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This document discusses Know Your Customer (KYC) procedures and money laundering prevention. It outlines the objectives of understanding KYC forms, elements, requirements, and advantages. KYC involves obtaining customer identity and address information to prevent financial crimes like money laundering and terrorist financing. The document also discusses suspicious transaction monitoring, money laundering risks and stages, and the importance of KYC compliance for banks.

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Presentation on Presented by- Manisha Upadhyay Sumit Kumar Dubey Subrata Kumar Bajani Satyajit Roul
Objectives of the study  To understand in detail the meaning of KYC.  To take a look at the KYC forms maintained by different banks.  To analyse the core elements of KYC and when it is required.  To show the Dos and Don’ts for bank officers.  To highlight the advantages of KYC norms.  To discuss about Money Laundering.
What is KYC...??  KYC stands for ‘Know Your Customer’  In the year 2002, RBI instructed that all the banks must obtain information about their customers’ identity and address. From that time onwards, it has been carried out by a process called KYC.  It is a process by which banks obtain information about the identity and address of the customers and helps to ensure that banks’ services are not misused  Banks are also required to periodically update their customers’ KYC details  It enables banks to know / understand their customers and their financial dealings so as to be able to serve them better.  Know your customer (KYC) policy is an important step developed globally to prevent:  Identity theft  Financial fraud  Money laundering and  Terrorist financing
KYC form of SBI KYC form of HDFC
Defining a Customer  Individual  Company/ Business Entity  Professional Intermediaries such as Stock Broker  CharteredAccountants, Solicitors etc  Any person or entity connected with a financial transaction Asks ’KYC’ Customer
Core elements of KYC CustomerAcceptance Policy Customer Identification Procedure- Customer Profile Monitoring of a customer’s transactions against their expected behavior and recorded profile as well as that of the customer’s peers Risk Management Determination of the customer’s risk in terms of propensity to commit money laundering, terrorist finance or identity theft Reporting of cash and suspicious transactions
When KYC is required…?? • Opening an account in a bank • Applying for a Credit card or Loan • Opening a subsequent account • Opening a Locker facility • While investing in a Mutual fund • Financial institutes may ask for a mandatory KYC process in other instances too • When there are not enough documents with the Bank in existing account • When there are changes in Signatories, Beneficial owners, etc • When the bank feels it necessary to obtain additional information from existing customers based on conduct of the account
Bank officers- do’s & don’ts ▶ Exercise constant vigilance right from opening of new accounts ▶ Know your customer & know your colleagues ▶ Separate legitimate business & illegitimate /irregular/ suspicious business ▶ Always think of bank’s reputation/clean image ▶ Develop risk aware culture- – a good customer today may not be good tomorrow ▶ Do not exercise willful blindness ▶ Involve in public awareness of KYC issues
KYC does not mean ▶ Denial of Service to the Common Person ▶ Intrusive Behavior ▶ Use of information for cross selling ▶ Harassment of customers- threatening to close down the accounts arbitrarily
Advantages of KYC norms  Sound KYC procedures have particular relevance to the safety and soundness of banks, in that:  They help to protect banks’ reputation and the integrity of banking systems by reducing the likelihood of banks becoming a vehicle for or a victim of financial crime and suffering consequential reputational damage;  They provide an essential part of sound risk management system (basis for identifying, limiting and controlling risk exposures in assets & liabilities)
Suspicious Transactions ▶ Providing misleading information / information not easily verifiable while opening an Account ▶ Large cash withdrawals from: a dormant or inactive account or account with unexpected large credit from abroad ▶ Sudden increase in cash deposits of an individual with no justification ▶ Employees leading lavish lifestyles that do not match their known income sources
Stages of the Money Laundering 1. Placement Induction of illegal money into the financial system 2. Layering Multiple transactions to confuse the audit trail and distance the original source of funds (e.g. successive transactions, international transfers). 3. Integration than integrating funds back into the real economy as “clean and Respectable money
Money Laundering Risks to banks? (I) Reputational risk (ii) Legal risk (iii) Operational risk All risks are inter-related and together have the potential of causing serious threat to the survival of the bank
Risk Category o High Risk Customers (CDD – Every Transaction) i) non-resident customers ii) private banking customers iii) legal persons o Medium risk customers ( CDD – Only on High amount) i) documentary businesses o Low risk customers ( CDD – Yearly )
Prevention of Money Laundering Observing Rules for Bankers Customer due Diligence Identifying Irregular / Suspicious Transactions Compliance with Laws Money Laundering Prevention
Conclusion ▶ The objectives of KYC guidelines is to prevent banks from being used, intentionally or unintentionally, by criminal elements for money laundering activities. ▶ The main objective of this policy is to prevent money laundering, identity theft, terrorist financing, and financial frauds. ▶ Related procedures of KYC also enable banks to better understand their customers and their financial dealings. This helps them manage their risks prudently. ▶ KYC policy is an indispensable part of banking operation, whether it’s about account opening or advancement of loans. Because it helps to ensure that the services are not misused.
b-28immersiong-1-170719184832 (1) (1).pptx

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b-28immersiong-1-170719184832 (1) (1).pptx

  • 1. Presentation on Presented by- Manisha Upadhyay Sumit Kumar Dubey Subrata Kumar Bajani Satyajit Roul
  • 2. Objectives of the study  To understand in detail the meaning of KYC.  To take a look at the KYC forms maintained by different banks.  To analyse the core elements of KYC and when it is required.  To show the Dos and Don’ts for bank officers.  To highlight the advantages of KYC norms.  To discuss about Money Laundering.
  • 3. What is KYC...??  KYC stands for ‘Know Your Customer’  In the year 2002, RBI instructed that all the banks must obtain information about their customers’ identity and address. From that time onwards, it has been carried out by a process called KYC.  It is a process by which banks obtain information about the identity and address of the customers and helps to ensure that banks’ services are not misused  Banks are also required to periodically update their customers’ KYC details  It enables banks to know / understand their customers and their financial dealings so as to be able to serve them better.  Know your customer (KYC) policy is an important step developed globally to prevent:  Identity theft  Financial fraud  Money laundering and  Terrorist financing
  • 4. KYC form of SBI KYC form of HDFC
  • 5. Defining a Customer  Individual  Company/ Business Entity  Professional Intermediaries such as Stock Broker  CharteredAccountants, Solicitors etc  Any person or entity connected with a financial transaction Asks ’KYC’ Customer
  • 6. Core elements of KYC CustomerAcceptance Policy Customer Identification Procedure- Customer Profile Monitoring of a customer’s transactions against their expected behavior and recorded profile as well as that of the customer’s peers Risk Management Determination of the customer’s risk in terms of propensity to commit money laundering, terrorist finance or identity theft Reporting of cash and suspicious transactions
  • 7. When KYC is required…?? • Opening an account in a bank • Applying for a Credit card or Loan • Opening a subsequent account • Opening a Locker facility • While investing in a Mutual fund • Financial institutes may ask for a mandatory KYC process in other instances too • When there are not enough documents with the Bank in existing account • When there are changes in Signatories, Beneficial owners, etc • When the bank feels it necessary to obtain additional information from existing customers based on conduct of the account
  • 8. Bank officers- do’s & don’ts ▶ Exercise constant vigilance right from opening of new accounts ▶ Know your customer & know your colleagues ▶ Separate legitimate business & illegitimate /irregular/ suspicious business ▶ Always think of bank’s reputation/clean image ▶ Develop risk aware culture- – a good customer today may not be good tomorrow ▶ Do not exercise willful blindness ▶ Involve in public awareness of KYC issues
  • 9. KYC does not mean ▶ Denial of Service to the Common Person ▶ Intrusive Behavior ▶ Use of information for cross selling ▶ Harassment of customers- threatening to close down the accounts arbitrarily
  • 10. Advantages of KYC norms  Sound KYC procedures have particular relevance to the safety and soundness of banks, in that:  They help to protect banks’ reputation and the integrity of banking systems by reducing the likelihood of banks becoming a vehicle for or a victim of financial crime and suffering consequential reputational damage;  They provide an essential part of sound risk management system (basis for identifying, limiting and controlling risk exposures in assets & liabilities)
  • 11. Suspicious Transactions ▶ Providing misleading information / information not easily verifiable while opening an Account ▶ Large cash withdrawals from: a dormant or inactive account or account with unexpected large credit from abroad ▶ Sudden increase in cash deposits of an individual with no justification ▶ Employees leading lavish lifestyles that do not match their known income sources
  • 12. Stages of the Money Laundering 1. Placement Induction of illegal money into the financial system 2. Layering Multiple transactions to confuse the audit trail and distance the original source of funds (e.g. successive transactions, international transfers). 3. Integration than integrating funds back into the real economy as “clean and Respectable money
  • 13. Money Laundering Risks to banks? (I) Reputational risk (ii) Legal risk (iii) Operational risk All risks are inter-related and together have the potential of causing serious threat to the survival of the bank
  • 14. Risk Category o High Risk Customers (CDD – Every Transaction) i) non-resident customers ii) private banking customers iii) legal persons o Medium risk customers ( CDD – Only on High amount) i) documentary businesses o Low risk customers ( CDD – Yearly )
  • 15. Prevention of Money Laundering Observing Rules for Bankers Customer due Diligence Identifying Irregular / Suspicious Transactions Compliance with Laws Money Laundering Prevention
  • 16. Conclusion ▶ The objectives of KYC guidelines is to prevent banks from being used, intentionally or unintentionally, by criminal elements for money laundering activities. ▶ The main objective of this policy is to prevent money laundering, identity theft, terrorist financing, and financial frauds. ▶ Related procedures of KYC also enable banks to better understand their customers and their financial dealings. This helps them manage their risks prudently. ▶ KYC policy is an indispensable part of banking operation, whether it’s about account opening or advancement of loans. Because it helps to ensure that the services are not misused.