In these yearss of frauds. terrorist act. KYC has become the bombilation word in fiscal sector. Before the execution of KYC Policy. Bankss used to inquire for an debut from an bing client to open a new history. even though an introducer can non be sued or otherwise held responsible for any bad luck. and it became a really common pattern to present anyone to the bank without cognizing its effects. In 2002. RBI directed all Bankss to meticulously follow the KYC guidelines to control the fiscal frauds efficaciously and to do Bankss comfy with the bonafide and unity of clients.
Aim: Aim of KYC is to prevents Bankss from being used. deliberately or accidentally. by condemnable elements for money laundering or fiscal terrorist act or fraud. It enables Bankss to understand their client and their fiscal traffics which in bend aid to pull off hazard providentially. It is the platform used by Bankss to command frauds and place money laundering.
Standard: Customer has been defined as an person or entity holding history or fiscal traffics or one on whose behalf history is maintained. KYC policy is digest of 4 elements –
I ) Customer Acceptance policy: Branch may non open history of a individual whose individuality can non be verified. If subdivision is non satisfied with the individuality or somehow it is found that the individual is holding condemnable background or connexion with terrorist group. subdivision may shut the history or terminate banking relationship after directing a notice explicating the ground.
two ) Designation Procedure: designation is done on the footing of paperss provided by the client as ( a ) cogent evidence of individuality and ( B ) cogent evidence of reference. Board of managers of the bank should hold in topographic point equal policies to set up process to verify designation. But in instance of little sedimentation histories like No Frill A/cs. some relaxation is granted to the persons as they are in no place to supply required KYC paperss. Documents differs along with the nature of client type. e. g. . child. company. trust. NRI etc. three ) Monitoring of Transaction: If the dealing sum in a individual a/c exceeds Rs. 10 Lacs ( Dr or Cr ) in a calendar month. the a/c should be monitored carefully. If any leery nature is found. that should be reported to Financial Intelligence Unit – India. four ) Hazard Management: Harmonizing to the beginning of fund and nature of dealing. clients are categorized in 3 groups – Low hazard. Medium hazard and High hazard.
Existing client: In instance of bing clients without KYC. Bankss are expected to turn them into to the full KYC complied clients by acquiring appropriate paperss otherwise this may impose a punishment from Bankss. Decision: Money washing through bank non merely affects the bank’s image but besides the functionaries who were used as instruments in the procedure. A banker loses any statutory protection u/s 131 of NI Act if it found that KYC was non done decently. In a broader sense it affect the country’s economic system besides. In the whole procedure we need to guarantee KYC attachment by converting the clients that all these are for their long term involvement. Besides guarantee that excess rigidness may lose in banking concern by manner of denial of banking service.