As a whole, KYC stands for “Know Your Customer.” The phrase “KYC,” which means “know your customer,” is often used in the financial services industry. Every financial institution must follow the “Know Your Customer” (KYC) protocol. To engage in this activity, financial institutions must get the names and addresses of their customers. Besides ensuring the accuracy of their databases, banks may nevertheless ask for your Know Your Client (KYC) documents, even if you’ve sent them regularly. The financial institution may refuse to open an account for a customer or cancel their relationship if they do not meet the basic KYC requirements.
Purpose of KYC
Know Your Customer (KYC) requirements help banks avoid using criminal networks to aid in the illegal practice of money laundering, both inadvertently and purposefully. Know Your Customer requirements make it easier for financial organizations to engage with consumers and execute financial transactions. The threats they face may be dealt with more effectively as a consequence. Banks and other financial institutions, as well as a wide range of online businesses, are likely to implement Know Your Customer standards in today’s atmosphere.
The Reserve Bank of India (RBI) advises banks to use the Know Your Customer (KYC) protocol whenever a new account is opened. Customers are protected against identity thieves who could use their name and address, as well as fake signatures and other means of identification, to commit fraud. Customers are also protected from fraudsters who would use fake signatures to commit these crimes. As a result, banks and other financial institutions need customers to supply verifiable information to know who they are dealing with and keep them satisfied. To ensure that banks can keep expanding.
KYC includes the following details
- Customer Name
- Date of birth
- Father’s name
- Mother’s name
- Marital status
- Address proof
- Proof of identification
- Contact number
- Pan Card
- Aadhar Card
- Source of funds
Required KYC documents for individuals
- Passport
- Voter ID Card
- Driving license
- Aadhaar Card
- NREGA card
- Pan Card
- Ration card
- Copy of bank passbook
- Landline or mobile bill
- electricity bill
What Is The Importance OF KYC?
The Know Your Customer (KYC) protocol is critical since it allows the bank to authenticate the request and other facts to establish whether or not they are genuine. In certain cases, money was illegally removed from or transferred from such accounts without authorization. It will be much easier to halt fraud if the identities of those engaged are kept hidden. For many years, one of the most prevalent and successful business tactics has been “Know Your Customer.” If a person goes ahead and establishes the account, they are required to follow this advice since creating the account is a requirement. Opening a bank account or a mutual fund account may be problematic if the institution does not comply with the Know Your Customer (KYC) rule.
Who Needs KYC?
All financial institutions and other organizations in the same business must know their customers’ checks. Companies must follow the law or face fines and other penalties from the appropriate authorities. The following are some examples of firms that must execute KYC procedures:
- Real estate business
- Banks and their respective subsidiaries
- E-commerce
- Dealers of precious metals
- Insurance companies
- Casinos and online gaming
- Virtual currency businesses
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