KYC

 Having sufficiently verified/corrected information about customers is known as “Know Your Customer” (KYC)

Money  Laundering  Prevention  Act,  2012  requires  all  reporting  agencies  to  maintain  correct  and concrete information with regard to identity of its customer during the operation of their accounts. KNOW YOUR CUSTOMER PROGRAM

n  The adoption of effective Know Your Customer (KYC) program is an essential part of financial institutions’ risk management policies.

COMPONENTS OF KYC PROGRAM

Financial institutions in the process of designing the KYC program should include certain key elements. Such essential elements should start from the financial institutions’ risk management and control procedures and should include –

(1) Customer acceptance policy, (2) Customer identification,

(3) On-going monitoring of high risk accounts, and

(4) Identification of suspicious transactions.

n   Financial institutions with inadequate KYC program may be subject to the following risks regarding

Money Laundering:-

1.   Reputational Risk

2.   Operational Risk

 3.   Legal Risk

4.   Concentration Risk