With the coming of the internet, the world has come closer than ever before, but with certain repercussions especially with respect to financial safety. Most companies have taken their operations online to ensure that customers worldwide can access their services faster and also conduct many operations simultaneously. Banks are no exception to this.
Almost every bank today has a website and net banking facilities have been made available for all. There are also many steps taken to ensure that banking facilities are made safe with the most stringent of features and regulations. Banking frauds have occurred all too often, putting the safety of customer’s money in jeopardy. To ensure that the security of banks and other financial institutions is not compromised, a number of features and safety measures have been implemented. One such measure is KYC or Know Your Customer.
What is KYC
KYC or Know Your Customer is a step that has been developed in order to prevent online fraud, identity theft, money laundering and also financing for terrorists through other financial scams. This process ensures that banks know their customers and understand them better so as to manage all risks associated with their financial holdings in that particular bank without issues.
This legal and regulatory requirement is framed by banks based on the directive provided by the Reserve Bank of India. These policies include procedures for customer’s identification, management of risk, customer acceptance policies, transaction monitoring and so on.
Through the process of KYC, customers are identified and verified through independent information or documents that are reliable. In case individuals open different accounts, then the identity of the customer is verified by collecting documents as necessitated by laws.
KYC is required during the following situations
- When a new account is being opened
- When individuals are applying for a new loan or credit card
- Opening a locker
- While customers are investing in a mutual fund
- When there are changes in signatories or beneficiaries
- When the documents are not enough for an existing account
Importance of KYC
Today, although the world is more connected than ever due to the internet and security is much more extensive than it ever was, online fraud and theft is on the rise. This is especially a problem for banks and financial institutions that operate online, as the safety of their customer’s funds might be compromised. In order to ensure that this breach of security does not occur, KYC as a process has been put forth.
Through KYC or Know Your Customer, customer’s details are taken and stored so that in case of identity theft or financial fraud, a money trail will be left and it will be easier to track fraudsters. Proper identification ensures that monitoring and compliance can be done easily in case of any mishaps or issues regarding money.
Role of PAN Card in KYC
The primary objective of KYC is to ensure that the individual’s identity is verified and documented. In order to do so, individuals will have to provide identity proof and one of the documents that can be provided for the same is a PAN card.
PAN or Permanent Account Number is an alphanumeric sequence of 10 digits that is issued in the form of a card that is laminated, by the IT department of India. This number acts as a method to prevent tax evasion and to identify all financial transactions universally. The PAN number is therefore an important document that acts as a proof of identity for the individual. Therefore one of the primary documents that individuals will have to provide during the KYC process is their PAN card.
The PAN number is necessary for a number of financial transactions such as receiving salary that is taxable, opening a bank account, purchase of assets above a specific amount and so on.
Steps to Check Status of KYC with PAN Card
Once individuals have submitted their KYC forms online, they can also check the status of the application by following the steps mentioned below:
- Individuals will have to log onto the Central Depository Service Limited website of India.
- Once they visit the site, they will have to enter their PAN number.
- In case their KYC has been verified then, the status will be displayed as ‘MF-Verified by CVLMF’.
- In case their KYC has not been verified, then the status will be ‘Pending’.
- A print of the page can be taken in needed.
Frequently Asked Questions (FAQs) on PAN Card KYC
- What is controlled by KYC?
The KYC controls the following:
- Analysis and collection of basic information regarding an individual’s identity
- Expectation of transactional behaviour of the customer
- Matching the name of the customer against a list of known parties
- What are the documents required for KYC?
Documents may vary for each bank and financial institution based on the requirements but the most commonly requested documents for KYC are proof of identity and address is required. These can include, PAN card, Passport, Voter ID, Utility bills, Birth Certificate, Driving License, etc.
Customers may also be asked to provide a recent coloured photograph of passport size along with the filled and signed KYC submission format. These details will also have to be updated regularly. In case the documents provided are not satisfactory according to the bank then it can close or terminate the account after providing a notice to the customer detailing the reasons for it.
- Where can the KYC form be procured?
Individuals can procure the KYC form from their broker or financial consultant. Additionally they can also download the same from a mutual fund company’s website.
- In case certain details are changed such as address, will KYC form have to be submitted again?
Yes, in case the address or other important details pertaining to the customer’s identity has changed, the KYC form will have to be filled and submitted again.
- What does ‘Customer’ mean according to KYC?
According to KYC regulations, a customer is seen to be an entity or individual that has an account or business relationship with a bank.