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All You Need To Know About KYC – ‘Know Your Client’

KYC full form is ‘Know Your Customer’) which refers to the process of identity and addresses verification of all customers and clients by banks, insurance companies and other institutions either before or while they are conducting transactions with their customers. These financial institutions can be anyone be it your stockbrokers, banks, online wallets, mutual funds or investment advisors. Organizations such as these ask for a host of documents from its customers to complete their KYC.

Why KYC?

KYC is needed by these financial institutions to mainly verify the identity of their customers. This can be done in the form of asking simple questions such as their date of birth, their PAN number, Aadhar number, name, address etc. This is also done to cross check whether the person / customer is charged or not with corruption or money laundering or terrorist financing etc., which have increasingly become common in the current times. While KYC is legally binding, completing the KYC/ eKYC process also helps customers gain access to the different premium products offered by the finance company and also get transactions done faster.

Origin of KYC

If you are wondering about what is KYC, then it is an acronym whose full form is ‘Know Your Customer.’ KYC makes it easier for an institution to authenticate its consumer identity and address details.
Essentially, the meaning of KYC is to establish an individual’s identity and address through relevant supporting documents, including photo IDs (for example, PAN card, Aadhar card), In-Person Verification (IPV) and proof of address.
As explained above, KYC compliance is a mandatory exercise under the Prevention of Money Laundering Act, 2002.

Documents needed for KYC

As per the guidelines issued by the Government of India, document serve as ‘Officially Valid Documents (or OVDs) and can be considered for the verification of identity. Even if you have already submitted the KYC documents once to an institution, they may ask again for the documentary proof to periodically update the KYC records. Document required • Passport

Ways of getting KYC done

There are two ways in which you can get your KYC formalities completed- Online and Offline.
Offline KYC – This requires you to download a form from the Central Depository Services Limited (CDSL) website and submit the same at the physical location where the KYC is required. In this, you need to attach self-attested copies of ID proof, address proof and a passport sized photo.

Key Takeaway

It is better to have your KYC registered with a KRA sooner or later as the sector of financial services is growing rapidly and with it the chances of you needing a financial asset such as a mutual fund and demat account, insurance etc. While this is a one-time hassle, it is nothing more than just updating your latest residential address and your ID.
For services of investment advisor as well, you require to undergo the KYC process without which your application cannot be processed further.

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