What’s New in RBI’s 2024 KYC Guidelines? A Complete Guide to the Changes
What’s New in RBI’s 2024 KYC Guidelines? A Complete Guide to the Changes
Recently, the Reserve Bank of India (RBI) implemented important changes to its Master Directions regarding Know Your Customer (KYC) regulations, which took effect on November 6, 2024. These updates are part of the central bank’s initiative to align KYC guidelines with recent modifications in related legal frameworks, including the Prevention of Money Laundering (Maintenance of Records) Rules, 2005, and the Unlawful Activities (Prevention) Act, 1967.
What is KYC?
KYC, which stands for Know Your Customer, is a procedure that financial institutions and regulated companies use to verify their clients’ identities. This process involves gathering and evaluating information such as personal identification and financial history. The main goal of KYC is to combat fraud, money laundering, and terrorism financing by ensuring that companies know their customers. KYC regulations mandate that businesses confirm customer identities and evaluate any associated risks.
Digital KYC
Digital KYC is the online method of verifying a customer’s identity using digital technologies. Unlike traditional approaches that require physical documents and face-to-face verification, digital KYC enables customers to upload their identification online via secure apps or websites. This process often includes biometric checks like facial recognition or fingerprint scanning to improve security.
Key Changes in the KYC Master Directions:
1) Customer Acceptance Policy (Paragraph 10)
The changes simplify the process for customers who already comply with KYC regulations. If an existing customer wants to open a new account or access additional services, they will not need to undergo a new Customer Due Diligence (CDD) process.
2) Risk Monitoring (Paragraph 37)
The definition of high-risk accounts has been clarified to highlight that these accounts require closer scrutiny. This clarification is now explicitly included in the regulations.
3) KYC Updation (Paragraph 38)
The phrase “updation” has been changed to “periodic updation,” which clarifies the timing and process for regularly updating customer KYC information.
4) KYC Records and Central KYC Records Registry (CKYCR) (Paragraph 56)
The amendments mandate that all KYC data be consistently uploaded to the CKYCR. Financial institutions are required to update KYC information within seven days or as directed by the government. The KYC records will be automatically refreshed for all reporting entities through CKYCR. For account-based relationships, institutions will not require customers to resubmit documents unless there are changes in customer details or if the retrieved information is outdated.
5) Changes in the UAPA Procedures (Annex II)
The title of the Central Nodal Officer under the Unlawful Activities (Prevention) Act has been revised from “Additional Secretary” to “Joint Secretary,” as per a corrigendum issued in April 2024.
6) Terminology Update
All references to “section” have been changed to “paragraph” throughout the Master Direction to ensure consistency and clarity.
