KYC is an acronym for "Know your Customer"
It is a term used for customer identification process. It involves making reasonable efforts to determine true identity and beneficial ownership of accounts, source of funds, the nature of customer's business, reasonableness of operations in the account in relation to the customer's business, etc. which in turn helps the banks to manage their risks prudently. The objective of the KYC guidelines is to prevent banks being used, intentionally or unintentionally by criminal elements for money laundering. KYC is applicable to the customers of all the Financial Institutions.
KYC has three components - Identity, Signature and Address (ISA). While identity remains the same, the address and signature may change and hence the banks are required to periodically update their records.
Banks create a customer profile based on details about the customer like social/financial status, nature of business activity, information about his clients’ business and their location, the purpose and reason for opening the account, the expected origin of the funds to be used within the relationship and details of occupation/employment, sources of wealth or income, expected monthly remittance, expected monthly withdrawals etc.
By adhering to proper KYC, RBI expects the Banks to perform the following:
- Customer Acceptance Policy
- Customer Identification Procedure
- Monitoring Customer Transactions
- Risk Management
To ensure that the latest details about the customer are available, banks periodically update the customer identification data based upon the risk category of the customers. Keep visiting our website to get the latest stock market tips which will bring daily profit for you while trading at NSE and BSE.
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