What is KYC and its norms?

KYC means “Know Your Customer”. It is a process by which banks obtain information about the identity and address of the customers. This process helps to ensure that banks’ services are not misused. The KYC procedure is to be completed by the banks while opening accounts and also periodically update the same.

What is the purpose of KYC norms in banking?

Definition of KYC The objective of KYC guidelines is to prevent banks from being used, by criminal elements for money laundering activities. It also enables banks to understand its customers and their financial dealings to serve them better and manage its risks prudently.

Why KYC norms are made compulsory?

KYC Norms were made compulsory, aiming to restrict money laundering and to stop terrorist financing. RBI issues guidelines for KYC, through Banking Regulation Act, 1949 Section 35A along with Prevention of Money Laundering (Maintenance of Records) Rules, 2005.

What is KYC and why is it important?

KYC is aimed to make it easier for the banks and other final institutions to know and understand their customers. Implementation of KYC guidelines for every new bank account was made compulsory by RBI in the year 2002, which came into force from 1st July 2005.

What is the Central KYC registry?

With uniform norms and inter-usability, central KYC registry across all financial sectors has been set up as a depository for KYC records. This new process, without asking customers to provide multiple KYC undertakings will help banks, mutual funds, brokerage firms and depository participants offer services.

What is the KYC policy for EU banks and financial institutions?

EU member states must implement the directive within two years. The KYC policy is a mandatory framework for banks and financial institutions used for the customer identification process. Its origin stems from the 2001 Title III of the Patriot Act to provide various tools to prevent terrorist activities.