of the lifestyle of their staff to prevent the fraud in microfinance.
An expert Shyam Khatri presented on legal remedies to tackle the problems endemic in microfinance sector. He mentioned that the bank and financial institutions can themselves formulate bylaws in conjunction with relevant acts of the government to tackle banking fraud in their particular organisation and such bylaws will have legal repercussions.
Discussion was also carried out on concept of internal control and good practices seen in different organisations. Traits and qualities of good management styles were also shared among the participants. There was consensus among the staff that the MFI’s should enact preventive measures such as right and well-motivated human resources and devising strong audit control practice in the organisation.

Banks to give Rs 100 for opening account

The banks are providing a customer Rs 100 if they open an account in the bank.
To increase the financial transaction through the banks and financial institutions, under the government scheme of ''Lets Open Bank Account Campaign, 2076' for opening bank accounts for all Nepalis. The government is launching the campaign from Baishakh 1, 2076 (April 14, 2019).
The central bank has also simplified the process of opening bank account as part of its effort to help the government in increasing people's access to finance. The new rule introduced by the central bank not only requires bank and financial institutions (BFIs) to use simplified know-your-customer (KYC) form under 'Lets Open Bank Account Campaign, 2076', but also paves the legal way for allowing them to deposit Rs 100 on those accounts from the bank's side, according to a circular of the central bank. The banks can count Rs 100 deposited in accounts opened under this campaign as their corporate social responsibility (CSR) expenses.
BFIs are required to spend at least one per cent of their total net profit in CSR activities. The central bank has also prescribed a list of activities – including activities organised to achieve Sustainable Development Goals (SDGs) and direct donation to education and health for poor families – where CSR fund can be utilized.
Under the new rule, people can now open bank accounts by filling up a simplified KYC form and enclosing a copy of government-issued identity cards along with their photographs.  However, the limit for annual transaction for accounts opened using the simplified KYC form has been set at Rs 100,000. "If the transaction is higher than that, the bank should make the client fill up the full KYC form," according to the central bank.
The campaign was announced through the budget for the current fiscal year 2018-19 with an aim to increase financial access and inclusion in the country.
The new provision is aimed at encouraging banks to help the government in its campaign to bring all people within the ambit of banking sector and also to formalise the economy.
Currently, there are 23.54 million deposit accounts as of mid-July last year, according to the central bank data. Lately the central bank has been offering various incentives and facilities to BFIs for deepening financial penetration. The central bank has also directed the BFIs to reach out to all 753 local units.

ID cards mandatory to deposit money in others' accounts

The central bank has made it mandatory for the depositors to show their identification card, if they are depositing Rs 100,000 or more cash in others' bank account. Bank and financial institutions (BFIs) may not accept cash, if depositors fail to show identification documents and reason for such deposit, according to the new rule introduced by the Nepal Rastra Bank (NRB) to check money laundering and terrorism financing. The new rule came into effect from the new fiscal year.
Earlier, BFIs used to ask clients to show their identity card only when withdrawing huge amount of cash. The central bank has now made it mandatory for the BFIs to seek identification documents even while depositing cash.
The central bank, in its recent circular to the BFIs, said that the new rules has been brought to introduce additional provisions on Money Laundering Prevention Act, 2008 and Assets (Money) Laundering Prevention Rule, 2016, to prevent the financial and banking system getting abused by the dirty money. "The new requirement is to identify and verify the client's identity popularly known as know-your-customer (KYC) process," the central bank added.
Likewise, the clients also cannot do cash transaction of more than Rs 1 million barring some central bank-prescribed circumstances. "The BFIs would also not provide withdrawal of cash of Rs 1 million or higher."
The new rule aimed at curbing abuse of banking channel for money laundering and terrorist financing is cumbersome could also be instrumental for the people to opt for non-banking channel for transaction, according to the bankers. 

Central bank simplifies 'Know Your Customer' provision

The central bank has simplified the Know Your Customer (KYC) forms due to complaints from both banks and financial institutions, and customers.
Nepal Rastra Bank (NRB), in consultation with Nepal Bankers' Association (NBA), today, said that customers must self-declare, if they have no PAN, email, mobile, telephone, passport or profession.
Likewise, it has also relaxed the time period for submitting the Know Your Customer forms for existing customers. "Existing customers can submit the Know Your Customer forms within this July, whereas new customers must submit all the information at the time of opening the accounts," it said.
Though customers must submit information — names and photocopies of citizenship certificates — of family members, they do not need to submit the information of deceased and legally separated family members, according to the amended Know Your Customer regulations. "If the customer provides logical evidence of inability to submit information of family members immediately, the banks and financial institutions can give them some time to submit the required information."
However, customers who need Enhanced Customer Due Diligence must submit the information and photocopies of citizenship certificates of family members, it added. "If need be, the banks and financial institutions can take interviews before opening the account."
Likewise, for refugees, an identification paper provided by any government agency will be enough, the central bank added.
NRB had brought the Know Your Customer provision for banks and financial institutions last year to keep tab on clients more effectively to control money laundering and fight terrorist financing, according to the international commitment made by the country to Financial Action Task Force (FATF), the inter-governmental agency that keeps watch on money laundering and terrorist financing.
The central bank has made it mandatory for banks and financial institutions to follow it thoroughly.
Though banks and financial institutions had been keeping track of all their clients and reporting suspicious transactions to the Financial Information Unit of the central bank, it has become more strict after some of the banks and financial institutions reported suspicious transactions, and due to the country's commitment to the FATF in fighting the flow of dirty money.
NRB had also asked banks and financial institutions to closely monitor customers with multiple transactions, even if the volume is small, and keep tabs on electronic transfers, both receipts and paid, too.
"They must list their customers under three categories — highly risk, medium risk and low risk — depending on the risks they are exposed to," the central bank said.