KNOW YOUR CUSTOMER

NORMS

DR.S.C.BIHARI

Presented by

KYC NORMS

From the year 2002, RBI has asked all banks to meticulously follow KYC guidelines in all accounts.

KYC involves the following four steps

(i) Proper Identification of every customer while opening account .

(ii) Establishment of data on the customer to know his/her profile

(iii) Monitoring transaction in the account to ensure that it is not used to money laundering, and

(iv) Risk Management.

BACKGROUND

The RBI has issued KYC guidelines in line with international standards under

Sec. 35A of the BR Act

Hence they are directive and non adherence to the same attracts penalties.

This policy broadly deal with Four Core

Components of KYC guidelines namely

(a) Customer Acceptance Policy

(b) Customer Identification Procedure

(c) Monitoring of the transactions

(d) Risk Management

Customer Acceptance Procedure

[CAP]

Banks must not open accounts in fictitious /benami /nick names.

While opening account, banks should judge the risk associated with the

customers as per their risk perception

into -

1. Low Risk,

2. Medium Risk,

3. High Risk and

4. Exceptional risk

While opening accounts

Banks must obtain identity proof, address proof, customer profile as

prescribed by RBI.

Banks must not open accounts or close existing account where they are not able

to apply Customer Due Diligence .

Customer Due Diligence means accepting the customer after knowing

entirely his identity, address and

authority to deal with the bank in a

representative capacity if any.

Customer Identification Procedure

This is done by obtaining Introduction, Photo, Identity Proof, Address Proof, PAN,

Independent check of address, etc.

As to profile, banks must get sufficient information on the nature of business and

occupation of the customer and record the

same in a form called KYC form.

Identity Proof is done through

(i) Passport (ii) PAN Card (iii) Voters Identity Card (iv) Driving License (v) Identity Card

etc.

While opening accounts of the

companies

KYC procedure requires the following document to be taken:

(i) Certificate of incorporation, Memorandum of association, Article of association, Resolution of the board of directors

(ii) Identity proof of those who have been authorized to operate the account

(iii) Copy of the PAN allotment letter to the company

(iv) Copy of the telephone bill.

while opening the account of the

partnership firm

KYC guidelines requires the following documents to be taken :

(i) Registration certificate if registered

(ii) Partnership deed

(iii) Power of attorney in favour of persons who are permitted to operate the a/c

(iv) Identity and address proof of those who have authority to operate the a/c

(v) Copy of the telephone bill in name of the firm / partners

While opening the account of

trusts / societies / associations

Documents required are:

(i) Certificate of Registration

(ii) Trust Deed / Bye law

(iii) Resolution of the managing body to open the account

(iv) Power of attorney / letter of authority in favour of persons who are authorized to

operate the account

(v) identity and address proof of those who have authority to operate the account

(vi) Copy of the telephone bill in the name of the firm/partners.

In case of joint accounts

The photo, identity proof, address proof and also record of profile have to

obtained for all the account holders.

Letter of thanks to the addresses given in the account opening form have to be

sent to all account holders.

The signatures of all the account holders are to be obtained presence of

bank official.

The introduction should be obtained for all the account holders,

Precautions for Identity proof and

Address proof documents:

The identity proof and address proof documents should be verified in

original

A photo copy of the same duly verified by the authorized officer of

the bank to be retained as record with

the bank.

The signature of the client should also be on the photo copy to avoid

dispute in future.

Identification of applicants for

issuance of TT/DD/MT etc.

TT/MT/DD of Rs 50,000/- and above through debit of account/against

cheque only

To obtain PAN for TT/MT/DD of Rs 50000/- and above.

Record Keeping

To keep record of minimum 5 years even for electronic payments and

messages.

KYC Penalties and Restrictions

Issued under section 35(A) of BR Act 1949 and contraventions attract

penalties

No misuse of personal information given to banks-for cross selling or

passing on to subsidiary business

associates.

Training of staff

All the staff must understand the norms and implication of KYC

Thanks for your

attention

Dr. S. C. Bihari

Tell:08417-236660 to 65(Extn: 6214)

Mail:scbihari@gmail.com