The full form of KYC is Know Your Customer. KYC is a company’s process of verifying the customer’s identification and assessing potential hazards to the business relationship from criminal intent. The term is also applied to the bank regulations and anti-money laundering legislation that control such activity. The KYC process was implemented by the Reserve Bank of India (RBI) to prevent financial crimes such as identity theft, money laundering, and illicit transactions.
Object of KYC
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KYC requirements assist banks in preventing the intentional or unintentional use of criminal networks for money laundering activities. Furthermore, KYC enables banks to engage with customers and conduct financial transactions. This enables them to manage their risks more carefully. KYC can now be implemented not only by banks but also by many online companies.
The RBI has advised banks to implement the KYC process while creating new accounts. It protects clients from scammers who may commit fraud using their name, address, and forged signs. Customers of banks and other financial institutions must therefore supply authentic information in order for banks to recognise and enhance consumer satisfaction.
Here is a needed document that serves as identification and address proof.
- Passport
- Voter ID card
- Driving Licence
- PAN card
- Aadhaar Card
If the document you offer for identity evidence does not include address information, you can send another legally valid document that does, such as an electricity bill, telephone bill, gas bill, etc.
What Is The Importance OF KYC?
KYC is necessary since it allows the banking to ensure that the request and other details are genuine. There were cases of theft and syphoning of monies from accounts. It will help to deter fraud by protecting people’s identities. For numerous years, the Know Your Customer strategy has been popular. That is a requirement that all persons must follow if they choose to open an account. It is difficult to open a bank or mutual fund account without KYC compliance.
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Who Needs KYC?
KYC is a requirement for financial institutions and other similar businesses. Companies must follow the rules or face fines or penalties from the authorities. The following are some instances of businesses that must implement KYC.
- Real estate business
- Banks and their respective subsidiaries
- E-commerce
- Dealers of precious metals
- Insurance companies
- Casinos and online gaming
- Virtual currency businesses