KYC Stands for “Know Your Customer”. Know your customer (KYC) policy is an important step developed globally to prevent identity theft, financial fraud, money laundering and terrorist financing. The objective of KYC is to enable banks to know and understand their customers better and help them manage their risks prudently.
KYC is a regulatory and legal requirement and KYC policies are framed by respective banks incorporating the key elements following the Reserve Bank of India’s directive in 2004 such as Customer Acceptance Policy, Customer Identification Procedures, Monitoring of Transactions and Risk management
The process of KYC entails identifying the customer and verifying the identity by using reliable and independent documents or information. While opening different accounts, the Bank collects documents to identify and verify the customer as required under the existing laws to demonstrate that it has performed the existing KYC procedures.
KYC has to be followed by every financial institute while dealing with customers. KYC procedure needs to be adhered to by a customer during following instances:
For Accounts of Companies/Partnership Firms/Trusts & Foundation, a different set of documentation and information is required.
Account Holders may be requested to furnish their recent passport size colored photograph along with the signed KYC submission format on the Bank’s request. It is also important to note that there is a requirement for the periodic updating of KYC Information as and when called for by the Bank.
If the bank is unable to apply appropriate KYC measures due to non-furnishing of information or non-cooperation by the customer, the bank has the right to consider closing the account or terminating the banking relationship after issuing due notice to the customer explaining the reasons for taking such a decision.