What is the full form of KYC?
The full form of KYC is Know Your Customer. KYC is the method of a company that verifies the customer’s identity and assesses possible risks to the business relationship from criminal intentions. The name is also used to relate to the regulations on banks and anti-money laundering regulations that govern such activities. Reserve Bank of India ( RBI) adopted the KYC process to avoid financial fraud, such as identity theft, money laundering and illegal transactions.
Object of KYC
KYC guidelines help prevent banks from using criminal networks, intentionally or involuntarily, for money laundering activities. Also, KYC helps the banks to communicate with clients and financial transactions. That helps them to handle their risks carefully. Today KYC can be implemented not only by the banks but also by different online companies.
RBI has recommended banks to implement the KYC process during account opening. It protects the clients from scammers who can make fraudulent activity using their name, address and forged signs. Therefore, customers of banks and other financial institutions must provide authentic information so that banks can recognise and improve customer satisfaction.
Here is a required document serving as identification evidence and address proof
- Voter ID card
- Driving Licence
- PAN card
- Aadhaar Card
If the document you provide for identity proof does not contain details of the address, you can send another legally valid document containing details of the address such as electricity bill, telephone bill, gas bill, etc.
What Is The Importance OF KYC?
KYC is essential because it helps the banker to make sure the request and other details are real. There were instances of theft and the siphoning off of accounts funds. It will help deter fraud by maintaining the identity of the individuals. The Know The Consumer approach has been in vogue for several years now. That is a must and all individuals must obey if they decide to open the account. It isn’t easy to open a bank account, or mutual funds account without KYC compliance.
Who Needs KYC?
KYC is a mandatory practice for financial institutions and other related businesses. Companies must comply with the regulations or may face fines or penalties from authorities. The following are some examples of enterprises which need to incorporate KYC
- Real estate business
- Banks and their respective subsidiaries
- Dealers of precious metals
- Insurance companies
- Casinos and online gaming
- Virtual currency businesses