Know Your Customer (KYC) & Anti-Money Laundering (AML) Policy

1. Introduction & Statutory Mandate

Enacted under PMLA 2002 (Notification GSR 436 (E) dated July 1, 2005) and RBI Master Direction – KYC Direction, 2016, this policy prevents the Company from being used, directly or indirectly, for money laundering or terrorist financing.

Each employee is required to comply with applicable AML/CTF laws, remain alert to suspicious activities, cooperate with regulatory and law enforcement agencies, and protect the Company from illicit financial conduct.

2. Key Definitions & Officially Valid Documents

• Customer: A person engaged in a financial transaction/activity with the reporting entity, including beneficial owners.
• Customer Due Diligence (CDD): Identifying and verifying the customer and the beneficial owner using reliable independent sources.
• Officially Valid Document (OVD): Passport, Driving Licence, proof of possession of Aadhaar number, Voter’s ID issued by Election Commission of India, NREGA job card, or letter from National Population Register (NPR).
• Deemed OVDs (for address proof if current address differs): Utility bills not older than 2 months (electricity, telephone, piped gas, water), municipal tax receipts, pension payment orders (PPOs), or official employer accommodation letters. Updated OVD with current address must be submitted within 3 months.
• Beneficial Owner: The natural person who ultimately owns or controls the client (e.g. >= 15% controlling interest for companies/partnerships) or exercises effective ultimate control.
• Suspicious Transaction: Transactions giving rise to reasonable suspicion of offence proceeds, unusual/unjustified complexity, absence of economic rationale, or terror financing link.
• Video-based Customer Identification Process (V-CIP): Live, informed-consent audio-visual interaction by authorized officials treated on par with face-to-face CDD.
• Politically Exposed Persons (PEPs): Individuals entrusted with prominent public functions in a foreign country (Heads of State, senior politicians, government/military officers).

3. Customer Acceptance Policy (CAP)

• No transaction or account-based relationship is undertaken without completing CDD procedures.
• No account is opened where CDD cannot be verified due to non-cooperation or unreliability of data.
• No account is opened in anonymous, fictitious or benami names.
• Mandatory checks before onboarding against sanctions lists circulated by the Reserve Bank of India, UNSC and FATF.
• CDD is followed at Unique Customer Identification Code (UCIC) level and for all joint account holders.
• Mandatory PAN verification with the issuing authority (Income Tax Department / NSDL / UTIITSL).
• Digital signature verification for equivalent electronic documents as per Information Technology Act, 2000.
• Accounts are NOT opened on behalf of clients by professional intermediaries (lawyers, CAs) bound by secrecy obligations that prevent disclosing beneficial ownership.

4. Risk Categorization & Management

Customers are classified into three risk categories: Low Risk, Medium Risk, and High Risk. Categorization considers: nature of customer business, workplace location, social and financial status, loan quantum and repayment tenure, legal constitution (individuals, partnerships, private/public ltd, trusts, NGOs), transparency of ownership, high-risk AML industries (bullion, casinos, arms & ammunition), presence of PEPs, and cross-border import/export activities.

Accounts are reviewed periodically for risk categorization at least once every six months, with enhanced due diligence applied to high-risk profiles.

5. Customer Due Diligence (CDD) Procedures

• Individuals: Proof of possession of Aadhaar (via e-KYC authentication or offline verification), PAN or Form 60, and verified contact details.
• Sole Proprietary Firms: CDD of the individual proprietor plus registration certificate, GST return, bank statement, or statutory licenses.
• Legal Entities (Companies, Partnerships, Trusts): Certificate of Incorporation, Partnership Deed, Trust Deed, Resolution of Board/Governing Body, PAN, and CDD of authorized signatories and Beneficial Owners.
• Reliance on third-party CDD: Permissible only where third-party is regulated and supervised, records obtained within 2 days, and ultimate responsibility remains with Kaynet.

6. Monitoring of Transactions

Kaynet does not accept any public deposits. Loans are short-term EMI-based digital personal loans. Transactional monitoring is focused on disbursements and EMI repayments.

Special attention is paid to unusually complex, large or irregular transactions without apparent economic rationale. Threshold limits for turnover are calibrated to aggregate EMIs, penal interest and loan repayments.

7. Risk-Based Periodic Updation of KYC

• High Risk customers: KYC updated at least once every two (2) years.
• Medium Risk customers: KYC updated at least once every eight (8) years.
• Low Risk customers: KYC updated at least once every ten (10) years.
• Low risk individual customers with no change in status may provide self-declaration via registered email/mobile.
• Address change only: Self-declaration obtained and verified within 2 months via positive confirmation.

8. Records Maintenance & Retention

In terms of Rule 3 of PML Rules, 2005, the Company maintains all necessary records of domestic and international transactions for at least five (5) years from the date of the transaction.

Customer identification records, address proofs, and loan agreements are preserved for at least five (5) years after the business relationship has ended, and made available to competent authorities upon request.

9. Governance, Reporting & Training

• Appointment of Designated Director and Principal Officer (intimated to FIU-IND and RBI within 1 month). The Principal Officer cannot be nominated as Designated Director.
• Reporting to FIU-IND: Cash and Suspicious Transaction Reports (STRs) are reported to the Financial Intelligence Unit – India.
• International Agreements: Strict compliance with UNSC Sanctions Lists (ISIL, Al-Qaida, 1988 Taliban Sanctions) and Section 51A of UAPA Act 1967.
• Customer secrecy is maintained under Section 45NB of RBI Act 1934.
• KYC data is captured and uploaded to the Central KYC Records Registry (CKYCR) in prescribed templates; CKYC Identifier is communicated to borrowers.
• Ongoing AML/KYC training programs are conducted for frontline employees, branch staff, and new joiners.