KYC and Anti-Money-Laundering Basics
Why banks must Know Their Customer, the elements of customer due diligence, officially valid documents and periodic updation, the anti-money-laundering framework under the PMLA, and the roles of FIU-IND and the RBI.
What you will be able to do
- State the purpose of KYC and the three stages of customer due diligence.
- Identify what counts as an officially valid document for identity and address.
- Explain risk categorisation and periodic KYC updation.
- Outline the AML framework: the PMLA, suspicious-transaction reporting, and FIU-IND.
What is inside this lesson
- 1Why banks must know their customer
- 2Customer due diligence
- 3Officially valid documents
- 4Risk categorisation and periodic updation
- 5The anti-money-laundering framework
- 6Common confusions
- 7Quick revision
Get Pro for full access. This is section 1 of 7; the rest of the lesson opens with Pro at onelystop.in/upgrade.
Why banks must know their customer
Know Your Customer (KYC) is the process by which a bank establishes who its customer really is, understands the nature of the customer's activity, and forms a view of the money-laundering and terrorist-financing risk the relationship carries.
KYC exists so that the banking system is not misused to launder the proceeds of crime or to move funds for terrorism, and so that a customer's identity can be relied on for the whole life of the relationship. It is required by the Prevention of Money-Laundering Act (PMLA), 2002 and the rules under it, and is implemented for banks through the RBI's Master Direction on KYC.
Reading the 7 sections above is free. A free account opens the first 2 topics of every subject in full, along with flashcards and private notes.