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ALL ABOUT KNOW YOUR CUSTOMER IN DETAIL

ALL ABOUT KNOW YOUR CUSTOMER IN DETAIL

Know Your Customer (KYC)

–  Most underrated area in a concurrent audit is compliance of KYC & AML norms.

– Is this area emphasized on with the same rigor as credit monitoring? Are we considering Money Laundering Risk ?

– Is there a mechanism in place which monitors accounts requiring enhanced due diligence?

 

KYC means –

-Making reasonable efforts to determine –

True identity & beneficial ownership of accounts; Sources of funds Nature of customers’ business Reasonable account activity Customer’s customer

 

Customer

–  Who maintains an account,

–  Establishes business relationship,

–  On whose behalf account is maintained

–  Beneficiary of accounts maintained by intermediaries,

–  Who carries potential risk through one-off transaction

 

What you should know?

–  True identity & beneficial ownership of accounts

– Permanent, Registered & Administrative addre

 

Core KYC Elements

kyc

Risk Rating Review

– As per RBI guidelines review of risk categorisation of customers should be carried out at least once in 6 months.

– It will ascertain customers who need enhanced due diligence

–  An ideal system

– Updating parameters for review in the current

AML system Exploit the existing thresholds.

Movement in Risk Rating of A/c’s as we do NPA’s

 

Periodical Updation Updation of KYC

–  Continue carrying on-going due diligence

– Closely examine the transactions to ensure

–  Consistency with client knowledge, Nature of business Risk profile Source of funds

Full KYC exercise will be required to be done every: 2 years for high risk accounts 8 years for medium risk 10 years for low risk

 

Beneficial Owner(BO)

–  Person behind the customer-owns/controls the customer

–  On whose behalf a transaction is carried out

– Be alert while analyzing the transactions in accounts by identifying the Beneficial owner

– Understand the true nature of the A/c’s maintained by the intermediary

– Eg: Tailor/Maid/ Servant depositing cash or cheques of high amount, huge turnover in a minor’s account etc

 

Gaps in KYC

–  The problem is not with KYC, but its implementation.

–  Industry Regulator- Improve frequency & quality of inspection

–  Government Government- Need to speed up Need to speed up Aadhar to eliminate multiplicity to eliminate multiplicity of documents

–  Banks-Aggressive sales culture

 

ALL ABOUT KNOW YOUR CUSTOMER IN DETAIL

ALL ABOUT KNOW YOUR CUSTOMER IN DETAIL

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