Knowledge Base

What is IPV (In per verification) and KYC, and how does RKSV conduct an IPV? – Part 2

in Opening an Account with RKSV
Tags: know your customerkyc

All you need to know about KYC

In the previous article, we covered what an In Person Verification, or IPV, is and why it is so important. In this article, we’ll cover what KYC stands for and its role in account opening formalities

KYC stands for ‘Know Your Customer’. All financial institutions worldwide such as banks, credit card companies and stock exchange brokers employ the KYC policy to prevent fraud, identity theft, money laundering and other finance related crimes. The ultimate purpose of stringent KYC norms is to help businesses know their clients and tackle risk associated with identity more efficiently.

It is mandatory that a broker conduct the KYC procedure before opening every account. Here are some things to know about KYC norms:

  • Customer Identification: KYC is basically an identification procedure that has organizations putting in place processes to ensure a customer’s valid identity. It also helps determine the customer’s business type, source of funds and ownership of accounts. The KYC policy also helps assess the rationality of account operations within a customer’s business. This helps financial institutions handle risks more prudently.
  • Components of KYC Policy: Identity and address are two major components of a KYC policy. Brokers need to update their customer records frequently, particularly the address. The main reason is that the identity is usually the same; customer addresses, on the other hand, do change from time to time. Most financial institutions frame their own KYC policy under which the customer is required to submit a documentary proof of identification, a recent photograph, and an address proof.
  • Conditions When KYC is Applicable: All financial institutes need to follow some common KYC requirements when dealing with their customers. The terms and conditions are to be abided by when:
    • Opening up a new bank, demat or trading account
    • Submitting application for a subsequent account
    • Applying for a credit facility
    • Making changes related to beneficial owners, signatories etc.
    • In case an institution doesn’t have all required documents of an existing account holder
    • It’s compulsory for a bank to gather detailed/additional information about a customer following conduct of their account
    • Investing in a mutual fund.

What Does the KYC Policy Regulate Practically?

A foolproof KYC policy can control:

  • Careful examination of the basic identification information about a customer;
  • Evaluation of the level of risk associated with customers in terms of identity theft, terrorist finance and money laundering;
  • Supervision of the transactions carried out by a customer against his/her expected behavior.

What Does the KYC Process Include?

A KYC Process includes three key aspects – filling the KYC form, submitting documents as proofs of identity and address and in-person verification. It is a fairly simple process. The KYC form requires you to fill in person details like full name, home and work addresses, contact details and so on. Once you submit the form to the broker, the firm will vet the details by conducting a verification. You can read more about In-Person Verification here.

What Documents are Required?

As part of KYC norms, you are required to submit a proof of identity and another for address. This includes all government-approved documents like PAN card, Passport, Voter’s ID, Driver’s license, Ration Card, and IT returns. You can also submit other ID cards issued by central and state governments and departments as well as those issued by professional bodies like ICAI, ICSI, Bar Council, ICWAI and government-affiliated institutions. The rules also allow you to submit verified or attested copies of electricity and phone bills, bank statements, housing and rent agreements or your college ID card if you are a student. Account holders may also be requested to provide their recent passport-size colored photograph along with the signed KYC submission form.