1.
What is KYC?
KYC
is an acronym for “Know your Customer”, a term used for customer identification
process. It involves making reasonable efforts to determine true identity and
beneficial ownership of accounts, source of funds, the nature of customer’s
business, reasonableness of operations in the account in relation to the
customer’s business, etc which in turn helps the banks to manage their risks
prudently. The objective of the KYC guidelines is to prevent banks being used,
intentionally or unintentionally by criminal elements for money laundering.
KYC
has two components - Identity and Address. While identity remains the same, the
address may change and hence the banks are required to periodically update
their records.
2.
Is there any legal backing for verifying identity of clients?
Yes.
Reserve Bank of India has issued guidelines to banks under Section 35A of the Banking Regulation Act, 1949 and Rule 7 of
Prevention of Money-Laundering (Maintenance of Records of the Nature and Value
of Transactions, the Procedure and Manner of Maintaining and Time for
Furnishing Information and Verification and Maintenance of Records of the
Identity of the Clients of the Banking Companies, Financial Institutions and
Intermediaries) Rules, 2005. Any contravention thereof or non-compliance shall
attract penalties under Banking Regulation Act.
3. I
want to keep a fixed deposit in a bank. Is KYC - applicable to me?
Yes.
KYC is applicable to customers of the bank. For the purpose of KYC following
are the ‘Customers of the bank.
• A person or entity that maintains an
account and/or has a business relationship with the bank;
• One on whose behalf the account is
maintained (i.e. the beneficial owner);
• beneficiaries of transactions
conducted by professional intermediaries, such as Stock Brokers, Chartered
Accountants, Solicitors etc. as permitted under the law, and
• any person or entity connected with a
financial transaction which can pose significant reputational or other risks to
the bank, say, a wire transfer or issue of a high value demand draft as a
single transaction.
4.
Is there any procedure specified for Customer Identification?
Customer
identification means identifying the customer and verifying his/her identity by
using reliable, independent source documents, data or information. Banks have
been advised to lay down Customer Identification Procedure to be carried out at
different stages i.e. while establishing a banking relationship; carrying out a
financial transaction or when the bank has a doubt about the
authenticity/veracity or the adequacy of the previously obtained customer
identification data.
5.
Once KYC requirements are complied with while opening the account, whether the
bank can again ask for KYC compliance from me?
Yes.
To ensure that the latest details about the customer are available, banks have
been advised to periodically update the customer identification data based upon
the risk category of the customers.
Banks
create a customer profile based on details about the customer like
social/financial status, nature of business activity, information about his
clients’ business and their location, the purpose and reason for opening the
account, the expected origin of the funds to be used within the relationship
and details of occupation/employment, sources of wealth or income, expected
monthly remittance, expected monthly withdrawals etc. When the transactions in
the account are observed not consistent with the profile, bank may ask for any
additional details / documents as required. This is just to confirm that the
account is not being used for any Money Laundering/Terrorist/Criminal
activities.
6. I
had submitted my driving licence as a proof of identity and address but still
the bank asked for telephone / electricity bill.
There
are two aspects of Customer Identification. One is establishing identity and
the other is establishing present residential address.
For
establishing identity, the bank requires any authentic document carrying photo
of the customer such as driving licence/ passport/ pan card/ voters' card etc.
Though these documents carry the residential address of the customer, it may
not be the present address. Therefore, in order to establish the present
address of the customer, in addition to passport/ driving licence / voters'
card / pan card, the bank may ask for utility bills such as Telephone /
Electricity bill etc.
7.
Can my wife who is not having any address proof in her name, open an account
with the bank?
Yes.
In such cases where the utility bills required for address verification are not
in the name of the person who wants to open an account ( close relatives, e.g.
wife, son, daughter and daughter and parents etc. who live with their husband,
father/mother and son, as the case may be) , an identity document and a utility
bill of the relative with whom the prospective customer is living along with a
declaration from the relative that the said person (prospective customer)
wanting to open an account is a relative and is staying with him/her is
acceptable. As supplementary evidence bank may ask for a letter received
through post for further confirmation.
8. I
am a daily wage earner without any document to satisfy the bank about identity
and address. Can I open a bank account?
A
customer belonging to low income group who is not able to produce documents to satisfy the bank about his
identity and address, can open bank account with an introduction from another
account holder who has been subjected to full KYC procedure provided that the
balance in all his accounts taken together is not expected to exceed Rupees
Fifty Thousand (Rs. 50,000/-) and the total credit in all the accounts taken
together is not expected to exceed Rupees One Lakh (Rs. 1,00,000/-) in a year.
The introducer’s account with the bank should be at least six months old and
should show satisfactory transactions.
Photograph of the customer who proposes to
open the account and also his address needs to be certified by the introducer, or
any other evidence as to the identity and address of the customer to the satisfaction
of the bank.
If
at any point of time, the balance in all his/her accounts with the bank (taken
together) exceeds Rupees Fifty Thousand (Rs. 50,000/-) or total credit in the
account exceeds Rupees One Lakh (Rs. 1,00,000/-) in a year, no further
transactions will be permitted until the full KYC procedure is completed.
In
order not to inconvenience the customer, the bank will notify the customer when
the balance reaches Rupees Forty Thousand (Rs. 40,000/-) or the total credit in
a year reaches Rupees Eighty thousand (Rs. 80,000/-) that appropriate documents
for conducting the KYC must be submitted otherwise operations in the account
will be stopped.
9.
Whether a certificate from my employer is sufficient as identity as well as
address proof for opening an account?
Banks
rely on such certification only from corporate and other entities of repute
provided that they are aware of the competent authority designated by the
concerned employer to issue such certificate. In addition, banks also require
at least one of the valid documents indicated above viz. Passport, Driving
Licence, PAN Card, Voter's Identity Card etc. or utility bills for KYC purposes
for opening bank account of salaried employees of corporate and other entities.
10.
Whether the information given by me to the bank under KYC is treated as
confidential?
Yes.
The information collected from the customer for the purpose of opening of
account is treated as confidential and details thereof are not divulged for
cross selling or any other similar purposes.
11.
Whether KYC is applicable for Credit Cards/Debit Cards/Smart Cards?
Yes.
Application of full KYC procedure is necessary before issuing Credit
Cards/Debit Cards/Smart Cards and also in respect of add-on/ supplementary
cards.
12.
If I refuse to give information on KYC asked for by the bank, what action the
bank can take against me?
Where
the bank is unable to apply appropriate KYC measures due to non-furnishing of
information and /or non-cooperation by the customer, the bank can consider
closing the account or terminating the banking/business relationship after
issuing due notice to the customer explaining the reasons for taking such a
decision.
