This includes beneficiaries of transactions conducted by professional intermediaries, such as Stock Brokers, Chartered Accountants, Solicitors etc. Policies to establish processes and procedures to monitor transactions of a suspicious nature in accounts and systems of conducting due diligence and reporting of such transactions must be in place.
The Customer Acceptance Policy must ensure that explicit guidelines are in place on the following aspects of customer relationship in the bank. Government of India Notification dated June 16, Rule 9, sub-rule 1C - Banks should not allow the opening of or keep any anonymous account or accounts in fictitious name or account on behalf of other persons whose identity has not been disclosed or cannot be verified].
Customers requiring very high level of monitoring, e. Bank may also consider closing an existing account under similar circumstances. It is, however, necessary to have suitable built in safeguards to avoid harassment of the customer. For example, decision by a bank to close an account should be taken at a reasonably high level after giving due notice to the customer explaining the reasons for such a decision.
The nature and extent of due diligence will depend on the risk perceived by the bank. However, while preparing customer profile banks should take care to seek only such information from the customer, which is relevant to the risk category and is not intrusive.
The customer profile is a confidential document and details contained therein should not be divulged for cross selling or any other purposes. Illustrative examples of low risk customers could be salaried employees whose salary structures are well defined, people belonging to lower economic strata of the society whose accounts show small balances and low turnover, Government Departments and Government owned companies, regulators and statutory bodies etc.
In such cases, the policy may require that only the basic requirements of verifying the identity and location of the customer are to be met.
Customers that are likely to pose a higher than average risk to the bank should be categorised as medium or high risk depending on customer's background, nature and location of activity, country of origin, sources of funds and his client profile, etc. As a corollary, banks would be required to adopt enhanced measures for products, services and customers with a medium or high risk rating.
The IBA guidance also provides an indicative list of high risk customers, products, services and geographies. Banks need to obtain sufficient information necessary to establish, to their satisfaction, the identity of each new customer, whether regular or occasional, and the purpose of the intended nature of banking relationship.
Being satisfied means that the bank must be able to satisfy the competent authorities that due diligence was observed based on the risk profile of the customer in compliance with the extant guidelines in place.
Such risk-based approach is considered necessary to avoid disproportionate cost to banks and a burdensome regime for the customers. Customer identification requirements in respect of a few typical cases, especially, legal persons requiring an extra element of caution are given in paragraph 2.
In this connection, a reference may be made to the circular DBOD.
The increasing complexity and volume of financial transactions necessitate that customers do not have multiple identities within a bank, across the banking system and across the financial system. This can be achieved by introducing a unique identification code for each customer.
The Unique Customer Identification Code UCIC will help banks to identify customers, track the facilities availed, monitor financial transactions in a holistic manner and enable banks to have a better approach to risk profiling of customers.
It would also smoothen banking operations for the customers. While some banks already use UCIC for their customers by providing them a relationship number, etc. Banks were therefore, advised to initiate steps for allotting UCIC to all their customers while entering into any new relationships for individual customers to begin with.
However, in view of difficulties expressed by some banks in implementing UCIC for their customers, for various reasons, and keeping in view the constraints, the time for completing the process of allotting UCIC to existing customers was extended up to March 31, In this regard a further extension upto December 31, has been allowed.The OCC is proposing to issue a regulation requiring national banks to develop and maintain ``Know Your Customer'' programs.
As proposed, the regulation would require each bank to develop a program designed to determine the identity of its customers; determine its customers' sources of funds;.
Know your Customer (KYC) guidelines - Risk Categorization and updation of Customer Profile Banks advised to complete the work of risk categorization and updation of risk profile of all customers .
Anti-Money Laundering (ALM) and Know Your Customer (KYC). Annex Guidelines issued by DBOD to banks. Guidelines on ‘Know Your Customer’ norms and Anti-Money Laundering Measures 'Know Your Customer' Standards 1.
The objective of KYC guidelines is to prevent banks from being used, intentionally or unintentionally, by criminal elements for money laundering activities. The adoption of ‘‘know your customer’’ guidelines or procedures by ﬁnancial institutions has proven extremely effective in detecting suspicious activity by ‘‘customers’’ of the institution in a timely manner.
Even though not presently required by regu-. Know Your Customer Every member shall use reasonable diligence, in regard to the opening and maintenance of every account, to know (and retain) the essential facts concerning every customer and concerning the authority of each person acting on behalf of such customer.