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Why KYC norms are required ?
I terms of guidelines issued by RBI and Prevention of Money Laundering Act-2002 (PMLA), Banks are required to follow the Know Your Customer (KYC) norms. Its main objective is to prevent criminal elements from using banking channels for money laundering activities and / or financing of terrorism related activities. Apart from checking money laundering, KYC is also an important tool for checking frauds that sometimes unscrupulous and criminal elements try to perpetrate on banks and unsuspecting members of public. In order to prevent such activities, it has become necessary to know about the true identity of customer, nature of customer’s business, source of funds etc. It assists the banks to know / understand the customers and their financial dealings better to monitor their transactions for identification and prevention of suspicious transactions.

Objectives of KYC Guidelines

  • To prevent banks from being used, by unscrupulous or criminal elements for their criminal activities including money laundering.
  • To prevent frauds and risks and protect bank’s reputation.
  • To avoid opening of accounts with fictitious name and address.
  • To weed out bad customers and protect good ones.

Why do banks ask for documentary proof for identity and address for opening account ?
The PMLA and the RBI guidelines require banks to establish the identity of the customer on the basis of documentary proof at the time entering into any business relationship. By submitting the required information, you actually not only help the bank to discharging its statutory / regulatory obligation but also to safe guard your own interest.

What is expected from the customers ?

  • Provide valid proof of identification along with proof of address.
  • Provide reference of an introducer.
  • Provide other relevant information as warranted under the KYC / AML.
  • Provide periodical mandatory information about himself account.

Why other information ?
Information related to customers’ occupation, professions, net worth, annual income, turn over, source of income, expected amount of single transaction etc is required while opening an account. Such mandatory information is necessary for maintaining risk profile of the customer and needs to be obtained periodically. As per Prevention of Money Laundering Act-2002, Banks are under obligation to monitor transactions in customer accounts. By providing information to the bank, at the time of account opening and subsequently, as and when required, customer is assisting the bank’s effort in prevention of money laundering / terrorist financing. However, no commercial usage of this information is intended.

What are the valid documents for ID and address proof ?
Prospective customer can give self-attested copy of one document each from following indicative list. The originals of these documents are, however, required to be shown to the bank officials for verification.

Note:

  1. Address proof of close relatives (Parents, spouse, son, daughter etc) may be provided with sufficient evidence in case prospective customer resides with the relative and no valid address proof in his / her name is available.
  2. In case of Joint holder, independent proof of identity and address for all individuals are required.

Following are the valid Documents for ID and Address Proof:

Proof of Identity

  1. Passport
  2. PAN Card
  3. Voter’s Identity Card
  4. Driving License
  5. Photo Identity Card*
  6. Letter from recognized Public Authority or Public Servant
  7. Letter issued by UIDAI containing details of Name, Address and AADHAR Number

*(subject to the satisfaction of the bank)

Permanent Address Proof

  1. Passport
  2. Voter’s Identity Card
  3. Driving License
  4. Photo Identity Card*
  5. Bank Account Statement
  6. Telephone Bill on Client’s Name
  7. Electricity Bill of Client
  8. Letter from recognized Public Authority or Public Servant
  9. Letter issued by UIDAI containing details of Name, Address and AADHAR Number

 

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