Objective: Objective of KYC is to prevents banks from being used, intentionally or unintentionally,by criminal elements for money laundering or financial terrorism or fraud. It enables banks to understand their customer and their financial dealings which in turn help to manage risk prudently.It is the platform used by banks to control frauds and identify money laundering.
Customer has been defined as an individual or entity having account or financial dealings or one on whose behalf account is maintained. KYC policy is compilation of 4 elements –
i)Customer Acceptance policy : Branch may not open account of a person whose identity cannot be verified. If branch is not satisfied with the identity or somehow it is found that the person is having criminal background or connection with terrorist group,branch may close the account or terminate banking relationship after sending a notice explaining the reason. ii)Identification Procedure : identification is done on the basis of documents provided by the customer as (a) proof of identity and (b) proof of address. Board of directors of the bank should have in place adequate policies to establish procedure to verify identification. But in case of small deposit accounts like No Frill A/cs, some relaxation is granted to the individuals as they are in no position to provide required KYC documents. Documents differs...