Anti-Money Laundering(AML)/Combating Financing Terrorism(CFT) - India in the Global Context

1. Preparation of Customer Profile from KYC Data In the initial years of KYC, RBI has been following a handholding approach as can be seen from their circular dated July 2009 and that of Feb 25, 2016 as updated on Jan 04, 2024. RBI requires REs to conduct risk profiling and risk categorization and periodic updation.  Extracts from RBI MD dated July 01, 2009 under Customer Acceptance Policy a)ii) Parameters of risk perception are clearly defined in terms of the nature of business activity , location of customer  and his clients, mode of payments, volume of turnover, social and financial status etc. to enable categorisation of customers into low, medium and high risk (banks may choose any suitable nomenclature viz. level I, level II and level III). Customers requiring very high level of monitoring, e.g. Politically Exposed Persons (PEPs) may, if considered necessary, be categorised even higher; b). Banks should prepare a profile for each new customer based on risk categorisatio...

 Introduction KYC means Know Your Customer and sometimes Know Your Client . KYC or KYC check is the mandatory process of identifying and verifying the client's identity when opening an account based or other relationship with a potential client and periodically over time as the relationship progress. In other words, banks/financial institutions must ensure that their clients are genuinely who they claim to be. The Reserve Bank of India has made it mandatory for banks, financial institutions and other organisations to verify the identity and address of all customers carrying out financial transactions. KYC enables an institution to authenticate the identity and address of an individual. A customer has to submit his KYC before he starts investing in various instruments such as mutual funds, fixed deposits, bank accounts, etc. However, an individual has to do it only while he starts investing for the first time. Meaning of Authentication & Verification   Authentication ...