Hello and welcome to exampundit. Here is an Essay on KYC Norms which was given previously. This essay is written by Priyanka.
KYC is a major tool used to verify the identity of the clients of an organization, be it banks , corporate houses or insurance companies. This is a process to ensure that the proposed customers, clients or distributers are reliable and truthful.
‘Know Your Customer’ is becoming very important globally to combat terror financing, money laundering, financial fraud and identity theft. The objective of KYC procedure is to detain banks and companies from involving in unlawful and illegal activities intentionally or unintentionally.
In India, RBI introduced the KYC guidelines for all banks in 2002. However, in 2004, RBI made it mandatory for all banks to be fully equipped with KYC norms by Dec 31st 2005. Some key features of KYC guidelines is proper verification of the identity provided by the customer, monitoring the customer transaction, ensuring that he is not involved in any fraudulent activities.
However, in some cases, despite using all these rules and regulations, some banks and companies are being cheated. What lack are proper coordination among banks or companies, using modern technologies to track customers, unavailability of quality and acute information and easy acceptance of customers.
So, the process needs to be relevant, effective and measurable. One effective way to strengthen KYC and to make the process more transparent is to follow digital route and implement e-KYC. e-KYC means that KYC exercise is conducted entirely through internet using an Aadhar interface provided by UIDAI and Pan card interface provided by Income tax department. Banks and companies before accepting customers should evolve a Customer Acceptance Policy i.e. application of Customer Due Diligence (CDD). No account should be opened in anonymous names or when the identity of the customer matches with the person involved in illegal activities, new customers should be accepted only after CDD.
So, by adopting all these features banks and insurance companies can have safe transactions and can help them build good image in market. Moreover, with the help of the improved KYC norms, we can have a society free of fraudulence.