It was nightmarish for Mr. Sanjay Jadhav to discover that someone had stolen his identity and misappropriated funds under his name. The thief had taken a copy of Mr. Jadhav’s KYC documents, posed himself as Mr. Jadhav and conned multiple banks.  Mr. Jadhav was a responsible taxpaying citizen and never believed that something like this could happen to him. The stark truth is, if it can happen to him, it can happen to anyone.

“KYC” is a commonly heard acronym whenever entering into a financial relationship. It stands for “Know Your Customer”. It is a vital procedure that enables the bank or institution to establish the true identity of the customer. The three pillars of KYC are – Identity, Address and Signature. The RBI has a list of OVDs (Officially Valid Documents) those that are accepted as proofs for identity, address and signature of the customer. Every individual seeking to start a new financial relationship like opening a bank account, take a loan, invest in mutual funds or find oneself a suitable insurance policy, for any of these the customer must submit one of the OVDs to verify his/ her identity and address.

Suppose, you are planning to buy a house and you have applied for a HDFC home loan. You will be asked to submit your KYC alongwith the application form. Upon failing to do so your application will not processed. It is an important step which cannot be overlooked.

Why is KYC Needed?

Since your KYC is one of the stepping stones when commencing a new financial relationship, it becomes obvious that you must keep all these documents well guarded and make sure they are not easily duplicated. If you let your documents float around the city then you could land in a major mess which could upset all your future financial relationships.

KYC was primarily introduced:

1. To avoid opening of accounts under fictitious name

2. To prevent money laundering

3. To prevent financing terrorist activities

4. For better customer management

In the past decade, conmen would easily pose as someone else and get themselves fake accounts, loans etc. They would have no intention of repaying any of the credits taken, thus completely smashing the credit record of the person whose identity was adopted. To cut through all of this KYC was introduced.

Through KYC, a bank can establish the true identity of the person and can connect with their customer. As part of bank’s guidelines, they cannot process any account opening forms unless customer due diligence process is complete.

When you wish to see your credit report, you will have to submit proof of identity and address to the bureau. Since your credit score and report are kept confidential and no one except you or the credit institution you authorised can view it, therefore it is important to establish your identity before you are sent a copy. The bureau does not want your report to fall in wrong hands.

Which are the important KYC documents?

Some of the Officially Valid Documents are:

1. A recent photograph, for each of all joint account holders. Customers must sign across the photograph. Photo should match with all documents with photo and with the person across the table.

2. A photocopy of Adhaar card, Passport, Driver’s License, Voter’s ID, PAN card, etc to serve as Identity Proof

3. A photocopy ofAdhaar card, Passport, Driver’s License, Voter’s ID, Ration Card, Bank Statement, Electricity Bill, Telephone Bill not later than 3 months, Letter of Allotment, etcfor Address Proof

4. A photocopy of the Passport, Personalised cheque leaf (subject to clearing), Driver’s License, Adhaar card, etc are accepted as Signature Proof

Things to remember:

1. Documents should be self attested or by a gazetted officer.

2. Make sure the photo on the photocopy is clear so it is not easy for someone to fake your identity

3. Sign on every photocopy with details like who is the document being given to, date and time and purpose for which it is given

4. Don’t use your bank signature at places other than the bank. Like when signing a bill or a feedback register etc.

5. Try to password protected online file for all e-copies of your documents

6. Don’t fall for traps. Hand your documents to authorised personnel only. For example, you are browsing through home loan interest rates on a website when that you are asked to submit KYC to the site. That would be a scam. Unless you apply for a relationship with a credit institution you need not part with your vital details.

How important documents should be disposed?

There are important norms on disposal of photograph and copies of the documents for banks, post office and other institutions that handle them. Documents are preserved in the guard file in HOs of all companies. Employees are not allowed to carry documents home. If they are to be disposed, they are shredded into bits before meeting with the bin.

Some banks work with softwares such as “Hunter” that flags suspicious cases where identity seems to be compromised owing to discrepancies in the application form. Quite a number of identity theft cases have been thwarted before they could cause any damage.

Being brash with disposal of your documents can lead to “identity theft”. One shouldn’t treat old documents as junk and give them away with other old papers. Important KYC documents must be shredded carefully before disposing.

Summarising

When it is about something as crucial as the KYC, one cannot be careful enough.Banks are required to update KYC records, periodically. This helps keep fraud customer accounts at bay. If you fail to provide your KYC documents at the time of updation, then your relationship may be frozen or cancelled.As you can see your documents are indispensable, so keep them safe and guarded.

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