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Developments in Know Your Customer (KYC) Guidelines
In terms of the provisions of Prevention of Money-Laundering Act, 2002 and the Prevention of Money-Laundering (Maintenance of Records) Rules, 2005, Regulated Entities (REs) are required to follow certain customer identification procedure while undertaking a transaction either by establishing an account based relationship or otherwise and monitor their transactions.
“Customer Due Diligence (CDD)” means identifying and verifying the customer and the beneficial owner using ‘Officially Valid Documents’ as a ‘proof of identity’ and a ‘proof of address’. “Central KYC Records Registry” (CKYCR) means an entity defined under Rule 2(1)(aa) of the Rules, to receive, store, safeguard and retrieve the KYC records in digital form of a customer.
CDD Procedure and sharing KYC information with Central KYC Records Registry (CKYCR)
REs shall capture the KYC information for sharing with the CKYCR in the manner mentioned in the Rules, as required by the revised KYC templates prepared for ‘individuals’ and ‘Legal Entities’ as the case may be. Government of India has authorised the Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI), to act as, and to perform the functions of the CKYCR vide Gazette Notification No. S.O. 3183(E) dated November 26, 2015. The ‘live run’ of the CKYCR was initiated with effect from July 15, 2016 in phased manner beginning with new ‘individual accounts’. Accordingly, REs need to take the following steps:
i. Scheduled Commercial Banks (SCBs) shall invariably upload the KYC data pertaining to all new individual accounts opened on or after January 1, 2017 with CERSAI in terms of the provisions of the Prevention of Money Laundering (Maintenance of Records) Rules, 2005. SCBs are, however, allowed time up to February 1, 2017 for uploading date in respect of accounts opened during January 2017.
ii. REs other than SCBs shall upload the KYC data pertaining to all new individual accounts opened on or after from April 1, 2017 with CERSAI in terms of the provisions of the Prevention of Money Laundering (Maintenance of Records) Rules, 2005.
iii. Operational Guidelines (version 1.1) for uploading the KYC data have been released by CERSAI. Further, ‘Test Environment’ has also been made available by CERSAI for the use of REs.
Central KYC Registry is a centralized repository of KYC records of customers in the financial sector with uniform KYC norms and inter-usability of the KYC records across the sector with an objective to reduce the burden of producing KYC documents and getting those verified every time when the customer creates a new relationship with a financial entity.
As per Prevention of Money-laundering (Maintenance of Records) Amendment Rules, 2015, Rule 9 (I) (1A), every reporting entity shall within three days after the commencement of an account-based relationship with a client, file the electronic copy of the client’s KYC records with the Central KYC Registry.
Central KYC Registry has the below salient features:
• User friendly web portal
• Unique KYC identifier linked with independent ID proofs
• KYC data and documents stored in a digitally secure electronic format
• Secure and advanced user authentication mechanisms for system access
• Data de-duplication to ensure single KYC identifier per applicant
• ID authentication with issuing authorities like Aadhaar/PAN etc
• Substantial cost reduction by avoiding multiplicity of registration and data upkeep
• Real time notification to institutions on updation in KYC details
• Regulatory reports to monitor compliance
Central KYC application can be accessed by authorised institutions or other notified institutions under the Prevention of Money Laundering Act or rules framed by the Government of India or any Regulator (RBI, SEBI, IRDA, and PFRDA) there under.
The financial institution can register online on https://www.ckycindia.in
Registration process entails:
• Compliance Officer/Nodal Officer/Authorised Signatory of financial institution can enter the requisite details on the registration screen and submit it online.
• Upon submission reference ID will be generated and an email will be sent to compliance officer’s registered mail ID.
• Duly signed form along with supporting documents to be sent to Central KYC Registry.
• Upon receipt and verification of the physical documents, Central KYC Registry’s administrator will authorize the request if all documents are in proper order.
In case of discrepancies, Registry’s administrator will put the request on hold and an email will be sent to the institution’s compliance officer with the reasons stated therein. The details will accordingly be required to be re-submitted. Upon successful registration, user credentials will be emailed to the individuals who have been identified as the admin and co-admin during the registration.
There needs to be internet connectivity with bandwidth of minimum 512 kbps and a scanner with the stipulated specifications.
The specifications for scanning the supporting documents and photograph are stated below:
i. Document should be scanned in grey-scale with a scanning resolution of 150-200 DPI.
ii. Photograph must be a recent passport style picture preferably in colour.
a. Dimensions 200 x 230 pixels
b. Size of photograph should be between 20kb-50kb
iii. Acceptable file format : '.tif', '.tiff', '.pdf', '.jpeg', '.jpg'
iv. File Size (Maximum Limit): 350 kb for individual KYC record.
Digital certificate authentication is required for accessing the Central KYC application. The Central KYC Registry requires data as per the common KYC template to be captured along with the scanned copy of the certified supporting documents (PoI/PoA), cropped signature and photograph.
The data required as per the common template needs to be captured. However, the same can be captured on the common template or the institution’s account opening forms can be modified to capture the required information. The common template need not be scanned and uploaded onto the Central KYC Registry.
There are two different types of templates – One for the accounts of the individuals and the other for the legal entities (non-individual accounts).There are three account types in the Central KYC form – Normal, Simplified and Small.
The account type can be gauged from the nomenclature of CKYC identifier issued to the customer.
For Normal Account, any of six officially valid documents (PAN, AADHAAR, Voter ID, Passport, Driving licence, NREGA Job Card) can be submitted for the ID of the customer.
Central KYC Registry will enable linkage of multiple communication addresses. An individual wanting to maintain different addresses, office or residential, for different types of relationships, can fill Annexure-A1 and submit the details to the financial institution which in turn will initiate the update request on the Central KYC application. In case of legal entities, where there may be a requirement to maintain different accounts for branches with different communication address, the entities shall submit the correspondence address details in Annexure-A2.
On update of a customer record being processed at the Central KYC Registry, all linked financial institutions (institutions that have either uploaded or downloaded the KYC record for that customer), will receive an electronic update notification of KYC record. The financial institutions need to download the last updated record of the customer.
For availing the services of the Central KYC Registry, financial institutions need to make an advance payment to CERSAI’s account. For every service availed, the requisite amount will be deducted from the advance payment made. If there is insufficient balance available, the financial institution will not be able to avail the paid services until the balance is replenished.
To make the advance payment, the financial Institution will be required to generate the proforma invoice through the Central KYC application. The financial institution is required to make an advance payment through NEFT/RTGS in CERSAI’s bank account and mention the system generated proforma invoice reference number as the remark.
Financial Institution user is required to enter advance payment details like amount paid, TDS, UTR No. and payment date in the Central KYC application. Upon confirmation of the payment receipt from the bank, balance will be updated. In case of the tax deducted at source (TDS), the financial Institutions are required to submit a copy of the TDS certificate to the Central KYC Registry. Financial Institution will be intimated when the balance goes below the prescribed limit set by them. The financial institution’s user can download / print the usage details till the previous day.
On update of a customer record being processed at the Central KYC Registry, all linked financial institutions (institutions that have either uploaded or downloaded the KYC record for that customer), will receive an electronic update notification of KYC record. The financial institutions need to download the last updated record of the customer.
A financial institution will initiate an update request when there is a change in the information of the customer as existing in the records of Central KYC Registry.
Where the customer submits a request for updation of the data in the Central KYC Registry, financial institution will accordingly initiate the request after duly verifying the supporting documents.
The financial institution will be required to update the details in the following cases:
There is a change in the details / information as existing in the KYC records in the linked registry.
There is doubt about the adequacy or veracity of previously obtained client identification data.
There is a change of the account type (e.g. Minor account to Normal account).
The updated data along with the scanned copy of the supporting document, where required, will be uploaded in the Central KYC Registry. In order to initiate a modification request, the financial institution will need to be linked with the latest KYC record of the customer.
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