– Risk management
• For the purpose of KYC policy, a ‘customer’ has been defined as:
– A person or entity that maintains an account and / or has a business relationship with
– One on whose behalf the account is maintained (i.e. the beneficial owner). This includes
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
reputation or other risks to the bank, such as a wire transfer or issue of a high value
demand draft as a single transaction.
• Know Your Customer” (KYC) procedure is to be the key principle for identification of
an individual / corporate opening an account. The customer identification should entail
verification through an introductory reference from an existing account holder / a person
known to the bank or on the basis of documents provided by the customer.
• The Board of Directors of the banks are to have in place adequate policies that establish
procedures to verify the bona fide identification of the individual / corporate opening an
account. Policies to establish processes and procedures to monitor transactions of a
suspicious nature in accounts and systems of conducting due diligence and reporting of
such transactions must be in place.
Customer Acceptance Policy (CAP)
• There must be a clear customer acceptance policy that lays down explicit criteria for
acceptance of customers. The Customer Acceptance Policy must ensure that explicit
guidelines are in place on the following aspects of customer relationship in the bank.
o No account is opened in anonymous or fictitious/ benami name(s);
o Parameters of risk perception are clearly defined in terms of the nature of business
activity, location of customer and his clients, mode of payments, volume of turnover,
social and financial status etc. to enable categorization of customers into low, medium and
high risk (banks