Essay On KYC Anti Money Laundering (AML) Norms - Regulations For SBI/IBPS PO Descriptive 2015

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Essay On KYC Anti Money Laundering (AML) Norms - Regulations For SBI/IBPS PO

What is KYC?
KYC is an acronym for “Know your Customer”, a term used for customer identification process. It involves making reasonable efforts to determine true identity and beneficial ownership of accounts, source of funds, the nature of customer’s business, reasonableness of operations in the account in relation to the customer’s business, etc which in turn helps the banks to manage their risks prudently. The objective of the KYC guidelines is to prevent banks being used, intentionally or unintentionally by criminal elements for money laundering.

The objective of the KYC guidelines is to prevent banks from being used, intentionally or unintentionally, by criminal elements for money laundering activities. KYC procedures enable banks to know/understand their customers and their financial dealings better which in turn help them manage their risks prudently. The revised KYC policy of the bank incorporates the following four elements:
i. Customer Acceptance Policy (CAP)
ii. Customer Identification Procedures (CIP)
iii. Monitoring of Transactions; and
iv. Risk Management

A customer for the purpose of KYC Policy is defined as:
A person or entity that maintains an account and/or has a business relationship with the bank One on whose behalf the account is maintained (i.e., the beneficial owner) Beneficiaries of transactions conducted by professional intermediaries, such as Stock Brokers,Chartered Accountants, Solicitors, etc as permitted under the law Any person or entity connected with a financial transaction which can pose significant reputational or other risks to the bank, say, a wire transfer or issue of high value demand draft as a single transaction. 

To ensure that the latest details about the customer are available, banks have been advised to periodically update the customer identification data based upon the risk category of the customers.
Banks create a customer profile based on details about the customer like social/financial status, nature of business activity, information about his clients’ business and their location, the purpose and reason for opening the account, the expected origin of the funds to be used within the relationship and details of occupation/employment, sources of wealth or income, expected monthly remittance, expected monthly withdrawals etc. When the transactions in the account are observed not consistent with the profile, bank may ask for any additional details /documents as required. This is just to confirm that the account is not being used for any Money Laundering/Terrorist/Criminal activities

The documentsto be given as ‘proof of identity’and ‘proof of address' . Any one of the documents such as :
  • Passport
  • Driving Licence
  • Voters’ Identity Card
  • PAN Card
  • Aadhaar Card issued by UIDAI and
  • NREGA Card 
can be furnished as ‘proof of identity’.If these documents also containyour address, it can serve both as ‘proof of identity and address’.

 Rules and Regulations on KYC/AML/CTF? 

The extant regulations of RBI and the rules notified under Prevention of Money Laundering Act, 2002 deal with what is called as an initiative of Anti Money Laundering (AML) and Countering the Terrorist Financing (CTF). These rules and regulations try to prevent the process of money laundering and financing of terrorism related activities. 
The regulations require the banks to know their customers (popularly known as the Know Your Customer or KYC regulations) and to monitor their transactions. Further, specified information under the PMLA about the cash and suspicious transactions need to be submitted to the Financial Intelligence Unit, India (FIU-IND). Compliance with AML regulations assists the banks in keeping a close watch on the transactions to identify suspicious transactions, if any, and thereby provide information to the law enforcement authorities (through reports to FIU-IND) to deal with such transactions as per the applicable laws and regulations. 

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