Basic understanding of a KYC form in Goa

Anyone residing in Goa for a while is most likely to have a bank account. And, one task regularly asked by any bank to its customers is to ‘complete their KYC’. We take a look at the applicable legal framework and requirements of this.

KYC or ‘Know Your Customer/Client’ is the process of authenticating or verifying a customer’s identity and address before entering into a financial transaction.

THE LAW SAYS

The KYC regulatory framework for banks, All India Financial Institutions, Non-banking Finance Companies, Asset Reconstruction Companies, organisations that provide credit card and electronic/mobile payment services and authorised persons regulated by the RBI, is provided by:

• Banking Regulation Act, 1949

• Reserve Bank of India Act, 1934

• Payment and Settlement Systems Act, 2007

• Foreign Exchange Management Act, 1949

• Prevention of Money Laundering Act, 2002 and the Prevention of Money Laundering (Maintenance of Records) Rules, 2005

• RBI (KYC) Directions, 2016

KYC POLICY

Each entity is required to have a KYC Policy, duly approved by its Board or Committee to whom this power is delegated, with the following:

• Customer Acceptance Policy

• Risk Management

• Customer Identification Procedures (CIP)

• Monitoring of Transactions

The KYC Policy specifies the mandatory information required for KYC purpose. If any additional information is sought, which is not specified in the KYC Policy, it can only be obtained with the explicit consent of the customer.

CUSTOMER DUE DILIGENCE (CDD)

The entity’s KYC Policy’s objective is to ensure that no account is opened in anonymous or fictitious/benami name. Thus, the account will not be opened if the entity is unable to apply appropriate CDD measures.

CDD is the carrying out of background checks and other customer screening measures to ensure that they are properly risk-assessed before being on-boarded as a customer.

It is at the heart of Anti-Money Laundering and KYC initiatives and helps reduce financial crimes like money laundering, financing of illegal activities and fraud.

KYC DOCUMENTS

The KYC process includes submission of any of the following Officially Valid Documents (OVD) to establish:

(i)    Proof of Identity:

• Voter identity card issued by the Election Commission of India

• Passport

• Driving licence

• PAN card with photograph

• Aadhar card

• NREGA job, duly signed by a State Government Officer

• National Population Register letter containing details of name and address

(i)       Proof of Address: In case the above document/s do not reflect the current address of the customer, any of the following documents can be submitted:

• Utility bill (electricity, telephone, post-paid mobile phone, piped gas, water bill) not more than two months prior to KYC date)

• Property/municipal tax receipt

• Pension/Family Pension payment orders issued to retired employees by Government Departments or Public Sector undertakings, if they contain the address

• Allotment letter of accommodation issued by employer (State or Central Government department, statutory/regulatory bodies, public sector undertakings, scheduled commercial banks, financial institutions and listed companies) and leave and licence agreements with such employers allotting official accommodation

• For foreign nationals, the document issued by the government departments of foreign jurisdiction and the letter issued by the foreign embassy or mission in India.

Next week, we take a brief look at the modes in which KYC can be carried out, periodicity and verification.

This article seeks to present, in simple words, legal issues and doubts that we face in our day-to-day lives. It should not be taken as a substitute for a lawyer.

(The writer is a lawyer and company secretary with a focus on education, legal issues and governance, and enjoys working with individuals and organisations towards enhancing their effectiveness).