KYC or know your customer is a very crucial process for financial institutions. It helps the banks and financial institutions to curb bad practises like money laundering, money diligence etc. KYC or Know your customer process is in high demand for all customers of banks and financial institutions. But, What is the full form of KYC?
KYC Full Form stands for Know Your Customer. KYC is a process used by banks and financial institutions to know about their customers well regarding customer verification, customer information etc. The information is necessary for different regulations and procedures.
Information used by bank and financial services to gather useful information about customers.
In modern times, it is easy to fool banks and customers by some criminal people. So to ensure the safety of both customers and bank, KYC or know banks and other financial institutors require your customer process. Banks use 4 key elements while framing their KYC policy-
1. Risk management customer identification procedure
2. Customer Policy
3. Monitoring of transactions
The objective of KYC or Know Your Customer process is to safeguard banks and financial institutions from being used, by criminal elements and money launderers for money laundering activities. These procedures also enable banks and financial institutions to understand their customers and their financial dealings better. This helps them manage their risks correctly.
Importance of KYC
In these modern times, banks and financial institutions are being continuously used by criminals and likeminded people for money laundering activities. They used banks for money laundering activities. They open many accounts by fake names and uses another account for their unethical and criminal activity. This created a massive problem for the banks. They need to make sure that this won’t happen and need to strengthen their regulations regarding money matters.
So they introduced KYC or Know your customer process with strong regulations. They need to make sure that no one can wrongly use their services for their benefit.
The objective of the KYC or know your Customer is to identity theft, prevent terrorist or criminal funding, money laundering and financial fraud. KYC allows banks and financial institutions to understand their customers better and manage risks smoothly. KYC collects and verifies data related to the necessary details of the customers like:
- Copy of one document for address proof – AADHAAR card/Passport /Driving licence/Voter id card
- Copy of one document for identity proof – AADHAAR card/Passport /Driving licence/Voter id card; PAN card
- Name and authorized signatures of Customer
- The legal status of the legal entity or a Person
- Identity of the beneficial controllers and owners of the account
Let’s make it a bit simpler to understand.
Suppose you have a house for rent. You want to rent your home to get additional income. You are looking for paying guest who can live in your rented apartment. Now you have been approached by someone. He is interested in using your rented house. Now before renting the house to that specific person, you will ask him to provide his identity card for police verification. Now you are doing KYC or know your customer process by yourself. To know your Customer well, you required certain identity documents.
Just like this, banks need certain documents from your side before letting you open account their branch as money is a very crucial matter, and bank don’t want someone to use bank services for some wrong work or money laundering purposes. Banks need to make sure that they are entertaining right customer base and not some fraud person who is using a fake name account to launder money.
So KYC or know your customer process is essential for banks and financial institutions.
The relation between KYC and AML
KYC or know your customer and AML(Anti-money laundering) is an interlinked process. KYC is a part of AML or anti-money laundry process.
AML is a set of rules of regulations which is used to curb money laundering process used by criminals and other notorious organisations. Many measures are introduced throughout the world to stop money laundering.
Whereas KYC or know your Customer is a process of collecting basic knowledge from customers like proof of address and proof of identity. It helps in curbing money laundering by providing essential information of customers to the bank so that that bank can stop money laundering to some extent.
Rights of Consumer
1. Right to Inform:- According to the Consumer Protection Act, It is a right of the consumer to get full information regarding the Product which he is using or willing to use in future.
2.Right to security:-Every and each consumer should get safety for the Product like- ISI marks for Electronic Items, Hall-marks for jewellery etc.
3. Right to heard:- If customer face dissatisfaction for good consumes, he \ she can file a complaint in consumer court.
4. Right to Education:- This Right is the father of all Rights, the consumer should be educated enough to use all the rights.
Responsibility of Consumer
To use all the above right, Consumer should fulfill these responsibilities:-
1. A consumer should buy a quality product only
2. The consumer should take cash memo from the seller
3. Consumer should read all the necessary information about the Product
4.Never buy Product from black-marketing
FAQ’s On KYC
Q1. What is the full form of KYC?
Ans:- KYC Full Form is Know Your Customer” and KYC Full Form In Hindi-” अपने ग्राहक को जानो “.
Hope, now you guys are bright with the topic Know Your Customer, i.e. KYC full form and information about KYC.
Written by-Aditya Soni