Reimagining Know Your Customer KYC

Where the CNO has reasons to believe that any funds or assets are violative of Section 12A (1) or Section 12A (2)(b) of the Act, he shall, by order, freeze such funds or Assets, without any delay, and make such order available to authorities, Financial Institutions, DNFBPs and other entities what is compliance for brokers concerned. (viii) All communications to Nodal officer as enunciated in subclauses (i) to (vii) above should, inter alia, include the details of funds and assets held and the details of transaction. 4.6 The order shall be issued without prior notice to the designated individual/entity.

The nature and depth of the regulatory risk and compliance check depend on the expected level of risk. Transactions are also screened to identify possible unusual activities. At the minimum, firms must pull four pieces of identifying information about a client, including name, date of birth, address, and identification number. With strong expertise in ID verification for governments, Gemalto supports private customers by providing a solution that helps them comply with the new rules, particularly those regarding CDD (Customer Due Diligence) and KYC obligations.

Why is Know Your Customer (KYC) Software market 2023 Important?

The Central [designated] Nodal Officer for the UAPA shall also forward a copy of the order to all Directors General of Police/ Commissioners of Police of all States/UTs for initiating action under the provisions of the Unlawful Activities (Prevention) Act, 1967. Know Your Customer (KYC) is the aspect of due diligence that deals with the identity verification of customers. KYC procedures involves checking personal and business details in order to exclude negative hits such as sanctions lists, watch lists and PEP lists and to identify ownership relationships, involvement in anti-money laundering and links between companies. To help tackle financial crime, money laundering, terrorist financing and other criminal activities, minimum standards for due diligence, risk and compliance checks have been introduced. The legal basis for the due diligence that makes a KYC analysis necessary is the 3rd EU Money Laundering Directive. Failure to comply with the due diligence requirement can result in heavy fines, reputational damage or even a prison sentence and withdrawal of your business permit.

G. The live photograph of the customer and his original documents shall be captured in proper light so that they are clearly readable and identifiable. B. The access of the Application shall be controlled by the REs and it should be ensured that the same is not used by unauthorized persons. The Application shall be accessed only through login-id and password or Live OTP or Time OTP controlled mechanism given by REs to its authorized officials. Any remittance of funds by way of demand draft, mail/telegraphic transfer/NEFT/IMPS or any other mode and issue of travelers’ cheques for value of rupees fifty thousand and above shall be effected by debit to the customer’s account or against cheques and not against cash payment. Complete originator and beneficiary information relating to wire transfers shall be preserved by the REs involved in the wire transfer, in accordance with Section 46 of the Master Direction. Domestic wire transfers of rupees fifty thousand and above, where the originator is not an account holder of the ordering RE, shall also be accompanied by originator and beneficiary information as indicated for cross-border wire transfers.

Importance and Benefits of KYC

Domestic wire transfer, where the originator is an account holder of the ordering RE, shall be accompanied by originator and beneficiary information, as indicated for cross-border wire transfers in (i) and (ii) above. (i) REs shall ensure that during periodic updation, the customers are migrated to the current CDD standard. (a) REs shall maintain secrecy regarding the customer information which arises out of the contractual relationship between the RE and customer. Accounts of FPIs which are eligible/ registered as per SEBI guidelines, for the purpose of investment under Portfolio Investment Scheme (PIS), shall be opened by accepting KYC documents as detailed in Annex IV, subject to Income Tax (FATCA/CRS) Rules.

KYC policies are about finding out who a customer is and ensuring they are who they say they are. During this process, some checks and verifications are done to ensure that no business deals https://www.xcritical.in/ are made with people involved in illegal activities like terrorism, corruption, or money laundering. KYC is the primary process that defines and makes business-user relationships possible.

X) The authorised official of the RE shall ensure that photograph of the customer in the Aadhaar/OVD and PAN/e-PAN matches with the customer undertaking the V-CIP and the identification details in Aadhaar/OVD and PAN/e-PAN shall match with the details provided by the customer. Vii) 51The V-CIP infrastructure shall undergo necessary tests such as Vulnerability Assessment, Penetration testing and a Security Audit to ensure its robustness and end-to-end encryption capabilities. Any critical gap reported under this process shall be mitigated before rolling out its implementation. Such tests should be conducted by the empanelled auditors of Indian Computer Emergency Response Team (CERT-In). Such tests should also be carried out periodically in conformance to internal / regulatory guidelines.

KYC Documents

A number of countries and economic regions oversee financial anti-money laundering agencies or regulators that overview financial transactions to prevent tax evasion, terrorism financing, and other anti-social activities. All the agencies are a part of the Global Financial Action Task Force (FATF), which overviews financial transactions globally. Account owners generally must provide a government-issued ID as proof of identity.

Ii) The activity log along with the credentials of the official performing the V-CIP shall be preserved. I) The entire data and recordings of V-CIP shall be stored in a system / systems located in India. REs shall ensure that the video recording is stored in a safe and secure manner and bears the date and time stamp that affords easy historical data search. The extant instructions on record management, as stipulated in this MD, shall also be applicable for V-CIP. 53In case of offline verification of Aadhaar using XML file or Aadhaar Secure QR Code, it shall be ensured that the XML file or QR code generation date is not older than three working days from the date of carrying out V-CIP. Iv) Any prompting observed at end of customer shall lead to rejection of the account opening process.

• Securities and Exchange Board of India (SEBI) has issued guidelines under The Prevention of Money Laundering Act, 2002 (PMLA) which requires Mutual Funds to follow enhanced Know Your Customer (KYC) norms.
• You can either courier physical documents to your Relationship Manager or check with your bank if there is a convenient option to submit these documents online.
• Sometimes appearances are deceptive or the camouflage is so good that it is difficult to discover the reality.

Regarding funds, financial assets or economic resources or related services held in the form of bank accounts, stocks or Insurance policies etc. I) The RE should have complied with the RBI guidelines on minimum baseline cyber security and resilience framework for banks, as updated from time to time as well as other general guidelines on IT risks. The technology infrastructure should be housed in own premises of the RE and the V-CIP connection and interaction shall necessarily originate from its own secured network domain. Any technology related outsourcing for the process should be compliant with relevant RBI guidelines. In order to address the growing problem of money laundering, both national and international bodies around the world provide guidelines for the finance industry.

One of the main challenges with traditional Know Your Customer procedures is their resource-intensive nature. Verification of customer identities and backgrounds often require substantial time, labour, and financial resources. On top of this, manual processes can be prone to human errors that may lead to non-compliance and subsequent penalties. By conducting thorough KYC checks, you can dramatically reduce the financial, reputational, regulatory and strategic risks to your company from customers and other entities. Investment and financial services firms employ a set of guidelines and regulations known as “Know Your Client” (KYC) to confirm the identification of their clients and any potential dangers in the client-company relationship.

RE shall have a Board approved policy delineating a robust process of due diligence for dealing with requests for change of registered mobile number. In cases where the REs are satisfied that it is not possible to furnish two such documents, REs may, at their discretion, accept only one of those documents as proof of business/activity. Xii) All accounts opened through V-CIP shall be made operational only after being subject to concurrent audit, to ensure the integrity of process and its acceptability of the outcome.

After Brexit, the UK is following the Sanctions and Money Laundering Act of 2018 to formulate its KYC measures. The Act recommends institutions to perform due diligence checks on all the entities to maintain domestic security and comply with the international security standards. The European Union’s Anti-Money Laundering Directives – notably the 5th anti-money laundering directive (5AMLD) and the 6th anti-money laundering directive (6AMLD) form the base of the region’s KYC norms. However, the General Data Protection Regulation (GDPR) in 2018 and the Second Payment Services Directive (PSD2) in the EU are creating additional hurdles for organisations in meeting CDD procedures for KYC compliance. By using KYC procedures, financial institutions may protect themselves from the above-mentioned crimes, remain in the good books of regulators and protect their brand reputation. Collaborating with specialised third-party providers can also prove advantageous.

This shall be done within 30 days of the update to the documents for the purpose of updating the records at REs’ end. CDD done in this manner shall invariably be carried out by an official of the RE and such exception handling shall also be a part of the concurrent audit as mandated in Section 8. REs shall ensure to duly record the cases of exception handling in a centralised exception database. The database shall contain the details of grounds of granting exception, customer details, name of the designated official authorising the exception and additional details, if any. The database shall be subjected to periodic internal audit/inspection by the RE and shall be available for supervisory review. The KYC process and methodology businesses use to verify customers, which can include the verification of identity documents as well as facial recognition and biometric verification.