Know Your Customer(KYC) is the process of verifying the identity of customer. The objective of KYC guidelines is to prevent banks from being used, by criminal elements for money laundering activities. It also enables us to understand our customers and their financial dealings to serve them better and manage its risks well.
The KYC guidelines have been put in place by the Reserve Bank of India in the context of the recommendations made by the Financial Action Task Force (FATF) on Anti Money Laundering (AML) standards and on Combating Financing of Terrorism (CFT). The Prevention of Money Laundering Act requires banks, financial institutions and intermediaries to ensure that they follow certain minimum standard of KYC and AML.
Importance of KYC
KYC is the means of identifying and verifying the identity of the customer through independent and reliance source of documents, data or information. For the purpose of verifying the identity of:
- Individual customers, CR-I will obtain the customer’s identity information, address and recent photograph.
- Non-Individual customers – CR-I will obtain identification data to verify the legal status of the entity, operating address, the authorized signatories and beneficial owners.