Key Components of KYC Guidelines

Customer Identification: This involves obtaining and verifying the identity of the customer. It typically includes collecting documents like an individual’s Aadhaar card, passport, driver’s license, or other government-issued identification, and ensuring that the information is authentic.

Risk Assessment: Financial institutions need to assess the potential risks associated with each customer. This includes understanding the nature and purpose of the customer’s account or relationship and establishing the risk category based on this assessment.

Customer Due Diligence (CDD): CDD involves continuous monitoring of customer accounts and transactions. It helps in recognizing unusual or suspicious activities.

Enhanced Due Diligence (EDD): EDD is essential for customers or entities posing a higher risk. In such cases, more comprehensive and detailed information is collected.

Ongoing Monitoring: Once a customer is onboarded, financial institutions must continually monitor the relationship. Any significant changes in behavior, transactions, or other factors should be investigated and reported if necessary.