KYC

Presented By:Saurav
Sandilya
28G
KYC (Know Your Customer) is a framework for

banks which enables them to know /
understand the customers and their financial
dealings to be able to serve them better.
Banking operations are susceptible to the risks

of money laundering and terrorist financing.
Therefore, banks are advised to follow certain

customer identification procedure for opening
of accounts and monitoring transactions of a
suspicious nature for the purpose of reporting
it to appropriate authority
Reserve Bank of India has advised banks to

make the Know Your Customer (KYC) procedures
mandatory while opening and operating the
accounts and has issued the KYC guidelines
under Section 35 (A) of the Banking Regulation
Act, 1949.
Any contravention of the same will attract

penalties under the relevant provisions of the
Act. Thus, the Bank has to be fully compliant
with the provisions of the KYC procedures.
Customer?
One who maintains an account, establishes business
relationship, on whos behalf account is maintained,
beneficiary of accounts maintained by intermediaries,
and one who carries potential risk through one off
transaction
Your? Who should know?

Branch manager, audit officer, monitoring officials, PO.
Know? What you should know?

True identity and beneficial ownership of the accounts
permanent address, registered & administrative address,
sources of funds, nature of customers business etc.
Opening a new account.

In respect of accounts where documents as per current KYC
standards have not been submitted while opening the initial
account.
Opening a Locker Facility where these documents are not
available with the Bank for all the Locker facility holders.
When the Bank feels it necessary to obtain additional
information from existing customers based on conduct of
account.
When there are changes to signatories, mandate holders,
beneficial owners etc.
For non-account holders approaching the Bank for high
value one-off transactions like Drafts, Remittances etc.
Sound KYC procedures have particular relevance to the

safety and soundness of banks, in that:
1.
They help to protect banks reputation and the integrity of

banking systems by reducing the likelihood of banks
becoming a vehicle for or a victim of financial crime and
suffering consequential reputational damage;
2.
They provide an essential part of sound risk

management system (basis for identifying, limiting and
controlling risk exposures in assets & liabilities
To prevent banks from being used, intentionally or

unintentionally, by criminal elements for money
laundering activities . KYC procedures also enable banks
to know/understand their customers and their financial
dealings better which in turn help them manage their
risks prudently.
4 key elements of KYC policies

1) Customer Acceptance Policy;
2) Customer Identification Procedures;
3) Monitoring of Transactions; and
4) Risk management
Why KYC norms required?

Objectives of KYC guidelines
Why do the banks ask for documentary proof for identity
and address for opening account?
What is expected from customers?
Why other information?
Is this information kept confidential?
What are the valid documents for ID proof and address
proof?
For opening accounts in legal capacity like partnership,
companies, trust etc. does one still need to submit
information mentioned above?
How can a person having no valid documents open
account?
Case : Aug 2012
Two public sector banks and one private

bank were held accountable by the
Reserve Bank of India (RBI),
Bangalore, for failure to exercise due
diligence in opening bank accounts
that enabled online fraudsters to hack
into the accounts of genuine
customers and walk away with Rs 6.60
lakh, exposing the lax implementation
of know your customer (KYC) norms
The cases were taken up by the RBI ombudsman after the

customers lodged complaints with him; the money trail was
traced to Mumbai and Coimbatore; the fraudsters had
opened accounts with fake employment letters, residence
documents and given fictituous telephone numbers.
The banks were found guilty and went in for appeal to the
appellate authority (Deputy Governor, RBI) who upheld two
of our verdicts
In another case, a public sector bank was asked to suspend

its mobile banking services after its security systems were
found to be deficient.
In all, the ombudsman received 3,486 complaints during

the year compared to 3,470 last year.
-failure to implement commitments made-1,209 .
-followed by those pertaining to credit and debit cards - 732
-other categories included levy of service charges without
prior permission, loans and advances and recovery agent
harassment.
-banks had wrongly rejected applications for education
loans, which were then rectified by the respective banks.
RBI ensures that the grievances are resolved and benefits

are restored to the customers, with occasional cases of
compensation to them.
THANK
YOU

KYC

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Presented By:Saurav

KYC (Know Your Customer) is a framework for

Banking operations are susceptible to the risks

Therefore, banks are advised to follow certain

Reserve Bank of India has advised banks to

Any contravention of the same will attract

Your? Who should know?

Know? What you should know?

Opening a new account.

Sound KYC procedures have particular relevance to the

They help to protect banks reputation and the integrity of

They provide an essential part of sound risk

To prevent banks from being used, intentionally or

4 key elements of KYC policies

Why KYC norms required?

Case : Aug 2012

Two public sector banks and one private

The cases were taken up by the RBI ombudsman after the

In another case, a public sector bank was asked to suspend

In all, the ombudsman received 3,486 complaints during

RBI ensures that the grievances are resolved and benefits

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