Banks are chasing account holders to give fresh proof to update their know-your-customer
(KYC) databases. This is inconvenient for customers whose antecedents
have been verified before a bank allows them to open an account and also
operationally inefficient.
True, banks are only complying with the RBI's diktat to periodically update customer identification data: once in five years for low-risk category customers and not less than once in two years for high- and medium-risk category customers.
Ordinary citizens are hamstrung. There is no reason why a salaried employee whose tax is deducted at source should provide her identity proof afresh. The bank accepts a passport as proof of address, but does it know that the passport office itself does not treat an existing passport as address proof when the passport is up for renewal?
The unique identification number, Aadhaar, serves as a proof of identity, making it sufficient KYC. Repeated compliance would become redundant once every citizen has an Aadhaar. Banks should have the machines capable of reading biometric data and querying the UID database to verify the identity of the account holder.
KYC rules are meant to ensure that banks are not used as a channel to route funds that are not kosher, though they become irrelevant when money is laundered with the connivance of the banker.
The way to guard against money laundering is intelligent analysis, preferably real-time, of bank transactions to identify patterns. Modern IT allows tracking of the location of ATMs used and computers/phones used to log into bank accounts.
Mobile phones are easy to locate. Let banks use the capabilities of their own electronic infrastructure and of IT companies that can do with a little more of domestic business, to spare customers validation hassles.
True, banks are only complying with the RBI's diktat to periodically update customer identification data: once in five years for low-risk category customers and not less than once in two years for high- and medium-risk category customers.
Ordinary citizens are hamstrung. There is no reason why a salaried employee whose tax is deducted at source should provide her identity proof afresh. The bank accepts a passport as proof of address, but does it know that the passport office itself does not treat an existing passport as address proof when the passport is up for renewal?
The unique identification number, Aadhaar, serves as a proof of identity, making it sufficient KYC. Repeated compliance would become redundant once every citizen has an Aadhaar. Banks should have the machines capable of reading biometric data and querying the UID database to verify the identity of the account holder.
KYC rules are meant to ensure that banks are not used as a channel to route funds that are not kosher, though they become irrelevant when money is laundered with the connivance of the banker.
The way to guard against money laundering is intelligent analysis, preferably real-time, of bank transactions to identify patterns. Modern IT allows tracking of the location of ATMs used and computers/phones used to log into bank accounts.
Mobile phones are easy to locate. Let banks use the capabilities of their own electronic infrastructure and of IT companies that can do with a little more of domestic business, to spare customers validation hassles.
Source : http://economictimes.indiatimes.com
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