What is KYC and its importance?

What is KYC and its importance?

Definition of KYC The objective of KYC guidelines is to prevent banks from being used, by criminal elements for money laundering activities. It also enables banks to understand its customers and their financial dealings to serve them better and manage its risks prudently.

What KYC means?

Know Your Customer
Know Your Customer (KYC) standards are designed to protect financial institutions against fraud, corruption, money laundering and terrorist financing. KYC involves several steps to: establish customer identity; understand the nature of customers’ activities and qualify that the source of funds is legitimate; and.

What is KYC and its components?

KYC is an important part of AML for corporations, banks, fintechs, and other financial institutions. Know your customer (KYC) is the regulatory process in which a financial institution verifies a customer’s identity by assessing their credentials before allowing them to use a service.

What is the importance of KYC in computer?

Getting the detailed information about your customer protects both parties in a business transaction and relationship. KYC serves an important purpose for providing superior service, preventing liability, and avoiding association with money laundering, and types of fraud.

What are the 3 components of KYC?

The 3 steps of a KYC compliance framework

  • Customer Identification. Before checking a customer’s identification documents, it’s necessary to verify their and scrutinise all available information for any inconsistencies.
  • Customer Due Diligence (CDD)
  • Enhanced Due Diligence (EDD)

What is the KYC process?

KYC process includes ID card verification, face verification, document verification such as utility bills as proof of address, and biometric verification. Banks must comply with KYC regulations and anti-money laundering regulations to limit fraud. Stricter KYC/CDD processes are helping to stop that.

Who needs KYC?

KYC exercise needs to be done for all those who want to make domestic remittances of Rs. 50,000 and above and all foreign remittances.

What triggers KYC?

Triggers for KYC can include: Unusual transaction activity. New information or changes to the client. Change in the client’s occupation. Change in the nature of a client’s business.

What are the benefits of KYC?

KYC Advantages

  • Establishing customer identity.
  • Helps to understand the nature of the customers’ activities.
  • Assessing money laundering risks associated with customers for the purpose of monitoring customers’ activities.
  • Providing protection from losses and frauds due to inappropriate and illegal fund transactions.

What is the list of KYC documents?


  • Voter ID Card.
  • Passport.
  • Driving License.
  • NREGA Job Card & Others.
  • Letter issued by National Population Register containing details of name, address.
  • UID (Aadhaar), provided authenticated using e-KYC mode (Biometric or OTP based) or Offline verification**

Why is KYC bad?

KYC/AML is a severe privacy threat If you have ever used the KYC/AML process of the hacked crypto exchanges, YOUR PRIVACY IS COMPROMISED. Also, anyone can use your leaked personal documents to open any fake account using your name and launder millions of dollars through fake crypto exchange accounts.

How many types of KYC are there?

There are two types of KYC: Aadhaar-based KYC. In-Person-Verification (IPV) KYC.