What is meant by KYC? How important is it to know?

21st October 2015

 
 

Whenever you walk into a branch to open an account, the attending officer conducts a KYC test on you before submitting your application for account opening. This is a commonly used banking jargon – KYC. It stands for ‘Know Your Customer’. Why is this important at the time of account opening?

Most banks have to follow a stringent guideline at the time of initiating a relationship with a customer. The concept of KYC is to obtain sufficient knowledge on the financial background and aspirations of the individual and thereby ascertain that the deposit accepted by the bank comprises of ‘white’ money. This practice is essential to eliminate money laundering activities in the banking sector. KYC further provides the attending officer with appropriate knowledge of the customer’s requirements, thereby enabling him to provide the optimal financial solution.

Most banks conduct KYC practices through simple questionnaires at the time of account opening and attach those documents as a record in the customer’s file. Although some banks have a more stringent screening process at the time of account opening, the concept of KYC remains the same across the banking sector.

 

By Saad Niaz

 

 
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