M is a Manager in Nationalized Bank. During the investors' meet, it was desired by Senior Management that a presentation on Customer Due Diligence and Know Your Client be put up. Being a professional, prepare a note on C

Know Your Client (KYC): KYC stands for 'Know Your Customer' or 'Know your Client'. This is a process to be followed by every professional, bank or financial & lending institution that involves obtaining requisite information about the identity and address of the customer. This process has been made compulsory for Bank by RBI before opening an account, to guarantee that there must not be any misuse of any service provided by the banks. As per the order by RBI, banks have to update the KYC details information at regular intervals depending on the risk of the profile of the customer. Customer Due Diligence (CDD): "Customer Due Diligence (CDD)" means identifying and verifying the customer and the beneficial owner and CDD refers to the monitoring of clients and their activities to see if the client does not change its status over time. In effect this contains the possibility that an individual (or more often an organization) that has passed KYC is still the same as was declared earlier and is doing the same what was declared earlier when they underwent KYC checks. For example changes in the signatory of the account, changes in the partners, changes in the object, changes in the source of income, revenue etc. Hence without CDD the services provider would not know that there is changes in the ownership. Banks and Financial Institutions (FIs) have been advised by Reserve Bank of India to follow certain customer identification procedure for opening of accounts and monitor transactions of suspicious nature for the purpose of reporting the same to appropriate authority. These 'Know Your Customer' (KYC) guidelines have been revisited in the context of the recommendations made by the Financial Action Task Force (FATF) on Anti Money Laundering (AML) standards and on Combating Financing of Terrorism (CFT). Detailed guidelines based on the recommendations of FATF and the paper issued on Customer Due Diligence (CDD) for banks by the Basel Committee on Banking Supervision (BCBS), with suggestions wherever considered necessary, have been issued. Banks/Fls were advised to ensure that a proper policy framework on 'Know Your Customer' and Anti-Money Laundering measures is formulated and put in place with the approval of their Boards. Importance of KYC: The importance of KYC is to stop the corporate vehicles to be used intentionally or unintentionally, by criminal elements for illicit purposes such as money laundering activities, Fraud, bribery and corruption, shielding assets from creditors, illicit tax practices, Market fraud, Terrorist Funding, avoiding future risk and the KYC related procedures also enable institution to better understand their customers and their financial dealings. This helps in managing associated risks prudently.