What is KYC ?

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KYC, which stands for “Know Your Customer.”

It is like a security check for businesses, especially banks. It is a method to confirm that you are truly the person you claim to be when handling financial matters.

The main goal is to stop bad things like fraud and make sure everyone is playing fair.

In this process, when you open a bank account or do important money things, they ask for your ID and proof of where you live. This helps them make sure you are a real person and not pretending to be someone else.

Governments and banks around the world have rules for KYC to keep money dealings safe and fair.

So, it is like a safety check to make sure everything is honest and secure when it comes to money matters.

KYC document List

The documents that are required need to be submitted as hard or scanned copies depending upon the type of KYC.

 Two broad sets of documents are required for KYC: proof of identity and proof of address, which can overlap, but generally vary. The documents required are as follows:

For Identity Proof

  1. Aadhar Card: The UID or unique identification number on your Aadhar card.
  2. Voter ID, Passport, or Driving License: These are accepted as identity proof.
  3. PAN Card: Make sure it has your photograph.
  4. Government-Issued Documents: Any document issued by the State or Central Governments with your photo.
  5. Identity Cards from Banks or Financial Institutions: Cards issued by scheduled commercial banks, public sector undertakings, or public financial institutions.
  6. College Identity Cards: If your college is affiliated with a University, or any identification provided by professional bodies like ICWAI, ICAI, Bar Council, ICSI, etc.
  7. Credit or Debit Card: Any card issued by a bank in your name with your address can also be used.

For Address Proof

  1. Government IDs: Voter’s card, passport, or driving license are accepted. Also, a registered sale agreement or lease, or maintenance bill for your flat.
  2. Utility Bills: Your electricity, gas, telephone, or water bills (not older than three months) are valid proof.
  3. Legal Declarations: A self-declaration by supreme or high court judges is accepted, especially if you’ve had a change of address due to legal reasons.
  4. KYC from Various Entities: Banks, cooperative banks, multinational foreign banks, notary public, and documents from statutory authorities or government representatives can serve as address proof.
  5. Identity Cards: Cards from government departments, public financial institutions, public sector undertakings, scheduled commercial banks, colleges (affiliated with universities), or professional bodies like ICWAI, ICAI, Bar Council, ICSI, etc., with your address printed on them.
  6. Power of Attorney: If you have given power of attorney to custodians, it can be used as proof with the registered address.
  7. Spouse’s Address Proof: Address proof in the name of your spouse is also accepted for KYC.

Here are some additional details about KYC:

KYC Components:

Customer Identification:

Collecting and verifying personal information, such as name, address, date of birth, and national identification number.

Risk Assessment:

Determining the level of risk associated with a customer based on factors like their location, occupation, and transaction history.

Ongoing Monitoring:

Continuously monitoring customer transactions and updating information to detect any suspicious activity.

Regulatory Compliance:

KYC procedures are often mandated by regulatory bodies and financial authorities globally to ensure businesses adhere to anti-money laundering (AML) and counter-terrorist financing (CTF) regulations.

Customer Due Diligence (CDD):

CDD is an integral part of KYC, involving the thorough examination of a customer’s background to assess potential risks and ensure compliance with regulatory requirements.

Technology in KYC:

Many businesses leverage technology, such as biometrics, artificial intelligence, and machine learning, to enhance the efficiency and accuracy of KYC processes.

Global KYC Standards:

Due to the global nature of financial transactions, there are efforts to establish international standards for KYC to facilitate smoother cross-border transactions while maintaining security.

Benefits of KYC:

Protects businesses and financial institutions from fraud and illicit activities.

Strengthens the integrity of the financial system.

Builds trust between businesses, customers, and regulatory authorities.

Challenges:

KYC processes can be time-consuming and may lead to customer inconvenience.

Balancing the need for stringent KYC measures with providing a seamless customer experience is an ongoing challenge.

Evolution of KYC:

The KYC landscape is continually evolving, with advancements in technology and changes in regulatory requirements influencing the way businesses approach customer identification and verification.

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