RBI revises bank KYC guidelines, advises new set of norms

Moneycontrol Bureau

In a bid to strengthen its safeguards against money laundering, the Reserve Bank of India (RBI) on Monday issued the master circular revising certain guidelines related to bank Know Your Customer (KYC) policy. It suggested to create Unique Customers Identification Code (UCIC) while bringing changes in new account opening process.

"The increasing complexity and volume of financial transactions necessitate that customers do not have multiple identities within a bank, across the banking system and across the financial system. This can be achieved by introducing a unique identification code for each customer," RBI said in a master circular on Know Your Customer (KYC)/Anti-Money Laundering (ALM), released on Monday.

KYC Registry

The government of India had formed a working group constituted, according to RBI, has proposed the introduction of unique identifiers for customers across different banks and financial institutions for setting up a centralized KYC Registry.

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Backdrop

It is worthwhile to mention that Cobrapost.com, an online investigative news website had earlier carried a series of sting operations on several banks and alleged that they were violating KYC/ALM norms. Later, RBI carried an investigation.

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"Banks should allot Unique Customer Identification Code (UCIC) to all their customers while entering into any new relationships for individual customers. The UCIC will help banks to identify customers, track the facilities availed, monitor financial transactions in a holistic manner and enable banks to have a better approach to risk profiling of customers," the central bank said adding that it would also smoothen banking operations for the customers.

However, RBI has set a deadline for lenders to introduce the same but for existing individual customers, who should be allotted UCIC by March 31, 2014.

New account opening...

The central bank also came out with a less cumbersome account opening process. It took cognizance of frequent customer complains in terms of voluminous documentations including identity and address proofs at the time of new account opening.

To ease the burden on the prospective customers in complying with KYC requirements for opening new accounts, the RBI advised, if the address on the document submitted for identity proof by the prospective customer is same as that declared by him / her in the account opening form, the document may be accepted as a valid proof of both identity and address.

"If the address indicated on the document submitted for identity proof differs from the current address mentioned in the account opening form, a separate proof of address should be obtained. For this purpose, apart from the indicative listed documents, a rent agreement indicating the address of the customer duly registered with state government or registration authority may also be accepted as a proof of address," RBI said.

Verification for "beneficial owner"

The regulator has advised banks and financial institutions to identify the beneficial owner and take all reasonable steps to verify his identify citing provisions of Rule 9 (1A) of the Prevention of Money Laundering Rules, 2005.

The term "beneficial owner" has been defined as the natural person who ultimately owns or controls a client and / or the person on whose behalf the transaction is being conducted, and includes a person who exercises ultimate effective control over a juridical person.

saikat.das@network18online.com