Know Your Customer: List of Norms

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  • Topic: Identity document, Permanent account number, Legal person
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  • Published : June 8, 2012
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Gist of Know Your Customer[KYC] Norms

1.

Objectives of KYC Norms

1.1 Banking operations are susceptible to the risks of money laundering and terrorist financing. In order to arrest money laundering, where banks are mostly used in the process, it is imperative that they know their customers well. 1.2 On combating financing of terrorism, RBI has specified certain standards based on which our Bank has formulated a policy on identification and acceptance of customers to have a business relationship with us. Our branches are required to prepare and maintain documentation on their customer relationships and transactions to meet the provisions of the Prevention of Money Laundering Act and other laws and regulations. 1.3 RBI has issued the KYC guidelines under Section 35 (A) of the Banking Regulation Act, 1949 and any contravention of the same will attract penalties under the relevant provisions of the Act. Thus, the Bank has to be fully compliant with the provisions of the KYC procedures. 1.4 The due diligence expected under KYC involves going into the purpose and reasons for opening an account, anticipated turnover in the account, sources of wealth (net worth) of the person opening the account and sources of funds flowing into the account. 2. Customer Acceptance

2.1 Before commencing a business relationship with a prospective customer, the Bank has to ensure that such a relationship does not, in any way, go against its Customer Acceptance principles viz., i. ii. No account is opened in anonymous or fictitious/ benami name(s) and Customers are categorised based on risk perceptions in terms of the nature of business activity, location of customer and his clients, mode of payments, volume of turnover, social and financial status, etc.

2.2 A Customer Profile (in the prescribed format) containing information relating to the customer's social/ financial status, nature of business activity, information about his clients' business and their location, Sources of funds, Annual Income, etc. shall be obtained from/prepared for all the applicants for opening SB/CA/ Term deposits accounts. 2.3 The customer profile shall be updated, on a periodical basis, as under: For low risk customers For medium risk customers For high risk customers Once in three years Every year Every year

Note: However, these periodicities are only indicative and wherever warranted, the updation exercise may be done even at lesser frequencies taking into account the activities, conduct of operations, etc.

3.

Customer identification

3.1 Customer identification means identifying the customer and verifying his/her/its identity by using reliable, independent source documents, data or information. 3.2 Customer Identification is carried out at different stages i.e., while establishing a banking relationship, carrying out a financial transaction or when the branch has a doubt about the authenticity/veracity or the adequacy of the previously obtained customer identification data.

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3.3 For opening an account, normally, the customer should come to the Bank in person. An account shall not, normally, be opened without a meeting between the bank official and the customer. 3.4 Branches need to obtain sufficient information to their satisfaction, to establish the identity of each new customer, whether regular or occasional and the purpose of the intended nature of banking relationship. 3.5 The process of enquiry/verification of the documents shall be a thorough one by having a dialogue with the prospective depositor, introducer, borrower and guarantor and confirmation through other channels, if necessary. Wherever it is necessary, a discreet verification shall also be made about the credentials of the parties, their business potential etc. 3.6 The process of verifying a customer's identity and his/her credentials is not a faultfinding exercise but to create a better customer relationship that may safeguard the mutual interests of the Bank as well as...
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