What is the full form of KYC?
The KYC full form is “Know Your Customer.” KYC is the process through which a firm checks the identification of a customer and assesses potential criminal intent hazards to the commercial relationship. The term is also used to refer to the anti-money laundering and bank rules that govern such activity. The Reserve Bank of India (RBI) implemented the Know Your Customer (KYC) procedure to prevent financial fraud such as identity theft, money laundering, and illicit transactions.
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Object of KYC
KYC guidelines prevent banks from purposefully or unintentionally utilizing criminal networks for money laundering activities. Additionally, KYC facilitates client communication and financial transactions. This enables them to carefully manage their risks. KYC can now be implemented not only by banks but also by many online businesses.
The Reserve Bank of India has advised banks to apply the Know Your Customer (KYC) procedure during account opening. It protects clients from fraudsters who may use their name, address, and fake identification documents. Therefore, consumers of banks and other financial institutions must supply verifiable information in order for banks to recognize and enhance customer satisfaction.
Here is a mandatory document for KYC functioning as identification and address verification
- Passport
- Voter ID card
- Driving Licence
- PAN card
- Aadhaar Card
If the document you provide as proof of identity does not include address information, you may submit another legally valid document that does, such as a utility bill, telephone bill, or gas bill.
What is the significance of KYC?
KYC is vital since it enables the banker to verify the authenticity of the request and other facts. There were cases of theft and account monies being siphoned off. It will assist prevent fraud by preserving individuals’ identities. The Know The Consumer strategy has been popular for many years. If they wish to open an account, all individuals must comply with this requirement. Without KYC compliance, opening a bank account or mutual fund account is difficult.
Who Requires KYC?
KYC is a requirement for all financial institutions and related enterprises. Companies must adhere to the requirements or face fines and penalties from the government. The following are examples of businesses that must incorporate KYC
- Real estate business
- Banks and their respective subsidiaries
- E-commerce
- Dealers of precious metals
- Insurance companies
- Casinos and online gaming
- Virtual currency businesses
