Customer Essay

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Practices of Know Your Customer (KYC) Norms in Banking Sector Practices in banks – before introduction of Kyc Origin of KYC concept Practices in banks – after introduction of kyc (phase by phase – fraud if it has taken place – improvement in kyc) Annexure – kyc requirements under the four heads for individual (for Indian and for NRI) , sole proprietor, joint account, partnership firms, public limited companies, trusts, and HUF Category | Sub category | Individual | Resident Indian | | Non resident Indian | Non Individual | Sole proprietor ship firms | | Partnership firms | | Public limited companies | | Trusts | | HUF | Practices in banks – before introduction of Kyc Origin of KYC concept The main purpose was identity threat and identity fraud when it was introduced in late 1990’s in United States. After 9/11 attack, the US govt. turned very strict to restrict money laundering and terrorist financing and all the regulations were finalized by 2002 for KYC. The US has made changes in its major legislations -- Bank Secrecy Act, USA Patriot Act, et cetera -- to make KYC norms really effective for the banking sector. RBI issued its first circular on kyc norms in 16th August 2002 containing guidelines on kyc norms and cash transactions. The key points of this circular is as follows: | | | Guidelines for New Accounts(In this regard, a reference to a report on AML guidelines for banks, is made strengthening Kyc norms with AML focus and also suggesting formats for customer profile, a/c opening procedures, illustrative list of suspicious activities etc; prepared by a working group set up by IBA, is made). | Objective is two fold i.e. 1. ensuring customer identification and 2. Monitoring transactions of suspicious nature | Customer identification is through the documents provided by the customer (or) Introductory reference through

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