kyc

What is Know Your Customer (KYC)?

KYC Stands for Know Your Customer. Know your customer (KYC) policy is
an important step developed globally to prevent identity theft, financial fraud,
money laundering and terrorist financing. The objective of KYC is to enable
banks to know and understand their customers better and help them manage
their risks prudently.
KYC is a regulatory and legal requirement and KYC policies are framed by
respective banks incorporating the key elements following the Reserve Bank of
Indias directive in 2004 such as Customer Acceptance Policy, Customer
Identification Procedures, Monitoring of Transactions and Risk management
The process of KYC entails identifying the customer and verifying the identity
by using reliable and independent documents or information.
While opening different accounts, the Bank collects documents to identify and
verify the customer as required under the existing laws to demonstrate that it
has performed the existing KYC procedures.
Know your customer (KYC) is the process of a business verifying the identity
of its clients. The term is also used to refer to the bank regulation which governs
these activities. Know your customer processes are also employed by
companies of all sizes for the purpose of ensuring their proposed agents,
consultants, or distributors are anti bribery compliant. Banks, insurers and
export creditors are increasingly demanding that customers provide detailed
anti-corruption due diligence information, to verify their probity and integrity.
Know your customer policies are becoming much more important globally to
prevent identity theft, financial fraud, money laundering and terrorist financing.

Objective:
The objective of KYC
guidelines is to prevent
banks from being used,
intentionally or
unintentionally, by
criminal elements for
money laundering
activities. Related
procedures also enable
banks to better understand their customers and their financial dealings. This
helps them manage their risks prudently. Banks usually frame their KYC
policies incorporating the following four key elements:

Customer Policy;

Customer Identification Procedures;

Monitoring of Transactions; and

Risk management.

For the purposes of a KYC policy, a Customer/user may be defined as:

a person or entity that maintains an account and/or has a business

relationship with the bank;
one on whose behalf the account is maintained (i.e. the beneficial owner);

beneficiaries of transactions conducted by professional intermediaries

such as stockbrokers, Chartered Accountants, or solicitors, as permitted
under the law; or

any person or entity connected with a financial transaction which can

pose significant reputational or other risks to the bank, for example, a wire
transfer or issue of a high-value demand draft as a single transaction.

KYC controls typically include the following:

Collection and analysis of basic identity information (referred to in US

regulations and practice as a "Customer Identification Program" or CIP)

Name matching against lists of known parties (such as "politically

exposed person" or PEP)

Determination of the customer's risk in terms of propensity to commit

money laundering, terrorist finance, or identity theft

Creation of an expectation of a customer's transactional behavior

Monitoring of a customer's transactions against expected behaviour and
recorded profile as well as that of the customer's peers

Situations When KYC is required?

KYC has to be followed by every financial institute while dealing with
customers. KYC procedure needs to be adhered to by a customer during
following instances:

While opening an account in a bank

While applying for a credit card or loan

While opening a subsequent account

Opening a locker facility

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
While investing in a mutual fund
Financial institutes may ask for a mandatory KYC process in other
instances too

According to the KYC policy, a Customer is-

A person or entity that maintains an account and/or has a business

relationship with the bank

One on whose behalf the account is maintained (i.e. the beneficial

owner);

Beneficiaries of transactions conducted by professional intermediaries,

such as Stock Brokers, Chartered Accountants, Solicitors etc. as permitted
under the law, and

Any person or entity connected with a financial transaction which can

pose significant reputational or other risks to the bank, say, a wire transfer or
issue of a high value demand draft as a single transaction.

What does KYC control?

Collection and analysis of basic identity information (Customer

Identification Program or CIP)
Name matching against lists of known parties
Determination of the customers risk in terms of propensity to commit
money laundering, terrorist finance, or identity theft
Creation of an expectation of a customers transactional behavior
Monitoring of a customers transactions against their expected behavior
and recorded profile as well as that of the customers peers

For Accounts of individuals, the bank will require the following information and
documents under KYC.
1.

Legal name and any other change in names used.

2.

Correct permanent address

The individual/s will have to provide the original document for verification and
submit a copy for the Banks record.
Identity Proof(any one of the following)

i. Passport
ii. PAN card
iii. Voters Identity Card
iv.Driving license
v. Ration Card
vi. Identity card (subject to the banks satisfaction)

Address Proof(any one of the following)

i. Utility bill
ii.Bank account statement received by mail / courier along with signature
verification by the Banker or a cheque drawn on that account for a minimum
amount as specified by the Bank, deposited into the account
iii.Ration card
iv. Letter from employer (subject to satisfaction of the bank)
Documents Required For KYC
For Accounts of Companies/Partnership Firms/Trusts & Foundation, a different
set of documentation and information is required.
Account Holders may be requested to furnish their recent passport size colored
photograph along with the signed KYC submission format on the Banks
request. It is also important to note that there is a requirement for theperiodic
updating of KYC Information as and when called for by the Bank.
If the bank is unable to apply appropriate KYC measures due to non-furnishing
of information or non-cooperation by the customer, the bank has the right to
consider closing the account or terminating the banking relationship after
issuing due notice to the customer explaining the reasons for taking such a
decision.

Know Your Customer (KYC) Framework Rules-Driven KYC Compliance for

Financial Institutions and Insurance Companies
Key Challenge :
Financial institutions (including retail, wholesale, private and investment
banks, and securities and capital markets firms) and insurance companies are
required to manage complex global KYC requirements that are geography-,
customer- and product-specific. f Increased time to onboard and transact with
customers, due to manual KYC processes, has resulted in loss of opportunity
(time to transact) and account abandonment. f Manual KYC processes have
resulted in noncompliance and long onboarding times, including repetition of
documentation requests for existing customers. f The lack of agility in changing
risk ratings and KYC processes by product, geography and customer type has
resulted in increased regulatory scrutiny and noncompliance. f Global financial
institutions and insurance companies find it difficult to manage processes to
ensure compliance and manage onboarding time as regulations and risks

change. f Few institutions have automated, rules-driven KYC processes that are
localized by product, geography and risk.
The Solution:
Pegasystems KYC Framework streamlines KYC processes and enforces
organizational best practices to ensure compliance with global and regional
requirements. Intent-driven user interfaces guide staff through required
processing activities based on customer, product, geography and risk rating.
Built on Build for Change technology, Pegasystems KYC Framework is easily
modified and extended to support new business and regulatory requirement
changes.
Improving compliance with complex global regulatory requirements and
time to revenue while ensuring agility as risks and requirements change:
In a global compliance environment with increasingly complex product and
organizational structures, financial institutions and insurance companies
continue to struggle with identifying ways to manage the cost of compliance
while significantly improving their internal controls and minimizing their time
to transact with new and existing customers. The KYC compliance process
becomes an operational challenge; it often delays the time to onboard and
transact with new and existing customers, as back-office operations staff and
sales officers try to ensure compliance with increasingly complex regulations.
The complexity continues to increase as new products, geographies and risk
profiles are added.
Key Features:
Common KYC Platformf
Enables prioritization and routing of due diligence activities between
multiple users on one common platform with SLAs and escalation
processes to ensure timely and accurate evaluation
Allows for specialization by country, line of business and productspecific KYC and Enhanced Due Diligence (EDD) compliance
requirements
Enables reuse of existing due diligence and KYC documentation
globally, displaying existing vs. required due diligence, ensuring
consistency in due diligence while minimizing time to transact

Dynamic Risk-Rating Engine

Customizable rules automatically assign risk rating based on customer,
product, geography and regulatory requirements
Intent-driven workflows drive required KYC and EDD activities (e.g.,
data collection processes) based on riskrating drivers and customer
profile
Automatically recalculates overall case and customer risk during the life
cycle of the customer profile and drives additional KYC requirements f
Configurable risk-rating tables allow for reclassification of variables and
addition of new risk types by authorized business and technical users
Rules-Based Workflow
Rules-based process management automatically prioritizes and drives
required KYC activities based on customer, product, geography and risk
rating
Configurable KYC processes including risk evaluation, drivers for
requirements by KYC type and entity data gathering
Supports specialized policies and procedures by region and product
while enforcing common best practices across lines of business and
geographies
Dynamic configuration of KYC business components (e.g., Applies
When, Required When, Complete When) allows policies and
procedures to be easily reused and maintained
KYC Investigation Tools
Visual representation of corporate structures
Integration to Web services (e.g., Google Maps, due diligence tools)
Predefined Object and Data Models
Organizes KYC data into reusable and extensible case and folder
structures that maintain all KYC information for an entitys KYC profile
Supports creation of references to various KYC document requirements
with integration to third-party content management systems
Easy integration with legacy client information and onboarding systems f

 Easily extended to Know Your Employee and Know Your Broker

requirements
Management Reporting
Out-of-the-box reporting on key operational risk metrics, including
timeliness, volumes and trending
Customizable management dashboards that support drilldown to case
detail
Real-time reporting wizard to build custom reports
Real-time Audit Trail
Time-stamped audit history of manual and automated steps taken during
evaluation, including related documentation
Audit trail of all system changes, including rules and workflow
History of KYC cases stored in profile for future reference and reporting

SLAs
Configurable service-level agreements ensure that processes are managed
within regulatory and internal control time frames
Autogenerate and drive cases for re-evaluation of due diligence,
documentation and high-risk customer review
Key Benefits
Ensure 100% processing completeness, accuracy, timelines, and
compliance with global and regional regulatory requirements
Minimize onboarding time to improve customer satisfaction and reduce
account abandonment
Automate enforcement of consistent KYC practices
Specialize policies and procedures for regional and product-specific
requirements
Patented Build for Change technology enables rapid deployment,
modification and extension to manage changing risks and regulatory
requirements