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Know Your Customer (KYC) Audit

CA Parag Jani (BCom CA DISA Forensic Auditor) (288 Points)

21 June 2011

Dear All

Please advise me on KYC Audit of Banks. Please mail me any RBI Master Circular on the same & also the format of audit report of it.

I will be very much thankful for a prompt reply.

You can send mail at paragjanica @ gmail.com

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2 Replies

Karan Teli (Life Is just an Illusion...!!) (4573 Points)
Replied 21 June 2011

Hi...!!!

here is something it wud help u.....

AUDIT POLICIES/PROCEDURE FOR KNOW-YOUR-CUSTOMERS, KYC

1) Introduction

Given the current problems of financial crimes on hand and the world-wide attention it has attracted, series of circulars and guidelines to banks and financial institutions have issued on the procedures for verifying the identify of customers. The guidelines known as Know-Your-Customer Guidelines (KYC) explains the formal steps financial institutions are required to follow in the verification of their customers’ identity.

2) Objectives

2.1 To give clear policy directives to account officers on the procedure for verifying the identity of customers as required by the various legislations on money laundering and financial crimes in the country.

2.2 To ensure that the company complies fully with the policy on Know-Your-Customer

2.3 To provide the company with a holistic framework for managing relationship with customers not only to satisfy the requirements of the regulatory authorities but also to deepen business relationship with the company’s customers.

3) Policy Statements

3.1 As a good corporate citizen, XYZ shall comply with all relevant legislations on money laundering and financial crimes and will seek through this policy to ensure that all reasonable steps are taken to verify the identity of all its customers.

3.2 XYZ will not permit any payments to be made from any account with incomplete account opening documents. If the customer decides to discontinue with the transaction on account of inability to produce the required documentation, the transaction will be reported to the relevant authorities as suspicious transaction. Funds deposited can only be returned after one week of the report to the relevant authorities.

3.3 XYZ will, from the onset of any relationship, explain the account-opening requirements to all its customers together with the need by the customer to inform XYZ whenever there are changes to the information in the account-opening forms.

3.4 There shall be a visit to the residential/contact addresses of all new customers within two weeks of opening the accounts. The purpose of the visit is to verify that the customer lives or stays at the contact addresses. This physical verification shall be in addition to the utility bills or other proofs of addresses already obtained from the customer. The results of such visits shall be documented and filed as part of the account opening documents

3.5 There shall be a minimum of one visit to the residential/contact addresses of all active customers at least once a year. The purpose of such visit is to ensure that the customers’ addresses are still current. The result of such visits shall be clearly documented and filed as part of the account opening documents

3.6 Where contact/residential addresses have changed without any information to this effect by the customer, payment out of the accounts shall be suspended pending the verification of the current addresses of the customer.

3.7 There shall be a review of all customer accounts every six months. The purpose of the review is to:

· Review the accounts for the existence of any suspicious transactions;

· Check if the movements in the accounts are consistent with the declared purpose of opening the accounts;

· Check that all the information in the account opening forms are still current and relevant for active accounts.

· Identify any new developments that may cast doubt as to the fitness of the customer to maintain an account with XYZ.

The results of this review shall be stated in writing and filed as part of the account opening forms.

3.8 There shall be a personal visit by the head of every business unit in XYZ to the residential/contact addresses of all individual customers with balances in excess of $X million. For those with balances in excess of $Ymillion, a personal visit to the customer’s residential/contact address by the CEO is required. These visits shall be properly documented and filed as part of the account opening documents.

3.9 XYZ shall not accept investments in cash from any new customer unless the source of such cash investments can be satisfactorily explained and verified.

3.10 XYZ shall not open any account for any person below the age of 18 years unless the accounts are opened by the parents or guardians of such a person. In this case, verification shall be done not only for the under-aged person, but also for the parents or guardians who are opening the accounts.

3.11 The approval of the CEO shall be required before accounts can be opened for any individual or organization resident abroad. All the documents required for individuals and organizations operating in Cty shall be applicable to those abroad modified as the case may be to reflect the differences in the operating environment. XYZ shall engage the services of a reputable legal firm for the verification of the documents received from all such customers.

3.12 XYZ will not open accounts for any person whose public reputation is not consistent with the company’s corporate culture and ethical standards. Therefore where an account officer is not comfortable with the reputation of any individual or where that individual is or is considered to be a controversial person, the approval of the Group Head shall be sought before accounts are opened for such persons.

THE PROCEDURE FOR PROSPECTIVE INDIVIDUAL CLIENTS

1. Prospective clients should be made to fill an account opening form. Duly completed account opening form. Information in respect of date of birth, occupation, and residential and postal addresses should be properly completed. Phone numbers and e-mail addresses (where available) should also be obtained. A detailed descriptttion of the sources of income of the customer together with an estimate of the level of the customer’s annual income should be provided. Such general information as ‘business-man’ should be discouraged. If the customer is employed in any establishment, the name of the establishment together with the position of the customer in that establishment should be provided. In addition, the customer is expected to state the purpose for opening an account with XYZ and the source or sources of the funds to be invested in XYZ.

2. Obtain proof of identity. - Current National Drivers License, National Identity Card, or Current International Passport. The identity card of the establishment where the customer works (though not acceptable for the purpose of proof of identity) should be obtained as part of the verification of the customers’ employment. Where the customer has none of these acceptable proofs of identity, a written introduction by somebody with any of the required proof of identity will be required. The person doing the introduction would be required to attach a copy of his/her proof of identity together with the residential/contact.

3. Obtain two recent passport photographs.

4. Obtain a duly completed mandate form

5. Obtain the birth certificate or sworn declaration of age

6. Copy of recent utility bills in the customer’s name.

7. A reference letter from the customer’s bankers

gaurav (article) (25 Points)
Replied 29 September 2013

Dear Everybody if u have any audit report format for kyc compliance reporting,please forward it at saboo4u @ gmail.com,any assistance in this regard will be highly appreciated.