KYC Full Form

Do you know your customer? Exactly, this is the content all about ‘Know Your Consumer’. The question is interrogated to all the financial institutions who deal with finance or loan. Knowing your customer will enable you to save them from damages or from money laundering activities. The institution must remain vigilant in this part. This will help seamless and easy work process in your institution.  

KYC long form and KYC full form in English is Know Your Customer. This process is generally followed by any financial institution or an entity that collects the details in order to establish the identity of their client. This process was first introduced by the Reserve Bank of India (RBI) to prevent financial frauds like money laundering, identity theft, and identifying all such illegal transactions.

KYC’s full meaning is nearly introduced to you in this section. As we proceed you will be clear about the KYC abbreviation and its exact meaning. 

What is the Full Form of KYC?

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Well, the full form of KYC is Know Your Consumers. The KYC full form in banking is the same that is Know Your Customer. This is an interesting terminology that is used in the banking sector. Students might be unaware of this term. This is important in the study of Economics. Further, let us continue to know more about this acronym. 

What is KYC?

Know Your Customer (KYC Full form) refers to the process where the identity of the consumers is verified. Verifying the customers starts before or during the time that they start doing the business with the company. This terminology ‘KYC’ refers to the regulated bank customer identity verification practices to access and monitor the customer risk. KYC process is a legally required process that is intended as an AML measure which means Anti- Money Laundering measures. 

Safety From Bank Fraud - Use the Process of KYC

RBI mandatorily advised and asked the banks to adopt the process of KYC while opening the accounts. This protects the customers of these financial institutions. The customers must provide authentic details so that the banks can easily identify their own customers and help by serving them in a better way. 

KYC Steps You Must Follow to Prevent Money Fraud

The fundamental question in this regard is ‘Do you know your customer?’. At any frequency, you must know them. Being a financial institution, you are open to possible fines, sanctions, even reputational damage. Without knowing your customer, if you do business with a money launderer or suppose a terrorist, you are risking your own company or financial institution. Broadly speaking, KYC is a fundamental practice that assists protection to the company from fraud and from the losses resulting from illegal funds and illegal transactions.

To Initiate and Run an Effective KYC Program Requires the Following Elements in the Process:

• Customer Identification Program (CIP)

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How can you be sure about the identity of your customer as presented by them? You need to be aware of this matter as identity theft is widespread that affects more than 16.7 million US consumers and this accounts for 16.8 billion dollars stolen (recorded in the year 2017). We present this data, in order to aware the institutions about the same. They must mandatorily and accurately identify their customers.

The Minimum Requirements Which Are Required To Open an Individual Financial Account Are Clearly Delimited in the Process of CIP:

• Name

• Date of birth

• Address

• Identification number

• Customer Due Diligence

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Literally, for any financial institution, the first analysis made is to determine if you can trust a potential client. This should be taken care of whether the person is trustworthy or not. This implies do the customers have due diligence in this regard. This is a very critical element as this will help in effectively managing the risks.

We Can Illustrate Three Levels of This Due Diligence:

• Simplified Due Diligence (abbreviated as “SDD”) are the situations in which a financial institution analyses that the risk for money laundering or terrorist funding is quite low and a full CDD is not necessary. 

• Basic Customer Due Diligence here information is obtained for all the customers to verify their own identity and thereby the institution assess the risks associated with that customer.

• Enhanced Due Diligence (abbreviated as “EDD”) is additional information that is collected for higher-risk customers. This helps the institution to provide a deeper understanding of their customer activity to mitigate any associated risks. 

To Include Some Practical Steps in the Customer Due to Diligence Program, the Following Are Advised:

• Know the identity and location of your potential customer.

• Gain a good understanding of the business activities performed by them. 

• Verify the name and address of your customer.

• While authenticating or verifying a potential customer, classify their risk category according to the classification presented above. 

• Know about the type of transactions done.

• Their expected pattern of activity in terms of transaction types, dollar value, and frequency.

• And their expected method of payment.

• Ongoing Monitoring

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It is never enough to just check the potential customers once; you need to have a program to monitor this already screened customer on an ongoing or regular basis. The ongoing monitoring function includes an overview of their financial transactions.

Periodical Reviews Include:

• Is the account record updated?

• Do the type and the number of transactions aligns with the stated purpose of the account?

• Is the risk level appropriate for the type and number of transactions?

Details You Must Submit for the Process of KYC

KYC documents full form refers to the KYC documents that are required to be submitted are as follows:

• Customer Name

• Date of Birth

• Father's Name

• Mother's Name

• Marital Status

• Address Proof

• Identity Proof

• Contact No.

• PAN Card

• Source of the Funds

If I Am an Individual, Which KYC Documents Are Required?

• Passport

• Voter's Identity Card

• Driving Licence

• Aadhaar Card

• NREGA Card

• PAN Card

• You need to submit any one or two of the above documents like identity proof and address proof.

If I Own a Company or a Partnership Business, Which KYC Documents Are Required?

• Entity Proof

• Address Proof of company

• Address and Identity proof of Directors and Authorized signatories

Will the KYC Process Impact You?

If you own a financial institution or you are a customer having transactions in any financial institution, then the process of KYC will definitely have an impact on you. 

The regulations nowadays have become very strict for the financial institutions in order to better and verify the customer identities during the opening and while maintaining their accounts. KYC policies emphasize “reasonable due diligence” concerning every customer. 

Whether you own an MNC or a local company, companies of all sizes must embrace the KYC procedures to protect themselves and their own customers. While, being a customer, it is your duty to provide all the required documents which will make the process streamline and smooth.

Compliance of KYC 

When you aren’t sitting with your customers face to face you never know them properly. How do you know, if their identity is fake or genuine?

Financial services companies, in particular, need to take KYC compliance seriously. This has a huge impact on how they enable the customers to open their accounts and perform the financial transactions on their own preferred device. On one hand, customers want to bank online, on the other hand, banks must satisfy themselves with AML and KYC requirements while also fighting fraud, financial crimes and while they mitigate high-risk transactions.

In order to meet the KYC obligations, you require an identity verification solution that will provide convenience to the customers and will protect the business. To initiate the same, you can look for mobile and web-enabled solutions which particularly leverage on-device technology, biometric authentication (such as facial recognition with liveness detection), compliant machine learning, and identify the experts to achieve accurate identity results within a seamless digital environment which your customers necessarily demand.

Motive of KYC Installation

The Main Objective of These KYC Guidelines is

• To prevent your own businesses from being used by criminal elements such as money laundering. 

• KYC and its related procedures might also enable businesses to better understand their customers and their required financial dealings.

• KYC helps them manage their calculated risks in a well-judged manner. 

• Today, the principle of KYC applies to banks as well as to different online businesses. 

The Businesses Usually Frame Their KYC Policies Incorporating the Following Four Key Elements:

• Customer acceptance policy

• Customer identification procedures

• Monitoring of transactions

• Risk Management

Who is a Customer in KYC Policy?

For the Purposes of a KYC Policy, a Customer or a User May Be Defined As-

• a person or entity who maintains an account or has a business relationship with the reporting entity.

• one on whose behalf the account is being maintained, the beneficial owner.

• beneficiaries of the transactions conducted by the professional intermediaries like the stockbrokers, Chartered Accountants, or the solicitors which are being permitted under the law.

• any person or any entity who is connected with a financial transaction that can pose a significant reputational or any other risks to the bank business, for example, a wire transfer or an issue of a high-value demand draft termed by a single transaction.