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KYC — Know Your Customer
The abbreviation or full form of KYC is Know Your Customer
Additional information about KYC full form, abbreviation & meaning
Know your customer (KYC) is a business process verifying the identity of its clients. Know your customer processes are employed by most of the companies of all sizes in order to ensure that their proposed agents, consultants or distributors anti-bribery compliance. Know your customer is nowadays becoming important globally to prevent identity theft, financial fraud, money laundering and terrorist financing.
KYC Full-Form refers to Know Your Customer. KYC is a process employed by a business to perform the identification of its clients. KYC may also be used as a reference for the bank regulation that governs the identification activities. This process is also used by companies, irrespective of their size, to ensure their proposed distributors, consultants or agents comply with anti-bribery. Many export creditors, insurers, and banks demand anti-corruption investigation information from their customers for verifying their integrity and probity.
The policies of the KYC are being used all over the world for preventing money laundering, identity theft, terrorist financing and financial fraud. The main aim of the guidelines provided by the KYC is to prevent the criminal usage of the banks, which can be done either unintentionally or intentionally for activities like money laundering. These procedures also help banks by understanding their customers as well as their financial dealings in a better way. This also enables them to prudent risk management. There are four key elements of the KYC policies. These elements are customer identification procedures, risk management, customer policies and monitoring of transactions.
The controls of KYC include the collecting and analyzing the basic information pertaining to the customer’s identity, determining the risk of customers in terms of the customer’s tendency to commit identity theft, terrorist financing or money laundering, and the monitoring the transactions of customers against their recorded profile and expected behaviour. The controls also include the matching of the name of the customers against the known parties’ list, and creating an expectation of the transactional behaviour of the customers. In India, KYC guidelines were introduced by the RBI for all banks in the year 2002. In the year 2004, RBI ensured that all banks are fully complying with the provisions of the KYC before 31st December of the year 2005.
Standards of KYC
The objective of KYC is to prevent banks from being used, intentionally or unintentionally by criminals who are involved in money laundering activities. Therefore it is very essential for the banks to implement certain procedures so that they can understand their customers and their financial dealings in a better way and this even helps them to manage their risks judiciously.
KYC policies are incorporated by the banks by considering the following key factors:
- Customer Policy
- Customer Identification Procedures
- Monitoring of transactions and
- Risk Management