KNOW

YOUR
CUSTOMER
 KYC
 KYC is an acronym for “Know your Client/
Customer”, a term commonly used for the Client Identification
Process. KYC enables banks to know / understand their customers
& their financial dealings to be able to both manage its risks and
also serve the customers better.
 For the purpose of KYC Policy, a „Customer‟ is defined as:

A person or entity that maintains an account and/or has a business

relationship with the Bank
One on whose behalf the account is maintained (i.e. the beneficial
owner)
Beneficiaries of transactions conducted by professional
intermediaries, such as Stock Brokers, Chartered Accountants,
Solicitors, etc. as permitted under the law.
 Why KYC
 Know your customer policies are becoming
increasingly important globally to prevent
identity theft fraud, money laundering and terrorist financing.
 One aspect of KYC checking is to verify that the customer is not on
any list of known fraudsters, terrorists or money launderers, such as
the Office of Foreign Assets Control's Specially Designated Nationals
list.
 A key aspect of KYC controls is to monitor transactions of a customer
against their recorded profile, history on the customers account(s) and
with peers.
 Banks doing KYC monitoring for anti-money laundering (AML) and
checks relating to combating the financing of terrorism (CFT)
increasingly use specialized transaction monitoring software,
 APPLICATION OF KYC
 Opening a new account
 Opening a subsequent account where documents as per current

KYC standards not been submitted while opening the initial

account
 Opening a Locker Facility where these documents are not

available with the bank for all the Locker facility holders
 When the bank feels it necessary to obtain additional information

from existing customers based on conduct of the account

 When there are changes to signatories, mandate holders,

beneficial owners etc

 KYC will also be carried out in respect of non-account holders

approaching the bank for high value one-off transactions.

 Verification of the records of identity of clients
(PMLA, 2002)

 Individual-Officially valid documents stating address- present

&/or permanent addresses, the nature of business & the
client’s financial stature & a copy of the client’s recent
photograph
 Company & Unincorporated Association-Certificate of
Incorporation, Memorandum & AOA (for the company), A
resolution by the BOD (for a company) and by the managing
body (for the unincorporated association) , Documents stating
of the power of attorney (for both)
 Partnership firm & trust-Registration certificate,
Partnership deed (in case of partnership firm), Trust deed (in
case of Trust), An officially valid document for the person
holding an attorney
 Maintenance of records of identity of clients
(PMLA, 2002)

 Every banking/financial company should maintain records of

identity of clients for 10years from the date of end of the
transaction.
 The records should be maintained in hard or soft copies in a manner
as specified by RBI (SEBI/IRDA) from time to time.
 In case of not providing the KYC required documents The Bank will
be entitled to refuse to open the account (if you are a prospective
customer) or discontinue its relationship with you citing non-
providing of KYC information / documents (if you are an existing
customer). However, for certain categories of customers who are not
able to provide the necessary documents, the Bank will open the
account as per the flexibility provided vide RBI DBOD circular no.
AML.BC.28/14.01.001/2005-06 dated 23rd August 2005.
CONTINUED…..
 The KYC guidelines of RBI mandate banks to collect three proofs
from their customers.
 They are

1. Photograph
2. Proof of identity
3. Proof of address
Banks have been asked to frame their KYC policies incorporating the
following four key elements:
– Customer Acceptance Policy
– Customer Identification Procedures
– Monitoring of Transactions
– Risk management
Indian Regulations on Prevention of Money
Laundering – A customer must know
 Under the Prevention of Money Laundering Act (PMLA)
2002, and the Rules thereof, the banks are required to report: -
a) All cash transactions (deposits and withdrawals) of the value
of more than Rupees Ten Lakhs or equivalent thereof in
foreign currency
b) All series of cash transactions integrally connected to each
other, which have been valued below Rupees Ten Lakhs or its
equivalent in foreign currency
c) All cash transactions where forged or counterfeit currency
notes or Bank notes have been used as genuine and where any
forgery of a valuable security has taken place
d) All suspicious transactions whether or note made in cash and
by way of as mentioned in the Rules
 ABHIJIT PAUL
ALIVA DAS
BISWARUP BANIK
DIPANNITA
BHATTACHARIYA
KOUSANI CHATERJEE
SUMAN CHAKRABORTY
BISWARUP BANIK
Thank you