Dear All,
Know your customer (KYC) is the due diligence and bank regulation that financial institutions and other regulated companies must perform to identify their clients and ascertain relevant information pertinent to doing financial business with them. Know your customer policies are becoming increasingly important globally to prevent identity theft fraud, money laundering and terrorist financing. One aspect of KYC checking is to verify that the customer is not on any list of known fraudsters, terrorists or money launderers. The Reserve Bank of India regularly publishes lists of known terrorists, willful defaulters etc on its website. One aspect of KYC is also to verify whether the customer’s name appears on any of such lists. Beyond name matching, a key aspect of KYC controls is to monitor transactions of a customer against their recorded profile, history of the customers’ account. RBI has introduced KYC guidelines for all banks first time vide circular DBOD. No. AML.BC.18/ 14.01.001/2002-2003 dated August 16 2002. Later vide circular no DBOD.NO.AML.BC.58/14.01.001/2004-05 dated November 29 2004, RBI has directed that all banks shall ensure that they are fully compliant with the provisions of this circular before December 31 2005. The purpose was to prevent money laundering, terrorist financing, theft and so on. Today other regulators too have made KYC mandatory. The Securities and Exchange Board of India (Sebi) has mandated it for mutual funds and broking accounts, the Insurance Regulatory Development Authority (IRDA) while buying insurance and the Forwards Markets & Commission (FMC) for commodity trading. You need to submit it even for making post office deposits.
For further information, refer RBI website for the abovementioned circular on KYC
Regards,
CA Rahul Joglekar
Partner
Gokhale & Sathe
Chartered Accountants
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