KYC/AML- MODULE 2 MASTER KEY

1. A well-designed KYC Policy complements the AML/ CFT systems deployed in a bank. Which
one of the of the following is not true/ correct?

Ans: It prevents the bank from lending to the persons with poor financials and saves the precious
capital of bank.

2. An account becomes KYC Non-Compliant/ KYC discrepant accounts in certain circumstances?

Which of the following statement is NOT correct in this regard?

Ans: Small accounts where OVD is not provided within a period of 12 months, subject to
relaxations provided by RBI/ Govt. of India.

3. Which of the following statements is NOT correct regarding Unique Customer Identification
Code (UCIC) ?

Ans: It is also required to create UCIC for all walk-in/occasional customers

4. Which of the following statement is NOT correct about “Digital KYC”?

Ans: Banks can not use the services of Business- Correspondent (BC) for Digital KYC.

5. Branch AB Park has received a request for opening an account in the name of a Partnership
firm, the officer in the branch has identified that all the three partners are beneficial owners.
How many CIFs are required to be created while opening the account in the name of that
Partnership firm?

Ans: Four

6. Which of the following documents are not required by the bank for opening an account of
an unincorporated association or a body of individuals?

Ans: Registration certificate and Trust deed

7. Which of the following statements is correct regarding the requirement of the undertaking
of customer due diligence (CDD) by the financial institutions?

Ans: All the statements are correct

8. Bank shall take steps to make KYC non-compliant accounts KYC Compliant first.
However, if the customer is not forthcoming to provide the necessary documents and/or
information, Bank will take the steps towards phased imposition of partial / full freeze and
eventual closure of the account. Who is the authority to permit closure of such accounts?
Ans: The competent authority to permit closure of such accounts shall be the Branch Head,
not below the rank of Chief Manager in Senior Management Grade. In all other cases, any
Chief Manager of the R.B.O shall be the competent authority to permit closure of such
accounts.
 9. Branches shall undertake Customer Identification while carrying out any international
money transfer operations. Which of the following statement is most appropriate in this
regard?

Ans: Branches shall undertake Customer Identification while carrying out any international money
transfer operations for a person who is not an account holder, irrespective of amount.

11. In our Bank which number is used as UCIC?

Ans: Customer Information File (CIF)

12. Who is a “Non face to face” customer for bank?

Ans: A customer with whom the Branch or any branch official has no direct interaction at the time
of opening of account.

13. Which of the following statements regarding Customer Identification Procedures (CIP) is
correct?

Ans: All statements are correct.

14. Which of the following documents are not required by the bank for opening an account of a
Partnership Firm?

Ans: Certificate of incorporation, Memorandum and Articles of Association

15. Which of the following statement is correct regarding the identification of a beneficial
owner, where the customer is a partnership firm?

Ans: Where the customer is a partnership firm, the beneficial owner is the natural person(s), who,
whether acting alone or together, or through one or more juridical person, has/ have ownership
of/ entitlement to more than 15 per cent of capital or profits of the partnership.

16. Which of the following is NOT true in respect of the Periodic Updation of KYC, in the case of
individuals?

Ans: Branches/ Business units shall ensure physical presence of the customer in all cases of KYC
updation, for submission of copy of OVD/ consent letter.

17. While opening an account in the name of a sole proprietary firm in addition to CDD of the
individual (proprietor) two documents or the equivalent documents thereof as a proof of
business/ activity in the name of the proprietary firm shall also be obtained. In cases where
it is not possible for the firm to furnish two such documents, can branch open the account
with obtaining one document only?

Ans: Branch may, at their discretion, accept only one document in the name of the firm as proof of
business/activity subject to ‘Contact Point Verification.
20. In respect of accounts opened through alternate channels (BCs)/ (BFs) who will be responsible
for ensuring KYC compliance including review of KYC, risk categorization, monitoring of transactions
etc?

Ans: The Parent Branch

21. Enhanced Due Diligence (EDD) is required to be exercised in respect of what type of customers-

Ans: All of the above

22. What is V-CIP in respect of KYC?

Ans: Video Based Customer Identification Procedure

23. For Risk management, Bank has adopted a _____________as per RBI Guidelines?

Ans: Risk Based Approach

24. Which one of the following is not an Officially Valid Document” (OVD)?

Ans: Permanent Account Number (PAN)

25. Which of the following statement is correct regarding the identification of a beneficial
owner, where the customer is a trust?

Ans: Where the customer is a trust, the identification of beneficial owner(s) shall include
identification of the author of the trust, the trustee, the beneficiaries with 15% or more interest in
the trust and any other natural person exercising ultimate effective control over the trust through
a chain of control or ownership.

26. The Customer Acceptance Policy (CAP) section of the Bank’s KYC Policy, lays down the criteria for
acceptance of a person as a customer of the bank. Which of the following statement is not correct in
respect of CAP?

Ans: An account may be opened in anonymous or fictitious/ benami name but it must be ensured
that identity of customer does not match with any person or entity whose name appears in the
sanction’s lists circulated by RBI.

27. The KYC policy includes four key elements. Which of the following is the correct set of these four
elements?

Ans: Customer Acceptance Policy, Risk Management, Customer Identification Procedures (CIP),
Monitoring of Transactions.

28. Branches/offices shall undertake Customer Identification while selling third-party products as
agents, selling our own products, payment of dues of credit cards/ sale, and reloading of prepaid/
travel cards and any other product. Which of the following statement is correct in this regard?

Ans: Branches/offices shall undertake Customer Identification while selling of third-party products
as agents, selling our own products, payment of dues of credit cards/ sale and reloading of
prepaid/ travel cards and any other product for more than Rs. 50,000/-.
29. Which one of the following is not an Officially Valid Document” (OVD)?

Ans: Landline Telephone Bill

30. If the branch has doubt about authenticity / veracity or the adequacy of the previously obtained
customer identification data, what is the periodicity for review of profile of Customer?

Ans: Whenever branch has doubt

31. NRI customers who want to open accounts without visiting the branch will be treated
as__________.

Ans: Non- Face-to-Face customer

32. In which of the following circumstances an account becomes KYC Non-Compliant/ KYC
discrepant?

Ans: All of the above

33. For opening a small account, which of the following procedure a bank branch need not follow?

Ans: Branch will obtain, any one of the OVDs for obtaining proof of identity and address.

34. Ms. Zia a Non-account holder has approached your branch to remit USD 200/- to a foreign
country as a fee for some application. The service Manager asks for identity documents from
him, which he resists stating that he is simply sending a fee, and he is not opening an account.
Which of the following statements is correct?

ANS: It is necessary to verify the identity of the walk-in customers for all international money
transfer operations, irrespective of amount.

1. Which of the following statement is correct regarding the identification of a beneficial

owner, where the customer is a trust?

Ans: Where the customer is a trust, the identification of beneficial owner(s) shall include
identification of the author of the trust, the trustee, the beneficiaries with 15% or more interest in
the trust and any other natural person exercising ultimate effective control over the trust through
a chain of control or ownership.

2. While opening an account in the name of a sole proprietary firm in addition to CDD of the
individual (proprietor) two documents or the equivalent documents thereof as a proof of
business/ activity in the name of the proprietary firm shall also be obtained. In cases
where it is not possible for the firm to furnish two such documents, can branch open the
account with obtaining one document only?

Ans: Branch may, at their discretion, accept only one document in the name of the firm as proof of
business/activity subject to ‘Contact Point Verification.
 3. Which of the following documents are required to be obtained as Customer Due Diligence
measures for opening an account in the name of a sole proprietary firm?

Ans: Prescribed documents for undertaking CDD of an individual to be obtained in the name of the
proprietor as well as two documents or the equivalent e-documents thereof as proof of business/
activity in the name of the proprietary firm.

4. What is the major risk of non-compliance with the KYC Policy?

Ans: Compliance and Legal risk

5. Customer risk categorization (CRC) is carried out by AML-CFT Department at pre-defined

periodicity. Which of the following option regarding periodicity is not correct?

Ans: CRC is done weekly for the incremental accounts/customers

6. For opening an account in the name of a sole proprietary firm, CDD of the individual
(proprietor) is carried out. In addition to this, the bank should obtain two documents or
the equivalent documents thereof as proof of business/ activity in the name of the
proprietary firm. Which of the following documents, in the name of the firm, will serve the
purpose?

Ans: All the above

7. Which one of the following is not an Officially Valid Document” (OVD)?

Ans: Landline Telephone Bill

8. If the branch has doubt about authenticity / veracity or the adequacy of the previously
obtained customer identification data, what is the periodicity for review of profile of
Customer?

Ans: Whenever the branch has doubt about authenticity / veracity or the adequacy of the
previously obtained customer identification data.

9. Which of the following statements regarding Customer Identification Procedures (CIP) is

NOT correct?

Ans: Branches shall undertake Customer Identification while selling of third-party products as
agents, selling our own products, payment of dues of credit cards/ sale and reloading of prepaid/
travel cards and any other product for more than Rs. 500,000/-

10. Which of the following statement is correct regarding identification of beneficial owner in
case of a company?

Ans: All the statements are correct

11. Which of the following categories of accounts are NOT exempted from obtention of details
of Beneficial Owners?

Ans: Partnership firms or LLPs

 12. Enhanced Due Diligence (EDD) is required to be exercised in respect of what type of
customers-

Ans: All of the Above

13. Which one of the following is not an Officially Valid Document” (OVD)?

Ans: Aadhaar number/ card

14. In which of the following instances, Customer Due Diligence (CDD) Procedure in the case of
an Individuals is required?

Ans: All the statements are correct.

15. Bank shall take steps to make KYC non-compliant accounts KYC Compliant first.
However, if the customer is not forthcoming to provide the necessary documents and/or
information, Bank will take the steps towards phased imposition of partial / full freeze and
eventual closure of the account. Who is the authority to permit closure of such accounts?

Ans: The competent authority to permit closure of such accounts shall be the Branch Head, not
below the rank of Chief Manager in Senior Management Grade. In all other cases, any Chief
Manager of the R.B.O shall be the competent authority to permit closure of such accounts.

16. Branches shall undertake Customer Identification while carrying out any international
money transfer operations. Which of the following statement is most appropriate in this
regard?

Ans: Branches shall undertake Customer Identification while carrying out any international money
transfer operations for a person who is not an account holder, irrespective of amount.

17. Which of the following is NOT one of the key elements of the KYC/AML/CFT Policy of the
Bank?

Ans: Customer Maintenance

18. What is Partial Freezing of an account that has become KYC Non-Compliant/ KYC
discrepant?

Ans: Partial Freeze means restricting debits in the account through all channels but allowing
credits.

19. Branch AB Park has received a request for opening an account in the name of a
Partnership firm, the officer in the branch has identified that all the three partners are
beneficial owners. How many CIFs are required to be created while opening the account in
the name of that Partnership firm?

Ans: Four
 20. Which of the following statements is NOT correct regarding Unique Customer
Identification Code (UCIC) ?

Ans: It is also required to create UCIC for all walk-in/occasional customers.

21. The KYC policy includes four key elements. Which of the following is the correct set of
these four elements?

Ans: Customer Acceptance Policy, Risk Management, Customer Identification Procedures (CIP),
Monitoring of Transactions.

22. As per RBI Guidelines on dealing in Virtual Currencies (VC) in India, which of the following
statement is correct as per Customer Acceptance Policy (CAP)?

Ans: As per RBI Guidelines, Bank shall not deal in Virtual Currencies (VC) or provide services for
facilitating any person or entity in dealing with or settling VCs

23. Which one of the following options is not the purpose of name screening?

Ans: To avoid the risk of financing an entity which is having a dubious reputation of non-
repayments to its creditors.

24. An account which has been opened using Deemed OVD, for the limited purpose of current
address, within what period the customer will provide the OVD updated with current
address?

Ans: The customer shall submit OVD updated with current address within a period of three
months of submitting the deemed OVD.

25. If a customer, who has submitted Aadhar number voluntarily, wants to provide current
address different from the address contained in Aadhaar records, which of the following
document will be obtained as proof of current address?

Ans: Simply a self-declaration regarding current address may be obtained.

26. In which of the following circumstances an account becomes KYC Non-Compliant/ KYC
discrepant?

Ans: All of the above

27. For Risk management, Bank has adopted a _____________as per RBI Guidelines?

Ans: Risk Based Approach

28. The Customer Acceptance Policy (CAP) section of the Bank’s KYC Policy, lays down the
criteria for acceptance of a person as a customer of the bank. Which of the following
statement is not correct in respect of CAP?

Ans: An account may be opened in anonymous or fictitious/ benami name but it must be ensured
that identity of customer does not match with any person or entity whose name appears in the
sanction’s lists circulated by RBI
 29. Which of the following documents are obtained for opening accounts of juridical persons
other than Company, Partnership or Trust accounts, such as societies, universities, and
local bodies like village panchayats?

Ans: All are correct

1. Which of the following statement is correct regarding the identification of a beneficial

owner, where the customer is a partnership firm?

Ans: Where the customer is a partnership firm, the beneficial owner is the natural person(s), who,
whether acting alone or together, or through one or more juridical person, has/ have ownership
of/ entitlement to more than 15 per cent of capital or profits of the partnership.

2. Can the Mandatory and other ‘Optional’ information collected from the customer be used
for cross-selling or any other purpose?

Ans: No, such information collected from the customer is to be treated as confidential and details
thereof are can not to be divulged for cross selling or any other purpose.

3. In our Bank which number is used as UCIC?

Ans: Customer Information File (CIF)

4. A small account which has been opened without obtaining OVD when it will become KYC
Non-Compliant/ KYC discrepant accounts?

Ans: The account shall remain operational initially for a period of twelve months which can be
extended for a further period of twelve months, provided the account holder applies and
furnishes evidence of having applied for any of the OVDs during the first twelve months of the
opening of the said account.

5. Some of the Customer categories may carry more than the ordinary risk of money
laundering and terrorist financing and therefore warrant a better understanding and closer
scrutiny by the operating staff at all levels. Out of the list given below, which does not fall
under this category?

Ans: Customers identified through V-CIP (Video Customer Identification Procedure), who did not
approach branch/ branch officials while onboarding

6. Which of the following statement is correct regarding the identification of a beneficial

owner, where the customer is a trust?

Ans: Where the customer is a trust, the identification of beneficial owner(s) shall include
identification of the author of the trust, the trustee, the beneficiaries with 15% or more interest in
the trust and any other natural person exercising ultimate effective control over the trust through
a chain of control or ownership.
 7. In which of the following situations Customer Identification Procedure (CIP) is not required
to be carried out, by the Branches/offices?

Ans: While effecting remittance for a non-customer who has approached for remitting INR 20000
through NEFT in cash.

8. Branches/offices shall undertake Customer Identification while selling third-party products

as agents, selling our own products, payment of dues of credit cards/ sale, and reloading of
prepaid/ travel cards and any other product. Which of the following statement is correct in
this regard?

Ans: Branches/offices shall undertake Customer Identification while selling of third-party products
as agents, selling our own products, payment of dues of credit cards/ sale and reloading of
prepaid/ travel cards and any other product for more than Rs. 50,000/-.

9. Which of the following is NOT true in respect of the Periodic Updation of KYC, in the case of
individuals?

Ans: Branches/ Business units shall ensure physical presence of the customer in all cases of KYC
updation, for submission of copy of OVD/ consent letter.

10. The Customer Acceptance Policy (CAP) section of the Bank’s Policy & Procedure Guidelines
on KYC/ AML/ CFT Measures lays down the criteria for acceptance of a person as customer
of the bank. Which of the following statement is not correct in respect of CAP?

Ans: It is sufficient to follow Customer Due Diligence (CDD) Procedure in respect of the first
account holder only in case of joint account holders, while opening a joint account.

11. Which of the following categories of accounts are NOT exempted from obtention of details
of Beneficial Owners?

Ans: Partnership firms or LLPs

12. Which of the following statements regarding Customer Identification Procedures (CIP) is
correct?

Ans: Branches shall undertake Customer Identification while carrying out transactions for a non-
account-based customer, that is a walk-in customer, where the amount involved is equal to or
exceeds rupees fifty thousand, whether conducted as a single transaction or several transactions
that appear to be connected.

13. Branches shall undertake Customer Identification while carrying out any international
money transfer operations. Which of the following statement is most appropriate in this
regard?

Ans: Branches shall undertake Customer Identification while carrying out any international money
transfer operations for a person who is not an account holder, irrespective of amount.
 14. Which of the following statements is NOT correct regarding the requirement of the
undertaking of customer due diligence (CDD) by the financial institutions?

Ans: There is no need of undertaking CDD measures while carrying out occasional transactions,
within the applicable designated threshold, for the account.

15. Which of the following documents are not required by the bank for opening an account of a
Partnership Firm?

Ans: Certificate of incorporation, Memorandum and Articles of Association

16. Which of the following statements regarding Customer Identification Procedures (CIP) is
NOT correct?

Ans: Branches shall undertake Customer Identification while selling of third-party products as
agents, selling our own products, payment of dues of credit cards/ sale and reloading of prepaid/
travel cards and any other product for more than Rs. 500,000/-

17. Some of the Customer categories may carry more than the ordinary risk of money
laundering and terrorist financing and therefore warrant a better understanding and closer
scrutiny by the operating staff at all levels. Out of the list given below, which Customer
category does not fall under this category?

Ans: Account of NGOs promoted by UNO or its agencies.

18. Which of the following documents are obtained for opening accounts of juridical persons
other than Company, Partnership or Trust accounts, such as societies, universities, and local
bodies like village panchayats?

Ans: All are correct

19. Branch AB Park has received a request for opening an account in the name of a Partnership
firm, the officer in the branch has identified that all the three partners are beneficial owners.
How many CIFs are required to be created while opening the account in the name of that
Partnership firm?

Ans: Four

20. Which one of the following is not an Officially Valid Document” (OVD)?

Ans: Permanent Account Number (PAN)

21. What is the periodicity of Customer Risk Categorisation (CRC) for Medium risk individuals
and entities?

Ans: Every 8 Years

22. Enhanced Due Diligence (EDD) is required to be exercised in respect of what type of
customers-

Ans: All of the Above

 23. Which of the following documents are not required by the bank for opening an account of
an unincorporated association or a body of individuals?

Ans: Registration certificate and Trust deed

24. Which of the following statements regarding Customer Identification Procedures (CIP) is
correct?

Ans: All statements are correct.

25. Which one of the following options is not the purpose of name screening?

Ans: To avoid the risk of financing an entity which is having a dubious reputation of non-
repayments to its creditors.

26. Which of the following statements is NOT correct regarding Unique Customer Identification
Code (UCIC) ?

Ans: It is also required to create UCIC for all walk-in/occasional customers

27. As per RBI Guidelines on dealing in Virtual Currencies (VC) in India, which of the following
statement is correct as per Customer Acceptance Policy (CAP)?

Ans: As per RBI Guidelines, Bank shall not deal in Virtual Currencies (VC) or provide services for
facilitating any person or entity in dealing with or settling VCs.

28. Where the OVD furnished by the customer does not have an updated address, the bank can
accept a utility bill, as deemed OVD, for the limited purpose of proof of address. Which of
the following option is correct in respect of a Utility Bill?

Ans: Utility bill which is not more than two months old of any service provider (electricity,
telephone, post-paid mobile phone, piped gas, water bill) can be accepted.

29. What is Partial Freezing of an account that has become KYC Non-Compliant/ KYC discrepant?

Ans: Partial Freeze means restricting debits in the account through all channels but allowing
credits.

30. Which one of the following is not an Officially Valid Document” (OVD)?
Ans: Aadhar number/Card

31. “Where no natural person is identified in case the client is a Company / Partnership firm /
Unincorporated Association or Body of Individuals, Who will be treated as ‘Beneficial Owner’
as per PML Amendment Rules 2013 ?
Ans: The relevant natural person who holds the position of senior managing official