INTRODUCTION
OBJECTIVE:
The objective of KYC guidelines is to prevent banks from being used, intentionally or unintentionally, by criminal
elements for money laundering activities. KYC procedures also enable banks to know/understand their
customers and their financial dealings better, which in turn help them manage their risks prudently.
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 they must also periodically update the same.
NEED:
Mandatory as per PMLA and FATF
ELEMENTS OF KYC:
• Customer Acceptance Policy
• Customer Identification Procedures
• Monitoring of Transactions
• Risk Management
CUSTOMER ACCEPTANCE POLICY
• No account is opened in anonymous or fictitious/benami name.
• Identity of the customer should not match with the name provided by Bank in the sanction list
• Should not open account for entities under Unlawful Activities Prevention Act
• Banks should not open accounts for those whose names appear in -
• FIU Alert list
• Caution advice by RBI
• Criminal list by CBI,ED and others
• Not to open an account where the Bank is unable to verify the customer
• If existing customer falls in this category, Banks must end the relationship
• Parameters of risk perception are clearly defined in terms of the nature of business activity, location of customer and
his clients, mode of payments, volume of turnover, social and financial status etc., to enable categorisation of
customers into low, medium and high risk
• Banks should prepare a profile for each new customer based on risk categorisation. The customer profile may contain
information relating to customer’s identity, social/financial status, nature of business activity, information about his
clients’ business and their location etc.
• DEFINITION OF CUSTOMER, PERSON, BENEFICIARY OWNER
CUSTOMER IDENTIFICATION PROCEDURE
Customer identification means identifying the customer and verifying his/her identity by using reliable, independent
source documents, data or information
Given below is the indicative procedure which may be reviewed and implemented by the Standing Committee
on KYC/AML from time to time.
POI (Proof Of Identity) - photo, signature, financial status, source of income
POA (Proof of Address) -
(i) verify the legal status of the legal person/entity through proper and relevant documents
(ii) verify that any person purporting to act on behalf of the legal person/entity is so authorised. Identify and verify the
identity of that person
(iii) understand the ownership and control structure of the customer and determine who are the natural persons who
ultimately control the legal person
(iv) The increasing complexity and volume of financial transactions necessitate that customers do not have multiple
identities within a bank, across the banking system and across the financial system. This can be achieved by
introducing a unique identification code for each customer. The Unique Customer Identification Code (UCIC) will help
banks to identify customers, track the facilities availed, monitor financial transactions in a holistic manner and
enable banks to have a better approach to risk profiling of customers.
KYC once done by one branch of the bank should be valid for transfer of the account within the bank, as long as full KYC
has been done for the concerned account. The customer should be allowed to transfer his account from one branch to
another branch without restrictions
CUSTOMER IDENTIFICATION PROCEDURE
The documentation process is easy & straight forward. Following are the bank opening documents that will
help Banks in processing quickly:
1. Duly-filled account opening form
2. PAN Card/Form 60 with reasons for not having a PAN Card
3. Recent photographs of the applicant
4. Proof of Identification and Signature
5. Proof of Address
For Address and Signature, Proof of Identity, acceptable KYC documents are as mentioned below -
1. PAN Card
2. Valid Driving License
3. Valid Passport
4. Voter’s ID
5. Aadhaar Card
6. E-Aadhaar (downloaded from UIDAI website)
7. National Rural Employment Guarantee Scheme (NREGA) Card
CUSTOMER IDENTIFICATION PROCEDURE
SOLE PROPRIETOR •Two Entity proofs and One Address PRIVATE LIMITED •Entity proof and Address proof
proof of the Entity. COMPANY of the Entity
•PAN card of the Proprietor is •Memorandum of Association (
compulsory. MOA ) or e-form INC 33** AND
•Articles of Association (AOA )
TRUST •Entity proof and Address proof
Documents of the Entity. or e-form INC 34** AND
•Trust Deed signed by at least 2 •Certificate of Incorporation
managing / authorized trustees & AND
•Certificate of registration with •Board Resolution (BR) -duly
Registrar of Trusts or Deputy / signed AND
•PAN Card in the name of the
Assistant Charity Commissioner / PF
Commissioner (in case of PF Trust) & company AND
•PAN card in the name of the Trust & •Any documents as mentioned
•Certified copy of the Resolution to above (except BR) containing
open/maintain the Bank account address will be acceptable as
signed by the chairperson/secretary/ address proof also.
2 authorised signatories
•Trust Declaration.
CUSTOMER IDENTIFICATION PROCEDURE
PARTNERSHIP FIRM •Entity proof and Address proof of VOSTRO •Entity proof and Address proof of the Entity.
the Entity. ACCOUNTS •Authenticated SWIFT message with a request to
•Partnership declaration to be open/Maintain the account in the Bank's name with whom
YES Bank has Bilateral Key Exchange (BKE) / Relationship
obtained on the Bank’s Format, Management Application (RMA) arrangement in place.
signed by all partners. •Physical copy of the KYC documents (Banking License
•The latest partnership deed. issued by respective regulator, certificate of
incorporation/Registration Certificate, Entity constitution
HINDU UNDIVIDED •Entity proof and Address proof of document such as Memorandum & Articles of
FAMILY (HUF) the Entity. Association/ Byelaws or such other document as
•HUF Declaration duly signed by all prevalent in the country of domicile of the Overseas
adult Co-parcerners and naming the Correspondent Bank, I & S of the AUS and person signing
the resolution) duly attested by a
Karta, who would be authorised to
Notary/Embassy/Overseas Banker/Company Secretary to
operate the account & be obtained.
•Karta’s ISA as per as applicable for •Names of directors to be downloaded from DDR
KYC of individuals & application of Bankers’ Almanac.
•HUF Deed (If available) & •Approval from YBL Board.
•PAN in the name of HUF. •CDD to be filled up.
•Confirmation from the International Banking Head of that
the overseas Bank is not a 'shell bank'.
RISK CATEGORISATION
MONITORING TRANSACTIONS
• Ongoing monitoring is an essential element of effective KYC procedures. Banks can effectively control and reduce
their risk only if they have an understanding of the normal and reasonable activity of the customer so that they have
the means of identifying transactions that fall outside the regular pattern of activity.
• However, the extent of monitoring will depend on the risk sensitivity of the account. Banks should pay special attention
to all complex, unusually large transactions and all unusual patterns which have no apparent economic or visible
lawful purpose.
• Banks may prescribe threshold limits for a particular category of accounts and pay particular attention to the
transactions which exceed these limits. Transactions that involve large amounts of cash inconsistent with the normal
and expected activity of the customer, should particularly attract the attention of the bank.
• Very high account turnover inconsistent with the size of the balance maintained may indicate that funds are being
'washed' through the account. High-risk accounts have to be subjected to intensified monitoring.
• Every bank should set key indicators for such accounts, taking note of the background of the customer, such as the
country of origin, sources of funds, the type of transactions involved and other risk factors.
• High risk associated with accounts of bullion dealers (including sub-dealers) & jewellers should be taken into account
by banks to identify suspicious transactions for filing Suspicious Transaction Reports (STRs) to Financial Intelligence
Unit- India (FIU-IND)
RISK MANAGEMENT
Maintain updated designated lists in electronic form and run a check on the given parameters on a regular basis to verify whether
individuals or entities listed in the schedule to the Order (referred to as designated individuals/entities) are holding any funds, financial
assets or economic resources or related services held in the form of bank accounts with them.
• In case, the particulars of any of their customers match with the particulars of designated individuals/entities, the banks shall
immediately, not later than 24 hours from the time of finding out such customer, inform full particulars of the funds, financial assets
or economic resources or related services held in the form of bank accounts, held by such customer on their books to the Joint
Secretary (IS.I), Ministry of Home Affairs, at Fax No.011-23092569 and also convey over telephone on 011-23092736. The particulars
apart from being sent by post should necessarily be conveyed on e-mail.
• Banks shall also send by post a copy of the communication mentioned in (b) above to the UAPA nodal officer of RBI, Chief General
Manager, Department of Banking Operations and Development, Central Office, Reserve Bank of India, Anti Money Laundering Division,
Central Office Building, 13th Floor, Shahid Bhagat Singh Marg, Fort, Mumbai - 400 001 and also by fax at No.022-22701239. The
particulars apart from being sent by post/fax should necessarily be conveyed on e-mail .
• Banks shall also send a copy of the communication mentioned in (b) above to the UAPA nodal officer of the state/UT where the
account is held as the case may be and to FIU-India.
• In case, the match of any of the customers with the particulars of designated individuals/entities is beyond doubt, the banks would
prevent designated persons from conducting financial transactions, under intimation to Joint Secretary (IS.I), Ministry of Home
Affairs, at Fax No. 011-23092569 and also convey over telephone on 011-23092736. The particulars apart from being sent by post
should necessarily be conveyed on e-mail.
• Banks shall also file a Suspicious Transaction Report (STR) with FIU-IND covering all transactions in the accounts covered by
paragraph (b) above, carried through or attempted, as per the prescribed format.
