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Special Deposit Accounts: Banks say no compromise on KYC, CDD

12 Jul 2020

By Madhusha Thavapalakumar Know Your Customer (KYC) and Client Due Diligence (CDD) policies are not being compromised in getting depositors on board for the recently announced “no-questions-asked” Special Deposit Account (SDA) scheme, according to the banking industry of Sri Lanka.   Senior officials from the banking sector who wished to remain unnamed told The Sunday Morning Business that despite the statements made by certain politicians when announcing the SDA, banks ensure full implementation of KYC and CDD policies in order to keep up with the international banking requirements. Accordingly, KYC and CDD policies apply fully for the SDAs and this is to make sure deposits made under this type of account are legitimate and would not risk the country getting back into the European Commission’s (EC) list of High-Risk Third Countries with Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) strategic deficiencies. “We have to ensure that KYC requirements are followed, because ultimately the country has to work according to international banking standards and other regulators. We are maintaining the same standards for the SDA too,” one official noted. Meanwhile, senior officials from the Bank of Ceylon (BOC), People’s Bank, Hatton National Bank (HNB), Commercial Bank of Ceylon, and Sampath Bank too told The Sunday Morning Business that their respective banks implement 100% of KYC and CDD policies for SDAs as they are bound to abide by the regulations set for the banking industry and cannot make any exemptions for the SDA. KYC or KYC check is the mandatory process of identifying and verifying the identity of the client when opening an account and periodically over time. Banks may refuse to open an account or halt business relationships if the client fails to meet the minimum KYC requirements. CDD is a process where relevant information about a customer is collected and subsequently evaluated to determine the risk of money laundering. KYC checks are done at the first stage of establishing business relations while CDD is an ongoing control of suspicious activity. Speaking further, an official termed opening SDAs while maintaining international banking standards as a “double edged sword”. “If you do not maintain the standard there will be a lot of inquiries. Depositors might come one day and they might go soon as well. Ultimately, the country will also not benefit. Sri Lanka came out from the EU’s grey list. We do not want to tarnish our image again because the repercussions are much higher, as the correspondent banks we are working with would look at these standards and start questioning,” the official noted. Nevertheless, according to the official, banks have received clean money requests too. Even though there was an initial doubt on whether banks’ balance sheets could accommodate deposits that come in large sums, it no longer persists as the response for the SDA has been somewhat lesser than expected by the Government. As of Thursday (9), HNB had received $ 25 million worth of deposits under the SDA, BOC had received $ 10 million from 500 depositors, and Sampath Bank had received $ 5.4 million from 160-170 depositors. The dollar-deprived Government invited expatriate Sri Lankans and local and foreign investors to deposit foreign currencies in any approved commercial bank in Sri Lanka under a SDA scheme that provides a 2% extra interest rate per annum.  The announcement was made by Co-Cabinet Spokesperson Dr. Bandula Gunawardana on 30 April, where he stated that no questions would be asked and no taxes would be charged from the depositors who deposit money under the SDAs. According to the Central Bank of Sri Lanka (CBSL), the SDA will not be subject to any foreign exchange regulations published in Gazette Notification No. 2045/56 dated 17 November 2017. Meanwhile, the CBSL entered into agreements to begin the process of developing blockchain technology-based shared KYC proofs of concept (POCs) on 7 July 2020. CBSL Governor Prof. W.D. Lakshman stated: “Evaluating the feasibility of using a technology such as blockchain to securely share KYC information has the potential to vastly increase the digital financial inclusion of Sri Lankans. Shared KYC opens avenues to seek opportunities to increase access to financial services through digital and remote onboarding.”


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