Operational Aspects of KYC | PAPER II – PRINCIPLES & PRACTICES OF BANKING | MODULE A: GENERAL BANKING OPERATIONS
Banker - Operational Aspects of KYC
Know Your Customer (KYC) Norms
KYC is a mandatory process for banks and financial institutions to identify and verify the identity of their clients. This process includes Customer Identification Procedure (CIP), Customer Due Diligence (CDD), and Enhanced Due Diligence (EDD) for high-risk customers.
Wire Transfers
Wire transfers involve the electronic movement of funds from one bank account to another. As per RBI and FATF guidelines, wire transfers must be accompanied by complete originator and beneficiary information, particularly for cross-border transactions.
Other Operations - Regulations
Operational aspects of banking are regulated under the Prevention of Money Laundering Act (PMLA), RBI Master Directions, and FATF guidelines. Banks must ensure compliance with KYC, record-keeping, risk categorization, and periodic review.
Central KYC Records Registry (CKYCR)
The CKYCR is a central repository maintained by CERSAI, where KYC data of customers is stored. Banks upload KYC records to CKYCR and retrieve existing KYC records to avoid duplication of the KYC process.
Monitoring of Transactions
Transaction monitoring is an essential part of AML compliance. Banks must monitor unusual transactions, large-value deals, and red-flag indicators. Suspicious transactions must be reported to the Financial Intelligence Unit - India (FIU-IND).
MCQs - Operational Aspects of KYC
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What is the primary objective of KYC norms?
- a) Enhance profitability of banks
- b) Identify and verify customers
- c) Increase deposit base
- d) Manage HR compliance
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CKYCR is maintained by which organization?
- a) RBI
- b) SEBI
- c) CERSAI
- d) IRDAI
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Which legislation governs KYC compliance in India?
- a) Companies Act
- b) PMLA
- c) Income Tax Act
- d) FEMA
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What does EDD stand for in KYC norms?
- a) Enhanced Due Diligence
- b) Electronic Data Deposit
- c) Employee Data Disclosure
- d) Escalated Document Details
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Which of the following is essential in a wire transfer as per FATF guidelines?
- a) Marketing information
- b) Beneficiary’s address
- c) Originator’s KYC data
- d) Loan details
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Which authority receives suspicious transaction reports?
- a) RBI
- b) SEBI
- c) CERSAI
- d) FIU-IND
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Periodic KYC updates are required for which category of customers?
- a) Only salaried customers
- b) High-risk customers only
- c) All customers
- d) Only government employees
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Which of the following is not a part of KYC?
- a) Customer Due Diligence
- b) Credit Assessment
- c) Customer Identification
- d) Risk Categorization
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Which KYC component involves validating address and identity proof?
- a) Transaction Monitoring
- b) Customer Identification Procedure
- c) Enhanced Reporting
- d) Internal Audit
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CKYCR helps in:
- a) Generating loan leads
- b) Avoiding KYC duplication
- c) Increasing NPA
- d) Promoting mutual funds
Chapter Index:-
PAPER II – PRINCIPLES & PRACTICES OF BANKING
MODULE A: GENERAL BANKING OPERATIONS
- Banker-Customer Relationship
- AML-KYC Guidelines
- Operational Aspects of KYC
- Opening Accounts of Various Types of Customers
- Operational Aspects of Deposit Accounts
- Operational Aspects of Handling Clearing/Collection/Cash
- Banker’s Special Relationship
- Foreign Exchange Remittance Facilities for Individuals
- Operational Aspect of NRI Business
- Foreign Currency Accounts for Residents and Other Aspects
- Cash Management Services and Its Importance
- Payment and Collection of Cheques and Other Negotiable Instruments
- Responsibility of Paying Bank
- Responsibility of Collecting Bank
- Ancillary Services
- Financial Inclusion & Financial Literacy
- Customer Service Guidelines
- Duties & Rights of a Banker and Customer Rights
- Grievance Redressal & RBI Integrated Ombudsman Scheme 2021
- The Consumer Protection Act, 2019: Preamble, Extent and Definitions
- The Right to Information Act, 2005
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