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http://www.gktoday.in/knowyourcustomer/
KnowYourCustomerGeneralKnowledgeToday
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CURRENTAFFAIRS CURRENTAFFAIRSQUIZ
Know Your Customer
First Published: February 22, 2012 | Last Updated:February 6, 2017
Know your customer (KYC) is a bank regulation that nancial
institutions and other regulated companies must perform to identify
their clients and ascertain relevant information pertinent to doing
nancial business with them.
What are Objectives of KYC?
Money laundering is a growing menace and it not only poses serious
threat to the stability and integrity of the nancial system but also to
the sovereignty and safety of nations worldwide. In the coming days,
challenges before banks would primarily lie in saving themselves from
the growing threat of money laundering. Click Here to read Indias
Efforts to Tackle Money Laundering
In India, prevention of money laundering act (PMLA) was passed in
2002 and it has been aligned with the nancial action task force
(FATF) recommendations in 2009. Further, India has become a
member of FATF in 2010.
Banks are being extensively sensitised about money laundering
and KYC norms.
In India Banks were advised to follow certain customer
identi cation procedure for opening of accounts and monitoring
transactions of a suspicious nature for the purpose of reporting it to
appropriate authority. These Know Your Customer guidelines have
been revisited time to time in the context of the Recommendations
made by the Financial Action Task Force (FATF) on Anti Money
Laundering (AML) standards and on Combating Financing of
Terrorism (CFT).
These standards have become the international benchmark for framing
Anti Money Laundering and combating nancing of terrorism policies by
the regulatory authorities. Compliance with these standards both by the
banks/ nancial institutions and the country have become necessary for
international nancial relationships.
Contents [hide]
India-On Path of Uni ed KYC
Factsheet: Know Your Customer (KYC)
1/3
28/04/2017 KnowYourCustomerGeneralKnowledgeToday

KYC and Damodaran Committee

KRA

India-On Path of Unied KYC

KYC discipline assumes critical importance especially in the light of our
concerted efforts to widen the reach of banking as part of nancial
inclusion initiatives.
Banks have to ensure a very high degree of KYC compliance and a very
robust AML regime. Once these standards are achieved, a uni ed KYC for
banking system could be thought of.
In 2011, SEBI said that it would also come out with Homogenous norms
for setting up a uniform Know Your Customer (KYC) Regulation
Authority. It will relieve the burden comparable on the intermediaries as
well as the common man, seeking to make investments. This
mechanism once set would make certain that KYC exercise is undertaken
only once and enabling all intermediaries to access a prospective clients
number for getting his KYC status.
Factsheet: Know Your Customer (KYC)
Know Your Customer (KYC) is the due diligence and bank
regulation that nancial institutions and other regulated companies
must perform to identify their clients and ascertain relevant
information pertinent to doing nancial business with them.

Know your customer policies are becoming increasingly important

globally to prevent identity theft fraud, money laundering and
terrorist nancing.

Beyond name matching, a key aspect of KYC controls is to monitor

transactions of a customer against their recorded pro le, history on
the customers account(s) and with peers.

Banks doing KYC monitoring for anti-money laundering (AML) and

checks relating to combating the nancing of terrorism (CFT)
increasingly use specialized transaction monitoring software,
particularly names analysis software and trend monitoring software.
The generated alerts identify unusual activity which is then subject
to due diligence or enhanced due diligence (EDD) processes that use
internal and external sources of information on the subject,
including the internet. This helps to determine whether a transaction
or activity is suspicious and requires reporting to the authorities.

Some specialist consultancies help multinational companies and

SMEs conduct Know Your Customer processes when entering new
markets.

The Reserve Bank of India introduced KYC guidelines for all banks
in 2002. In 2004, RBI directed that all banks ensure that they are fully
compliant with the KYC provisions before December 31, 2005. The
purpose was to prevent money laundering, terrorist nancing and
theft.

http://www.gktoday.in/knowyourcustomer/ KYC and Damodaran Committee 2/3

28/04/2017 KnowYourCustomerGeneralKnowledgeToday

KYC and Damodaran Committee

The committee, headed by former SEBI chief M Damodaran, has
proposed a slew of consumer-friendly measures. The committee was set
up by RBI and if the recommendations are accepted, Bank account
holders can expect better standards of service and more secure ways of
doing business. (all important recommendations here)
In context with KYC, the committee recommended third-party Know
Your Customer data bank.
KRA
In January 2012, the Capital markets regulator SEBIs Chairman, Mr. U.K.
Sinha, launched Indias rst Know Your Customer Registration Agency
KRA at Bombay Stock Exchange.
The system avoids duplication of customer details and is interoperable,
which means that other market participants can share the data and bring
in more uniformity.
Tags:Banking GK

Comments
Ravi March 27, 2012 Log in to Reply
Thanks for useful information. It is much helpful.

Babi ganguly February 2, 2013 Log in to Reply

PLS GIVE NOTE ON RTGS AND NEFT

rajkumar October 10, 2014 Log in to Reply

thanks very much.

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