Bank Takes Precautions to Ensure Customer Verification

Mumbai, [Date] - The Reserve Bank of India (RBI) has issued guidelines for banks to verify customer identity and categorize them as low, medium or high risk in a bid to ensure transparency and prevent financial crimes.

Guidelines for Banks

According to the guidelines, banks must:

• Ensure that no account is opened in anonymous or fictitious names
• Verify the identity of customers and obtain necessary documents
• Not open an account where they are unable to apply appropriate customer due diligence (CDD) measures
• Check if the name of the prospective customer matches with any individual with a known criminal background or with banned entities such as terrorist organizations

Categorizing Customers

To categorize customers, banks will prepare a profile containing information about:

• Identity
• Social and financial status
• Nature of business activity
• Other relevant details

The risk categorization will be based on these parameters, and the customer profile will be kept confidential unless explicitly permitted by the customer.

Additional Requirements

Banks must not use the information obtained from customers for cross-selling purposes. Any additional information required to prepare the customer profile must be collected with the express approval of the customer and should not form part of the account opening form.

Do’s and Don’ts on KYC Norms and AML Standards

Do:

• Verify customer identity and obtain necessary documents
• Check if the name of the prospective customer matches with any individual with a known criminal background or with banned entities
• Prepare a customer profile containing information about their identity, social and financial status, nature of business activity, and other relevant details
• Categorize customers as low, medium or high risk based on the assessment and risk perception

Don’t:

• Open an account in anonymous or fictitious names
• Use the information obtained from customers for cross-selling purposes

By following these guidelines, banks can ensure a safer and more transparent banking system.