KYC and Anti Money Laundering Policy

1. Introduction

Pursuant to the Government of India’s approval, India Infrastructure Finance Company (UK) Limited (“IIFC (UK)”, or “the Firm”) who was incorporated on February 7, 2008 under the UK Companies Act 1985 with its registered office at Third Floor 72 King William Street London EC4N 7HR United Kingdom. IIFC (UK) is a wholly owned subsidiary of the India Infrastructure Finance Company Limited (IIFCL) which, in turn, is wholly owned by the Government of India. The Companies House registration number of IIFC (UK) is 06496661. India Infrastructure Finance Company (UK) Limited is registered with the FCA FRN 497234.

This policy outlines IIFC (UK)’s approach to preventing and detecting Money Laundering, Terrorist Financing, and Proliferation Financing. The policy has been created utilising guidance issued by the Financial Conduct Authority (FCA), Her Majesty’s Revenue & Customs (HMRC), the Joint Anti-Money Laundering Steering Group (JMLSG), as well as best practice guidance issued for the Annex I financial institution sector..

1.1 AML Policy Statement

IIFC (UK) fully acknowledges that its products and services are at risk from individuals or groups seeking to launder criminal proceeds or facilitate funds designated for the financing of terrorism. As such, IIFC (UK) is committed to fostering and promoting a compliance culture throughout the Firm which underpins the importance of preventing Money Laundering, Terrorist Financing, and Proliferation Financing.

IIFC (UK) recognises it has a statutory duty under UK law to prevent the facilitation of its services for Money Laundering, Terrorist Financing, and Proliferation Financing purposes. Subsequently, IIFC (UK) pledges to allocate sufficient resources to the Firm’s internal controls, monitoring system, human resources and staff training to prevent financial crime.

1.2 Scope

This policy and its associated procedures must be followed by all employees, directors, officers, contractors, subcontractors, and associated agents. This includes any individuals or parties based in another country who are acting on behalf of the Firm.

Failure to comply with the requirements of this policy (and the associated procedures) may result in disciplinary action, and could also result in the employee, director, officer, contractor or subcontractor and the Firm, facing criminal, civil and regulatory penalties.

1.3 Objectives

The objectives of the policy are to:

Outline the Firm’s core principles to ensure compliance with applicable regulations and legislation.

Emphasise our stringent commitment to preventing IIFC (UK) being used as a conduit to deposit, conceal and transfer criminal proceeds or funds intended for orchestrating terrorism.

Summarise the main procedures, systems, and controls IIFC (UK) has implemented to prevent and detect Money Laundering, Terrorist Financing, and Proliferation Financing.
Clearly outline the responsibilities of the IIFC (UK)’s senior management, and other key individuals in relation to the Firm’s AML/CTF strategy.
Explain the most up-to-date Money Laundering, Terrorist Financing, and Proliferation Financing risks that IIFC (UK) is vulnerable to and how the Firm intends to counteract these risks.
Confirm that IIFC (UK) will take steps to monitor compliance with this policy throughout the

2. Money Laundering: Definitions

2.1. Money Laundering

Money Laundering is the process of cleaning and sanitising illegally obtained proceeds or funds in order to conceal their illicit origins. If the operation is successful, the money will lose its criminal identity and appear legitimate. Illegal arms sales, smuggling, and organised crime activities such as drug trafficking and prostitution can generate large sums of money.

Money or money’s worth, securities, tangible property, and intangible property are all examples of criminal property. However, it also includes money used to fund terrorism.

Money Laundering activity can include:

Acquiring, using or possessing criminal
Handling the proceeds of crimes such as theft, fraud and tax
Being knowingly involved in any way with criminal
Entering into arrangements to facilitate laundering criminal

2.1.1 Three Stages of Money Laundering

The Money Laundering process traditionally follows three stages:

Placement

The placement stage represents the initial entry of proceeds derived from an illegal activity into the financial system. It is during the placement stage when criminal transactions are most vulnerable to detection.

Layering

Layering is the most complex stage of the process, where criminals aim to separate the illegal proceeds from their illicit origin. This is traditionally done via several complex transactions within the international financial systems. It is common for criminals at this stage to transfer funds electronically between jurisdictions and invest them into advanced financial products or overseas markets. This is done repeatedly to obscure the audit trail and decreases the probability of law enforcement authorities tracing the proceeds to their original crime.

Integration

It is at this final stage where the money is returned to the criminal as “clean” funds as they appear to come from a legitimate source. Having been “placed” as cash and “layered” through several complex financial transactions, the criminal proceeds are now “integrated” into the financial system and can now be used for any purpose.

2.2 Financial Crime

In accordance with section 1H of the Financial Services and Markets Act 2000, any kind of criminal conduct relating to money or to financial services or markets, including any offence involving:

fraud or dishonesty; or
misconduct in, or misuse of information relating to, a financial market; or
handling the proceeds of crime; or
the financing of terrorism; H of

in this definition, “offence” includes an act or omission which would be an offence if it had taken place in the United Kingdom.

Financial Crime encompasses a range of illegal activities involving money, assets, or financial systems. It refers to the commission or facilitation of various offenses that exploit financial institutions, systems, or transactions for unlawful purposes. Financial Crime can take different forms, including but not limited to:

Money Laundering
Fraud
Bribery and corruption
Tax evasion
Insider trading

The Firm is committed to combating Financial Crime by implementing adequate framework and adhering to regulatory requirements.

2.3 Terrorist Financing

Terrorist Financing is the use of funds or the provision of funds for terrorist purposes. This is the sum of funds contributed by individuals and organisations to the financing of terrorist activities or terrorist organisations.

The source of Terrorist Financing can take many forms, including:

Self-financing from individuals, including but not limited to income from employment, savings, borrowed money from families or friends and bank loans.
Funds raised by legitimate charities affiliated to or sympathetic to terrorist
States directly or indirectly sponsoring terrorist

IIFC (UK) is committed to ensuring that:

Our clients are not terrorist organisations
We are not providing the means through which terrorist organisations can be funded (i.e. by providing loans and other services to individuals who intend to finance terrorism).

2.4. Proliferation Financing

Proliferation Financing is viewed as the act of providing funds or financial services for use, in whole or in part, in the manufacture, acquisition, development, export, trans-shipment, brokering, transport, transfer, stockpiling of, or otherwise in connection with the possession or use of, chemical, biological, radiological or nuclear weapons, including the possession on of funds or financial services in connection with the means of delivery of such weapons and other related activities. This type of illicit financing can be subtle and difficult to detect, however, certain patterns and behaviours may serve as indicators of Proliferation Financing:

Unusual payment
Transactions linked to Sanctioned
Mismatched
Use of front
Avoidance of traditional
Links to research
Transactions related to the purchase, sale, or transfer of technical

3. AML/CFT in India

Considering the India centric business profile of IIFC (UK), the main components of the KYC/ AML/CFT regime in India are briefly discussed below:

India is a member of both the Asia Pacific Group on Money Laundering, and the Financial Action Task Force (FATF), which are inter-governmental bodies whose purpose is to develop and promote broad AML/ CFT standards both at national and international levels.

The Prevention of Money-Laundering Act, 2002 was passed by the Indian Parliament and came into effect since 1st of July, 2005. The Act has been amended by the Prevention of Money Laundering (Amendment) Act, 2012.

India has a fully functional Financial Intelligence Unit (FIU) under the Ministry of Finance, Government of India. The FIU is responsible for receiving, processing, analysing and disseminating information relating to suspect financial transactions. It is also responsible for coordinating and strengthening the efforts of national and international intelligence, investigation and enforcement agencies in pursuing the global efforts against Money Laundering and related crimes.

The Reserve Bank of India issues detailed instructions on KYC, AML/CFT guidelines and monitors compliance by all the banks and financial institutions. In addition, adequate control is exercised by Reserve Bank of India on foreign exchange remittances to and from India. The loans by IIFC (UK) are treated as External Commercial Borrowings (ECB) and strict and well laid guidelines regulate such ECB loans. For each loan a commercial Bank in India is appointed as an Authorised Dealer Bank (from the list of banks authorised by the Reserve Bank to act as AD Bank). All the remittances (like interest payments, debt repayments etc) are necessarily routed through such AD Bank. Therefore, in addition to the checks at IIFC (UK), checks in India as per prevailing regulations also provides a lot of comfort in addressing any potential issues.

As a UK incorporated entity, IIFC (UK) is also required to adhere to all relevant UK regulations. The Prevention of Crimes Act and Part 3 of the Terrorism Act as amended from time to time, decide whether these should be reported to the National Crime Agency, and, if appropriate, make such external reports. Given the present lean and thin organisational structure of IIFC (UK), an officer of the IIFC (UK) will act as the Nominated Officer (NO). (Manager/Asst. General Manager of IIFC(UK))

4. UK Legislation & Regulation

IIFC (UK) is fully aware of the UK’s regulatory framework relating to AML and CTF. IIFC (UK) also provides regular training to our employees to ensure they have sufficient knowledge of the UK’s regulatory framework.

IIFC (UK) is required to adhere to the following legislation and regulations:

The Proceeds of Crime Act 2002 (as amended by the Crime and Courts Act 2013 and the Serious Crime Act 2015)
Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017, as amended 2019 and as amended 2022.
The Terrorism Act 2000 (as amended by the Anti-Terrorism, Crime and Security Act 2001, the Terrorism Act 2006 and the Terrorism Act 2000 and Proceeds of Crime Act 2002 (Amendment) Regulations 2007).
The Counter-Terrorism Act

Due to changes made in the MLRs Regulations 74A and 74C(1) will now apply to Annex 1 financial institutions. IIFC (UK) recognizes and acknowledges its new reporting requirements, where upon FCA’s request the Firm must provide to the Regulator information about: compliance by the Firm with requirements in or under Parts 2 to 6 of the MLRs; required by the FCA for the purpose of calculating charges under regulation 102 (costs of supervision); or otherwise reasonably required by the FCA in connection with the exercise by the FCA of any of its supervisory functions.

The FCA may either send a written notice to the Firm requiring IIFC (UK) to appoint a skilled person to provide the FCA with a report as abovementioned or may itself appoint a skilled person to do so, and recover any expenses incurred in doing so as a fee to be payable by the Firm. The skilled person must appear to the FCA as possessing necessary skills to produce report containing requested information. Where an appointment is made by the Firm, the skilled person shall be nominated, or approved by the FCA.

Furthermore, under the new regime the FCA may exercise its powers of direction in writing in relation to: imposing a new direction, varying a direction imposed under the regulation, or rescind such a direction either on its own initiative, or on the request of the Firm. A direction may be imposed after registration for the purpose of remedying a failure to comply with a requirement under MLRs, preventing a failure to comply, or continued non- compliance with a requirement under these Regulations, or preventing the Firm from being used for Money Laundering, Terrorist Financing or Proliferation Financing.

4.1 Offences

The above legislation and regulations outline multiple Money Laundering and Terrorist Financing offences, which IIFC (UK) is committed to avoiding. The key offences under the applicable legislation and regulation are as follows:

Concealing (Subject to a maximum 14-year jail term and/or a fine)
- It is an offence to help conceal, disguise, convert, transfer or remove funds from the UK if you know, should have known, suspect or should have suspected that the funds were the proceeds of criminal conduct.
Arrangements (Subject to a maximum 14-year jail term and/or a fine)
- It is an offence to enter into or become concerned with an arrangement if you know, should have known, suspect or should have suspected that the arrangement facilitates the acquisition, retention, use or control of criminal property.
Acquisition, use, and possession of funds (Subject to a maximum 14-year jail term and/or a fine)
- Regardless of any attempt to conceal or disguise the criminal origin of property, it is an offence to acquire, use or possess criminal property. This offence does not require the laundering process to be actively undertaken.

Tipping Off (Subject to a maximum 5-year jail term and/or a fine)
- It is an offence for anyone to take any action likely to prejudice an investigation by informing the person who is the subject of a suspicious activity report, or anybody else, that a disclosure has been made, or that the police or customs authorities are carrying out or intending to carry out a Money Laundering investigation.

Failure to Report (Subject to a maximum 5-year jail term and/or a fine)
- It is an offence to turn a ‘blind eye’ to Money Laundering. It is a criminal offence for persons working in the regulated sector to fail to report where they have knowledge, suspicion or

reasonable grounds for knowledge or suspicion that another person is engaged in Money Laundering.

Laundering Terrorist Property (Subject to a maximum 14-year jail term and/or a fine)
- It is an offence to enter into or become concerned in an arrangement which facilitates the retention or control of terrorist property by concealing, removing it from the jurisdiction, transferring it to nominees or in any other way.

4.2 Directions from HM Treasury

Concerning the Money Laundering, Terrorist Financing, and Proliferation Financing threat that certain designated countries pose to the UK, IIFC (UK) will comply with all applicable directions issued by HM Treasury under Schedule 7 of the Counter-Terrorism Act 2008.

5. Risk-Based Approach

IIFC (UK) applies a risk-based approach with regards to its AML/CTF strategy and routinely identifies and assesses the Money Laundering, Terrorist Financing and Proliferation Financing risk the business is exposed to.

The Money Laundering and Terrorist Financing (Amendment) (No. 2) Regulations 2022 adds Proliferation Financing to the list of financial crime risks covered by the MLRs 2017, alongside Money Laundering and Terrorism Financing. It creates new obligations on the Treasury and relevant persons to incorporate Proliferation Financing into their existing Money Laundering and Terrorist Financing risk assessment processes, to identify and assess any additional, specific risks posed. The requirements around establishing and maintaining policies, controls, and procedures to mitigate and manage risks effectively are also extended to require relevant persons to ensure these address Proliferation Financing risk.

As required under the Money Laundering Regulations, IIFC (UK) will conduct a regular risk assessment to examine all risks of Money Laundering, Terrorist Financing and Proliferation Financing to which to business is subject. In assessing and identifying such risks, the Firm will take into consideration the following factors:

Risks posed by the Firm’s customers;
Products and services offered by the Firm;
The geographical areas where the Firm operates;
Delivery channels the Firm uses;
The volume and complexity of the Firm’s

Once the risks have been identified and assessed, IIFC (UK) pledges to amend its policies, procedures, and controls in accordance with the underlying risks.

5.1 Risks Identified

IIFC (UK) has conducted a risk assessment to identify the most potent Money Laundering and Terrorist Financing risks for the which the Firm is vulnerable. A full list of risks identified by the Firm in its most recent risk assessment can be found below.

When considering the probability of a risk occurring, IIFC (UK) will consider the following factors:

The extent to which a potential risk’s vulnerability or weakness can be exploited
The extent to which individuals or entities are likely to exploit that risk
The prevalence of the risk within the sector(s) that the Firm operates in and the countries the Firm operates in

When considering the impact of a risk occurring, IIFC (UK) will consider the following factors:

The extent of the reputational damage the Firm will experience if the risk occurs (including adverse media coverage)
The extent of the amounts of funds that can potentially be laundered or used to fund terrorism
The extent of the enforcement action taken against the Firm by the FCA is the risk is discovered to have occurred
The extent of the costs incurred by the Firm to implement controls to mitigate the risk

5.1.1 – Customer Risk

IIFC (UK) does not primarily deal with retail or individual clients and deals typically with corporates. Such entities may either be listed or unlisted. The entities which are listed are typically listed on either the Bombay Stock Exchange (“BSE”) and the National Stock Exchange (“NSE”) in India. These firm types will follow a rigorous regulatory undertaking whilst having to adhere to the directions from the Securities & Exchange Board of India, the capital markets regulator of India.

As a result of the continuous compliance and Anti-Money Laundering regulatory requirements these firm types will have to undergo through their operating lifecycle public listed entities pose a lower risk to Money Laundering, Terrorist Financing, and Proliferation Financing. Public listed companies will have strong internal controls that allow all staff members to have the ability to report any potential illegal activity conducted within the Firm. All new opportunities or projects the Firm undertake will be subject to upper management sign off before the process can begin.

Large corporate will display characteristics such as complex ownership structures, middle, senior and executive management structures, these firm types will have a board of directors that the Firm will answer into and who will steer the direction of the business. Due to the size of the business and it potential branches to the business there is a lack of immediate transparency of the ultimate beneficial ownership. However, due to the size of these firm types it is likely these companies will be regulated by a governing body and will have to uphold a high level of compliance within the Firm, further to that due to the size of the business other controls that are mandatory will include having audited financial that are publicly available.

Large corporate structures pose a medium to high risk towards Money Laundering, Terrorist Financing, tax evasion bribery and corruption due to the many layers of management and a lack of clear oversight and visibility of the day-to-day operations form the executive management team. These entity types can have corporations linked to the business that are registered in “tax haven” countries which are not obligated to disclose incorporation documents, articles of associations, trust structures and so forth, therefore it is harder to have a full understanding of the Firms dealings. Large corporate entities are more likely to be linked to Money Laundering activities as it can be easily concealed through “fancy” accounting therefore the legitimacy of the business operations can be questionable.

Due to the Firm’s core customer type and the type of entities they are i.e. large corporate or publicly listed entities, often these companies will have beneficial ownership that will lead into a government entity which will have board members and/or non-executive board members who are classified as PEPs. These PEPs normally do not have any direct control or influence with the company that is IIFC (UK) customer.

Although there may be a PEP connection in a scenario such as this it does not directly increase the risk towards Money Laundering/ Terrorist Financing, as the PEP that has been identified does not have any controlling influence within the Firm. The risk will lay in appropriately identifying who the PEP is. As these PEP’s are in government official positions the Firm may not be able to directly obtain ID&V of the customer. Other PEP types that will be on IIFC (UK’s) platform will include those who are directly involved with the Firm that is being onboarded to IIFC (UK)’s platform. These PEPs will wither have a large controlling potion of the ownership of the Firm or they are a director and have influence within decisions made within the Firm.

These PEPs do pose a higher risk towards Money Laundering and Terrorist Financing as their potential politically reach can cause them to use the Firm a vehicle for Money Laundering and/or use the company as a front for financing Terrorist Financing.

IIFC (UK) will always ensure enhanced due diligence is carried out on the identified PEP’s which are involved in day to day operations of the company.

Proliferation of finance risk:

IIFC(UK) makes remittances through banking transactions, conducting of businesses in international markets may possess Proliferation Financing risks, owing to factors such as nature, scale, geographical diversity, customer profile and the volume and size of the transaction etc.

1.1.2 Jurisdictions

IIFC (UK) only deal with entities that have been incorporated in India and operate in India. India has been identified as a medium risk jurisdiction. IIFC (UK) undertake the relevant due diligence of these customer as a part of its client onboarding.

Proliferation of finance risk:

5.1.3 – Product & Services

IIFC (UK) offers very limited type of products and all of its loans are classified as External Commercial Borrowings as per the guidelines laid out by the Reserve Bank of India. All such loans have very specific loan agreements attached to it. While financing the infrastructure projects directly, since IIFC (UK) restricts its exposure to a maximum of 20% of the project cost, there are typically other lenders and the financing is as a part of a syndicate/consortium. Also, presently, IIFC (UK) provides financing to infrastructure projects in India, that have an interest in developing India. IIFC (UK) also considers providing loans to other financial institutions which are regulated by the Reserve Bank of India.

The repayment structure will have been pre sanctioned before the full agreement has completed the repayment period is in line with its mandate (typically long and not less than the average maturity as prescribed by the Reserve Bank of India for ECB Loans as outlined in the External Commercial Borrowing guidelines.

This product/service IIFC (UK) offer poses a very low risk to Money Laundering and Terrorist Financing as the Firm is lending the money to large reputable firms and the borrowing by such firms from overseas (including from IIFC UK) is strictly regulated by the Reserve Bank of India.

Proliferation of finance risk:

5.1.4 – Transaction Risk

Presently, apart from Equity and internal accruals, IIFC (UK)’s major source of long-term funds is the Reserve Bank of India (RBI – the Central Bank of India). Typically, a RBI regulated entity is designated as the Lead Lender of the syndicate/consortium. As stated above as per regulations prevailing in India, the Lead Lender and other lenders also undertakes KYC/AML and CFT checks on the borrower. Disbursement requests from the borrowers are only usually considered by IIFC (UK) when they are received from the Facility Agent with their views/recommendation. The amount disbursed by IIFC (UK) is typically remitted to the Nostro account of a Banking entity (regulated entities) for onward remittance to the supplier(s)/ other banks. Typically, the payment of interest and repayment of loans by the borrowers are made through the Trust and Retention Accounts maintained with the Commercial Bank (regulated entity) and is also through the appointed Authorised Dealer Bank. It is not envisaged that there will be any disbursement/repayment of the loans in IIFC (UK) operations, in the form of cash.

Proliferation of finance risk:

Considering the method of transaction method described here, the risk of Money Laundering has been deemed low to very low risk.

5.1.5 – Delivery Channel

In providing funding to infrastructure projects directly, IIFC (UK) considers approval for such funding based on the appraisal of the reputed appraising agency / lead lender of the consortium/syndicate. Such appraisal also typically involves review of ownership, directors, experience, reputation of the borrower etc. Due diligence is also carried out before every disbursement made out by IIFC (UK) Ltd. Such due diligence among other things typically involves procuring a report from the Independent Lenders Engineer, certification from a chartered accountant. Also, after the disbursement is made end use of such disbursement is ascertained by way of various certifications. Moreover, typically the disbursements are made through banking channels only (in most of the cases through the Authorised Dealer Bank / L/C Issuing Bank or Document Handling Bank). All the debt servicing by the borrower is typically also routed through the Banking channels and specifically through the Authorised Dealer Bank.

Proliferation of finance risk:

This delivery channel poses a low risk towards Money Laundering and/or Terrorist Financing.

5.2 Control Risk Score Calculation

Given the control framework the Firm has outlined through this policy, other associated financial crime framework documentation and the risks that the Firm manages, the Firm has adequate controls and therefore overall residual risk is very low.

5.3 AML/CTF/CPF Risk Appetite

IIFC (UK) has a highly adverse risk appetite for the Firm being used as a vehicle for the purposes of laundering criminal proceeds or allowing Terrorist Financing.

IIFC (UK) has calculated its residual risk against risk appetite and is satisfied that the risk of Money Laundering is within the Firm’s risk appetite.

6. Due Diligence

IIFC (UK) carries out due diligence assessment on all the borrower entities (entities to which IIFC (UK) provides loan) it deals with from a financial crime prevention perspective (Appendix I). Such due diligence assessments are undertaken each time IIFC (UK) makes a disbursement with regards to a loan sanctioned to such client. Once the disbursements are complete, IIFC (UK) once in 2 years frequency seeks to ascertain changes if any in KYC of the client. Some clients may provide a greater risk to the business based on a number of factors including nature of business, ownership or legal structure etc. Therefore, in order to correctly risk assess the client and apply the Firm’s resources accordingly, IIFC (UK) will carry out a risk assessment of each client. The risk rating applied to the client will determine the level of due diligence required for that particular client.

A standard risk client has one or more of the following factors (to illustrate):

operating in a high-risk business type such as mining or shipping
Politically Exposed Person involvement at leadership or ownership level
a higher risk legal entity structure
significantly or unnecessarily complex ownership structure
operational or incorporated in a jurisdiction with low ABC controls

The list is not exhaustive and IIFC (UK) will consider other factors that may point to a greater risk of financial crime from a specific client before determining the level of risk that the entity poses to IIFC (UK). This level of risk will require Enhanced Due Diligence (EDD) to be applied to the client. As per the risk appetite of IIFC (UK), the EDD categorisation is equivalent to standard risk KYC. KYC for a standard client will need to be renewed on a 2 year cycle in respect of any changes to the KYC.

A lower risk client is one with no high-risk factors identified as part of the risk assessment and is regulated by or listed on an equivalent regulator or stock exchange. In this instance, the client will be classified as lower risk, and the evidence of this decision will be maintained along with any KYC documentation collected for the client. The client’s KYC will need to be renewed on a 3-year cycle in respect of any changes to the KYC.

6.1. Customer Due Diligence

Customer Due Diligence (CDD) is required to verify customer’s identity and comprise the risk profile of the customer. To complete CDD, ID must be sought. This could include IIFC (UK) requesting a physical copy of the customer’s government issued ID and/or by performing electronic Know Your Customer (KYC) checks and requesting financial information of customer. Further, it may be mentioned that typically the infrastructure project is undertaken on SPV basis and have escrow account to control & monitor the cash flows of the project.

Standard CDD must be obtained in relation to regulated firms taken on as clients. This is likely to take the form of a check against the FCA Financial Services Register (or another regulatory record, as required), combined with the obtaining of client legal documents such as memoranda and articles and documentary evidence of the identity of the individuals representing the client firm.

In order to identify the project company and its beneficial owners (shareholders owning /controlling more than 25 percent of the shares or the voting rights in the project company), KYC documents will be obtained (Appendix II).

6.1.1. Listed Entities:

For companies listed on regulated/equivalent markets/BSE/NSE and companies that are subsidiaries or special purpose vehicles (SPVs) of such companies, the following information/documents shall be obtained:

Full Name of the company
Registered Number and PAN Number

Registered Office of the company

Business and correspondence address
Names of directors
List of shareholders holding more than 25 percent shares in the

Nature of business
List of authorised officials who have authority to give the instructions to IIFC (UK) in relation to the loan (supported by signed copy of the company’s Board Resolution)

Of above, item (i) to (vii) may be confirmed by visiting the website(s) of the concerned stock exchange/s or from audited accounts.

6.1.2. Unlisted companies:

In respect of unlisted companies, the following documents shall be obtained:

Full Name of the company
Memorandum and Articles of the company

Registered Number and PAN number

Registered Office of the company
Business and correspondence address
Names of directors

Names of beneficial owners holding more than 25% shareholding

Care should be taken to ensure that the individual acting for the company is authorised to do so. Before a business relationship is established steps should be taken by way of company search and /or other commercial enquiries to ensure that the company has not been, or is not in the process of being, dissolved, struck off, wound up or terminated (Appendix-I). It is also necessary to ensure that the applicant exists at the address provided (and for a legitimate purpose).

6.2. Enhanced Due Diligence

Enhanced Due Diligence (EDD) will be required when the risk assessment has ascertained that the customer poses a high risk of Money Laundering to mitigate the increased risk to the business. This includes, but is not limited to, customers that are or may be Politically Exposed Persons and/or Sanctioned individuals.

In addition, customers found to be residing in/transferring to high-risk countries and customers performing large or complex transactions that cannot be explained when considering the client’s transaction history will also be subject to EDD by IIFC (UK).

What EDD entails will be dependent on the nature and severity of the identified heightened risk. This could include, but is not limited to, obtaining additional ID evidence, ID verification, a full description of the source of wealth and funds. All EDD customers must be signed off by the IIFC (UK)’s nominated officer before the relationship is finalised and before any transactions take place.

Amendments to regulation 33 of the 2019 MLRs require firms to include additional high-risk factors when assessing the need for enhanced due diligence and seek additional information and monitoring in certain cases.

These may occur where:

there are relevant transactions between parties based in high-risk third countries,
the customer is a third-country national seeking residence rights or citizenship in exchange for transfers of capital, purchase of a property, governments bonds or investment in corporate entities,
there are transactions related to oil, arms, precious metals, tobacco products, cultural artefacts, ivory or other items related to protected species, or archaeological, historical, cultural and religious significance, or of rare scientific value

As per the risk appetite of IIFC (UK) the customer may need to undergo Enhanced Due Diligence (EDD) to be applied to the client. Below outlines the list of when EDD measures are required to be undertaken within the Firm. This may include one or more of the following-

Obtaining additional information on the intended nature and purpose of the business
Obtaining information of the source of funds or source of wealth of a
Obtaining information on the intended purpose of a
Obtaining, and where appropriate verifying, additional information on the customer and beneficial
Screening, where possible, negative information about the customer and his/her business activities through adverse media searches.
Increasing the frequency of reviews on a
Conducting enhanced monitoring of the business relationship, by increasing the number and timing of controls applied, and selecting patterns of transactions that need further examination.

7. Politically Exposed Persons (PEPs)

When a valid PEP, or family member or close associate of a PEP, has been identified, IIFC (UK)’s NO is required to approve the initiation of the bespoke business relationship. This includes the continuation of a relationship with an existing client who may be identified as a PEP following the initial client on-boarding process. In the event that IIFC (UK) identifies a PEP, the Firm will conduct EDD measures determined on a risk-sensitive basis.

IIFC (UK) agrees with the definition of PEP given by the Financial Action Task Force (FATF), which is: ‘an individual who is or has been entrusted with a prominent public function’.

IIFC (UK) will initially be made aware of a potential PEP status as a result of the AML checks which is completed across the Firm’s entire customer base and during the initial onboarding process. IIFC (UK) will then conduct a full media search on the potential PEP before assessing whether it is a ‘true match’. The results of this search are to be submitted to the NO for consideration.

7.1. Enhanced due diligence for PEPs

A Politically Exposed Person (PEP) is defined by the FCA as ‘Individuals entrusted with prominent public functions’. The definition of a ‘prominent public function’ will vary according to the nature of the function held by a person. IIFC (UK) is required to understand the nature of each position held and whether the function gives rise to the risk of large-scale abuse of position.

The FCA’s guidance helps provide clarity on the definition of a prominent public function:

Heads of state, heads of government, ministers, and deputy or assistant
Members of parliament or of similar legislative
Members of supreme courts, of constitutional courts or of any judicial body the decisions of which are not subject to further appeal except in exceptional circumstances.
Members of courts of auditors or of the boards of central
Ambassadors, charges d’affaires and high-ranking officers in the armed
Members of the administrative, management or supervisory bodies of State-owned
Directors, deputy directors and members of the board or equivalent function of an international

A ‘known close associate’ of a PEP is defined as including:

An individual known to have joint beneficial ownership of a legal entity or a legal arrangement or any other close business relationship with a politically exposed person.
An individual who has sole beneficial ownership of a legal entity or a legal arrangement that is known to have been set up for the benefit of a PEP.
A known close associate of a PEP is not a PEP themselves but purely through being associated with a
A family member of a PEP is defined as including:
Spouse, or civil

Children and their spouses or civil

Under Regulation 2 of the MLR 23, The Firm requires that a domestic PEP, or their family members and close associates, be initially assessed as presenting a lower risk than a non-domestic PEP. If the only risk factor is their status as a domestic PEP, or their connection to one, then the enhanced customer due diligence (EDD) measures should be less extensive than those for non-domestic PEPs. The Firm emphasises that the geographical location of the PEP’s position is crucial in determining the required level of EDD.

7.3. Identification of PEP

The compliance department are required to undertake certain measures when they identify and verify a proposed customer PEP, or family member or known close associate of a PEP’s status. Upon verification of the PEP, or family member or known close associate of a PEP’s status. The following measures should be applied:

Obtain sign-off, as a minimum, from its NO before proceeding with the relationship. The sign-off requirements will vary according to the risk assessed.
Take “adequate measures” to establish the customer’s source of wealth and source of funds relevant to the proposed business relationship or transaction. The adequate measures required will vary according to the risk assessed.
Conducted enhanced ongoing monitoring of the business relationship. The nature and extent of this monitoring will depend on the individual risk assessment for the customer.

As outlined with the business risk assessment, IIFC (UK) will undertake the corrective measure to onboard a PEP.

8. Beneficial Ownership

IIFC(UK) will identify and verify the identity of any beneficial owner of any entity on whose behalf a transaction is being conducted.

Under MLR 2019, relevant persons who identify a discrepancy between the beneficial ownership information available in the People with Significant Control Register and the beneficial ownership information provided by the company in the course of customer due diligence (at the onboarding stage), must report this to Companies House.

The new MLR 2022 removes the timing window to make this an ongoing requirement, but limits the matters that must be reported to “material” discrepancies that may reasonably be considered:

to be linked to Money Laundering or Terrorist Financing, or
to conceal details of the business of the

Specific examples of “material” discrepancies are listed, including incorrect names, dates, dates of birth, nationalities, addresses and missing Persons with Significant Controls. MLR 2022 also extends the discrepancy

reporting regime to discrepancies on the new Register of Overseas Entities maintained by Companies House (which was created under the Economic Crime (Transparency and Enforcement) Act 2022).

A material discrepancy may arise, as the case may be, in relation to information about a beneficial owner and in relation to information about a registrable beneficial owner.

A material discrepancy is one which satisfies either, or both of the conditions of the discrepancy, where by its nature, and having regard to all the circumstances, may reasonably be considered:

to be linked to Money Laundering or Terrorist Financing; or
to conceal details of the business of the

Additionally, a material discrepancy will include at least one of the forms listed below:

a difference in name;
an incorrect entry for nature of control;
an incorrect entry for date of birth;
an incorrect entry for nationality;
an incorrect entry for correspondence address;
a missing entry for a person of significant control or a registrable beneficial owner;
an incorrect entry for the date the individual became a registrable

9. Sanctions

Before dealing with new clients, IIFC (UK) will check to ensure that the individual or firm being dealt with is not subject to sanctions. There are several versions of the full list, available on the UK Government website, in different formats (i.e. Excel, HTML and Plain Text).

In addition, there is a link to enable access to regime specific lists on the UK HMT website. As a UK incorporated entity, the Firm is required to strictly adhere to these requirements.

IIFC (UK) is required to comply with the UK’s financial sanctions regime and recognises its responsibility to deny services and products to individuals who pose a significant Money Laundering and Terrorist Financing risk to the UK and the international financial system.

To comply with the regime, IIFC (UK) screens all persons being on-boarded by the Firm against the most up-to- date consolidated list of sanctions targets issued by the Office of Financial Sanctions Implementation (OFSI). IIFC (UK) also allocates adequate resources on areas of the business that carries a greater likelihood of involvement with targets or their agents. As part of the Firm’s controls, IIFC (UK) monitors payment instructions to ensure that proposed payments to targets or their agents are not made.

If IIFC (UK) freezes a client’s funds under the financial sanctions regime, the Firm must make a report to OFSI and/or NCA.

IIFC (UK) pays close attention to jurisdictions which have been earmarked by international organisations, such as FATF, as having AML/CTF regimes considered to be strategically deficient. FATF frequently publishes documentation available on its websites which identifies and evaluates such jurisdictions.

FATF uses these publications to signal to its members (such as the UK) and other jurisdictions to apply counter- measures to protect the international financial system from the ongoing and substantial Money Laundering and Terrorist Financing risks emanating from these countries.

FATF publishes a list of jurisdictions which have strategic AML/CFT deficiencies for which they have developed an action plan with FATF. This list can be found at: https://www.fatf-gafi.org/en/countries/black-and-grey- lists.html (21^st October 2022)13.1 Terrorist Lists

The acts of terrorism committed against the USA in September 2001 increased the international efforts to locate and cut off funding for terrorists and their organisations. Terrorists often control funds from a variety of sources around the world and employ increasingly sophisticated techniques to move those funds between jurisdictions. In doing so, they require the services of skilled professionals such as bankers, accountants, and lawyers.

The sites below confirm lists of international terrorists: http://www.statewatch.org/terrorlists/thelists.html

https://www.treasury.gov/resource-center/sanctions/SDN-List/Pages/default.aspx

https://www.fbi.gov/wanted/wanted_terrorists

IIFC (UK) understands it is an offence to provide financial services to any suspected or known terrorists and implements measures to prevent this eventuality.

1.1 What do I do if a client appears on the list?

This distinguishes between a ‘target match’ and a ‘name match’. A target match is where the Firm is satisfied that the account held is that of the targeted individual. A name match is where the name of the client has been matched with a target on the Treasury’s consolidated list. This does not necessarily mean that it is one and the same as the target.

All target matches should be notified to HM Treasury. Any funds held should be frozen immediately and details provided to the Asset Freezing Unit (AFU). The Firm will submit an annual statement to the AFU on all frozen assets that it holds.

Where a name match occurs, the Firm will conduct their own enquiries using the ‘KYC information and client profile’ that is available and compare this against the details available on the consolidated list. If after conducting this exercise the Firm is not sure whether the person / entity is one and the same as the target, the Firm will contact the HM Treasury Asset Freezing team for further advice. The details are as follows.

Asset Freezing Unit

HM Treasury

1 Horse Guards Road London

SW1A 2HQ

Email: assetfreezingunit@hm-treasury.gov.uk

1.2 How often do we scan our customer database for target matches?

All new clients will be checked, and a further check should be carried out each time a new transaction is completed.

10. Record Keeping

An Officer at IIFC (UK), may be designated for this purpose as the ‘Designated Officer’, and shall be responsible for verifying the requisite CDD documentation to ensure that documentation received bears appropriate certification and is adequate for its purpose.

The Designated Officer shall prepare a CDD note as per Appendix-I on the basis of verifications made/obtained.

The CDD note shall act as a standalone document and enable a third-party, such as the regulator, to obtain a clear, comprehensive and accurate record of the details of the customer, the customer’s business, etc. The changes in KYC shall be updated in the CDD note as and when new information is provided by the client or when any information about the client comes to the knowledge of IIFC (UK) by the Designated Officer.

The CDD documents and the CDD Note shall be securely kept in its original form as long as the loan is outstanding. When the loan is fully paid off, the original documents will be kept for subsequent 5 years as required under the ML Regulations. In the event that the information is required for the prevention of Money Laundering, all unnecessary information relating to any individual will be removed and the information may be kept for a further 5 years.

JMLSG supports the above by confirming that a firm’s records should cover:

Customer
The information relating to the identification and verification of relevant
The addresses or accounts involved (or equivalent identifiers).
The nature (e.g., deposit, transfer, exchange) and date of
The amounts
Internal and external suspicion
MLRO annual (and other)

Information not acted
Training and compliance
Information about the effectiveness of

[Firm to insert short paragraph about its record deletion process i.e. if there is a specific person or team that does this, or if information automatically deletes after a certain time.]

11. Suspicious Activity Reports

IIFC (UK)’s nominated officer must report to the NCA any transaction or activity that, after their evaluation, they know or suspect, or have reasonable grounds to know or suspect, may be linked to Money Laundering and Terrorist Financing. This is done by means of a Suspicious Activity Report (SAR). Such reports should be made as soon as is reasonably practicable upon receiving the notification of suspicion. IIFC (UK)’s nominated officer must consider each report of suspicious activity from within the Firm and determine whether it gives rise to knowledge or suspicion, or reasonable grounds for the knowledge or suspicion of Money Laundering or Terrorist Financing. Any approach to the customer or to the intermediary should be made sensitively by someone other than the nominated officer, to minimise the risk of alerting the customer or an intermediary that a disclosure to the NCA is being considered. Under no circumstance, is the individual under suspicion to be informed of a pending investigation.

IIFC (UK) fully understands that it is an offence to “tip-off” (i.e. inform) a person suspected of Money Laundering that an AML investigation in their business relationship or transactions is taking place. All relevant staff have been made aware of the penalties for tipping-off and potentially jeopardising an AML investigation. For further clarity regarding tipping-off, please contact IIFC (UK)’s nominated officer.

When considering an internal suspicion report, the nominated officer should make every endeavour to collect as much information as possible regarding the customer/transaction but in the interest of timely reporting, may need to consider making an initial report prior to the full review of linked/connected relationships and transactions.

Internal reports to the nominated officer must be made regardless of whether the transaction has taken place. In some instances, it may be necessary for the nominated officer to obtain consent from the NCA prior to IIFC (UK) continuing with the transaction.

1.1 External reporting

On receipt of an internal report the nominated officer, will:

Acknowledge the report and at the same time provide a reminder to do nothing that might prejudice enquiries i.e. ‘tipping off’.
Consider the report made in the light of all relevant information accessible to, or reasonably obtainable, by the Nominated Officer.

Be permitted to have access to any information held by the Firm, including ‘know your business information or Know Your Client information’, which could be relevant.
If they suspect that a person has been engaged in Money Laundering, make a report to the National Crime Agency (NCA) as soon as practicable.

In these circumstances and if applicable, NCA defence should be obtained before any funds are returned to where they came from. In the interim, the funds will be frozen until the NCA has provided approval to release the funds. In the event the freezing of the funds may ‘tip off’ the entity/individual, the Nominated Officer will request defence from the NCA on an exception’s basis, to release the funds or continue the transaction.

Note: There is a legal matter under English law that affects the returning of funds when a firm is aware that the funds do not belong to the client or is on notice that the funds may not belong to the client. In these circumstances there is the possibility that the Firm is considered a ‘constructive trustee’ and there may be a conflict in not paying the money to the rightful owner and tipping off the client by doing so. The NCA should be consulted in these circumstances and legal advice normally sought.

It should be noted that the receipt of the consent letter does not indicate that the suspicion has been investigated and is unfounded. A firm should continue to be vigilant for any additional transactions or instructions in respect of the client that increase suspicions and should continue to submit further transactions to NCA as appropriate.

The Nominated Officer will work closely with the investigating officer that the NCA allocates and will assist and ensure that information requested is provided. The Nominated Officer will be the key co-ordinator between the Firm and law enforcements agencies so that an informed overview of the situation can be maintained.

The reporting of a Suspicion Report to the NCA and the lodging of a complaint or crime with the police for investigation are different matters. For example, a fraudulent deception based on forged documents, should be reported to the police (usually the appropriate fraud squad) as an allegation of crime in the public interest. The Nominated Officer will take this into account when reporting matters

A templated internal SAR report has been included as Appendix III.

The Money Laundering and Terrorist Financing (Amendment) (No. 2) Regulations 2022 grants additional powers to AML supervisory authorities to request a relevant person to provide a copy of any suspicious activity report filed with the National Crime Agency.

The Firm acknowledges the requirement and will provide the FCA with requested documentation in a timely manner.

12. Monitoring, Management Information & Reporting

(UK) the place the compliances to the risk management committee/Board and periodically this policy would be updated with the approval of Risk Management committee/Board

IIFC (UK)’s NO must ensure that all systems, controls, policies, and procedures are up-to-date and compliant with all applicable legislation and regulation.

At least once in each calendar year, the Firm’s NO will provide a report to the governing body and senior management. The report must include the following:

Review of the effectiveness of the Firms AML systems and controls, with appropriate recommendations for improvement in the management of risks and priorities, including resources.
Detail those within the Firm responsible for AML systems and
Concluding actions and the remedial progress in response to
It must indicate the way in which new findings on countries with AML inadequacies have been used during the year.
The number of internal reports made by

IIFC (UK)’s senior management will give these reports due consideration and take necessary actions to remedy any deficiencies identified by the report.

13. Monitoring Customer Activity

IIFC (UK) is required to conduct ongoing monitoring of the business relationship with all of its customers. As per the JMLSG guidance, this ongoing monitoring entails:

Scrutiny of transactions undertaken throughout the course of the relationship (including a source of funds) to ensure the transactions are consistent with the Firm’s knowledge of the customer.
Ensuring that the documentation obtained for the purpose of applying CDD remains up to

It is essential for the Firm’s monitoring system to have the following features:

Flags up transactions for further
These transactions are reported to and reviewed promptly by the authorised person(s).
Appropriate action is taken on the findings of any further

IIFC (UK) risk of Money Laundering is low given that the disbursement procedure of IIFC (UK) stipulates that direct payment is made to the bank account of overseas supplier(s) or to other banking entities. Therefore, the loan disbursement transaction is not very susceptible to Money Laundering.

The main Money Laundering risk arises through variations in the loan arrangements such as acceleration of an agreed repayment schedule, either by means of lump sum or early termination of loan without good commercial rationale. When these circumstances occur, they shall need to be considered carefully. IIFC (UK)’s loan terms normally provide for prepayment of loans out of the surpluses generated by the project and in a few other situations. In case the acceleration occurs for any reason other than those covered in the loan terms, the amount shall only be accepted with due consideration to the source of the money used and the purpose. This will be recorded as part of the client profile and used for the purposes of understanding any ongoing relationship with the entity.

IIFC (UK)’s monitoring system for customer activity is based on the following risk factors:

The unusual nature of the E.g. an abnormally large transaction not consistent with the Firm’s knowledge of the customer.
The number of a series of E.g. many small transactions initiated in quick succession.
The geographical destination or origin of a E.g. a payment to a high-risk jurisdiction.
The parties E.g. a request to make payment to or from a person on a sanctions list.

14. Training

In the UK, individual members of staff face criminal penalties if they are involved in Money Laundering or Terrorist Financing, or if they do not report, to the Nominated Officer, their knowledge or suspicion of Money Laundering or Terrorist Financing where there are reasonable grounds for their knowing or suspecting such activity. It is important, therefore, that staff members are made aware of these obligations, and shall be given training in how to discharge their obligations under the ML Regulations.

The staff members of IIFC (UK) are required to read and acknowledge this Policy and understand their respective obligations under the ML Regulations.

All staff members will receive formal training on the ML Regulations, as applicable to IIFC (UK), once in two years at the minimum (preferably on an annual basis). Proper records will be maintained of all the formal trainings given to members of staff.

All staff and contractors of IIFC (UK) should be made aware of the laws and regulations surrounding Money Laundering, Terrorist Financing and Proliferation Financing, how to identify suspicious activity, and the obligations placed on the Firm.

All staff requires training covering the Firm’s procedures and how to recognise and deal with suspected Money Laundering , Terrorist Financing and Proliferation Financing concerns.

15. Anti-Bribery and Corruption

Bribery is defined as the offering of money or other incentives to persuade somebody to do something dishonest or illegal. Corruption is the offering, giving, soliciting, or acceptance of an inducement or reward which may influence any person to act inappropriately.

IIFC (UK) will take steps to identify, assess and mitigate the risk of bribery or corruption, and will ensure that all its employees, clients and third parties are aware of their responsibilities. The Firm will:

conduct its business fairly, honesty, with integrity and in a transparent manner;
not make or offer bribes, whether directly or indirectly, to gain a business or personal advantage; and
not accept bribes, whether directly or indirectly, to give business advantages

not accept or carry out business with any entity or individual who accepts, solicits or facilitates bribes, whether with the Firm or a third party.

As part of the initial and ongoing due diligence carried out on a client, the Firm will carry out a negative news and reputational risk check to confirm that the entity and its owners/controllers do not have any associations with bribery or corruption.

In the event that the checks undertaken uncover an element of bribery or corruption associated with the client, the Firm will carry out an assessment of the information to determine the risk to the Firm, including whether it is within the set risk appetite, whether the entity should not be brought on as a client or whether any mitigating action may be undertaken to ensure the Firm does not face any risk from a bribery or corruption perspective. The documentary evidence of this check will be maintained as part of the KYC document collected on clients.

16. Reporting to the Board of the IIFC (UK)

An updated status of compliance with this policy shall be placed before the Board of Directors at least once in a year or earlier, as may be deemed fit.

The policy shall be updated with the approval of the Board of Directors as and when there are any changes/amendments in the ML Regulations as notified by consultant/experts in the Industry having any bearing on IIFC (UK).

17. Ambiguity of the Policy

In the event of any issue relating to the ML Regulations remaining unaddressed in this Policy, IIFC (UK) shall continue to follow the advice of consultant/expert in the industry.