KYC, which is also known as knowing your customer, is a bank account verification. In the year 2004, RBI made it mandatory for all the financial institutions, banks, and other organizations to verify the identity of the customers if they are making any financial transaction.
It becomes very important since there are various online platforms from where customers are paying and collecting money. So to verify the authenticity of the user, KYC is important.
So in simple words, KYC is a bank account verification process to check if the customer is legit or not. In this blog, we will learn a lot about the bank account verification process and how KYC is streamlining the process.
KYC is mandatory if you want to carry out any financial transactions.
Why is KYC Important?
Now you must be wondering why there is a need for KYC or bank account verification. The very first reason is the person who is taking out any transaction is not doing money laundering. It puts a full stop to money laundering activities. Money laundering is frequently carried out without the knowledge of the financial body whose infrastructure is used for those purposes.
Banks can detect any significant money laundering networks with KYC online verification and physical KYC validation in operation. Further, many non-individual consumers utilize financial institutions such as brokerage, mutual fund investing, and other similar activities. KYC gives bankers, financial firms, and brokerage firms, among others, the ability to check an institution’s legal standing. This can entail validating the identification of their security holders and authorized signatories, as well as cross-checking their working address.
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What Are Things Included in KYC Document?
Some documents need to be included in the bank account verification or KYC process. The KYC process involves documents related to proof of identity and proof of address.
1. Proof of Identity
Proof of identity involves various documents, which are as follows:
- Unique Identification numbers like Passport, Aadhar, Voter ID, and Driving License.
- The second document which you can present is a PAN Card.
- School and College identity cards issued by regulatory bodies.
- Identity cards issued by public authorities.
2. Proof of Address
Proof of address involves various documents, which are mentioned below:
- Any government-authorized identity card with an address such as p[assprt, driving license, aadhar card, etc.
- Further, you can present telephone, electricity and gas bills.
- Next, you can provide a bank account statement or a copy of passbook entries.
Types of KYC – Bank Account Verification
There are two types of KYC available in India. Below we are going to discuss the same.
1. Aadhar Based KYC
AAdhar based KYC is an authentication process that can be completed online, making it incredibly simple for individuals with access to the internet. For this sort of KYC, one must submit a scanned copy of their actual Aadhar card. This type of KYC is convenient to people as they don’t have to visit any institution to do KYC; it can be done via home as long as they have access to the internet.
2. In-person KYC
If a person wants to invest for a longer period, they will be required to complete an in-person KYC confirmation. In contrast to the online verification method described previously, in-person authentication KYC is done offline. To do the same, the client might go to a KYC kiosk or a mutual fund institution and utilize Aadhaar biometrics to verify their identification. Not just this, if you cannot go, you can ask a representative to pay a visit to your house. Many companies started performing in-person KYC through video calls.
Benefits of Doing KYC
So now you know all about the types of KYC. Let’s cast light on its advantages.
- The KYC process helps banking and other financial institutions in identifying legit customers. It makes the bank account verification process a cakewalk.
- Further, the method establishes credibility with banking and other financial institutions.
- Not just this, the KYC process helps stop illicit activities like money laundering and all.
- Moreover, it keeps scammers and fraudsters at bay.
- Above all, it provides security. If somebody has done its KYC, then they will know all their financial assets are safe.
How Does the KYC Process Work?
It is the process of verifying if the customer is legit or not. The KYC procedure entails confirming that the customer is who he claims to be and granting him access to things or goods he needs. The procedure is set up so that a person who wishes to be a customer of a business must prove his identification with legal and enforceable evidence. It can be carried out by video calls where customers can verify their faces and other biometric checks to confirm their identity. The process can be carried out in person or remotely.
That’s it! Here you get all the information about the KYC and why it is important for bank account verification.
