KYC, or Know Your Customer, is a process where banks obtain details about a customer's identity and address. This helps ensure that bank services are not being misused, and enables banks to understand customer transactions and manage risks like money laundering and terrorism financing. As part of KYC, banks must periodically update customer details. KYC helps prevent identity theft, financial fraud, money laundering and terrorist financing. Banks must perform KYC when opening accounts, issuing loans or credit cards, and in other instances to obtain additional customer information.

1. KYC
Know Your Customer
Know Your Customer – KYC enables banks to know/understand their
customers and their financial dealings to be able to servethem better and
prudently manage the risks of money laundering and financing of terrorism.
 KYC stands for ‘Know your Customers’
 Itis a process by which bank obtains about the identity and address of
the customers and helps to ensurethat banks services arenot misused.
 Banks are also required to periodically update their customer’ KYC
details
 Itenables banks to know / understand their customers and their
financial dealings so as to be able to servethem better.
 Know Your Customer (KYC) Policy is an important step developed
globally to prevent:
 Identify theft
 Financial fraud
 Money Laundering
 Terroristfinancing
Define a Customer
 Individual
 Company/Business Entity
 ProfessionalIntermediaries such as Stock Broker
 Chartered Accountants, Solicitors
 Any person or entity connected with a financial transaction
Why KYC?
 To establish the identity of the client. This means identifying the
customer and verifying his/her by using reliable, independent source
documents, data or information.
 To ensurethat sufficientinformation is obtained on the nature of
employment/ business that the customer does/expects to undertake
 And the purposeof the account.

2.  To prevent banks frombeing used, intentionally or unintentionally,, by
criminal elements for money laundering activities.
When KYC Required?
 Opening an account in a bank
 Applying for a Credit Card or loan
 Opening a subsequentaccount
 Opening a locker facility
 While investing in a mutual fund
 Financial institutes may ask for a mandatory KYC process in other
instance too
 When there are not enough documents with the Bank in existing
account
 When there are changes in signatories, Beneficial Owners etc.
 When the bank feels it necessary to obtain additional information from
existing customers based on conduct of the account
What does KYC controls?
 Name Matching against list known parties
 Collection and analysis of basic identity information
 Creation of an expectation of a customer’s transactionalbehaviour
 Determination of the customer’s risk in terms of propensity to commit
money laundering terroristfinance or identity theft
 Monitoring of a customer’s transaction againsttheir expected behaviour
and recorded profile as well as that of the customer’s peers.
List of KYC Documents
Individual
 Passport
 Voter’s Card
 Driving License
 Adhaar Card
 NREGA Card
 Pan Card

3. Company / Business Entities
 Certificate of incorporation
 Article of Association (AoA)
 Memorandumof Association (MoA)
 Service tax / VAT Certificate
 Rent Agreement Copy
 KYC of Directors and Authorised Signatory
Terminologies toKnow
 Money Laundering :-
Is the process of creating the appearance those large amounts of money
obtained fromserious crimes, such as drug trafficking of terrorist
activity, originated froma legitimate source
 TerrorismFinancing :-
 Refers to activities that providefinancing or financial supportto
individual terrorists or terroristgroups.
 A governmentthat maintains a list of terroristorganization
normally will also pass laws to prevent money laundering being
used to finance thoseorganizations