In the current diversified financial environment, it is a crucial responsibility of FIs and other obliged subjects to maintain compliance with regulations. The first of these critical compliance obligations is Re-KYC. While Re-KYC may be seen as a routine check to update stolen, lost or fake customer details to ensure institutional compliance and customer protection standards, it is also a trickle of KYC information. This article is a deeper exploration of what Re-KYC entails, why it is essential, when it is done, and how it is done.
KYC stands for Know Your Customer, which is a process through which a customer’s identity to a business entity, legal or otherwise, is subjected to verification and authentication. To fulfil the know-your-customer norms, it is necessary to gather details relating to the identity and the address proof, the customer’s financial status, and otherwise relevant information. KYC, on the other hand, aims to eradicate frauds like money laundering, identity theft, and associated fraudulent activities to maintain a secure surrounding in the operation of the financial structure.
Re KYC’s Full Form is Re-Know Your Customer, an ongoing process introduced by the RBI (Reserve Bank of India) regarding collecting and updating customers’ data from time to time. This is due to, among other reasons, the need to maintain records, mitigate and manage risks, and adhere to the standard requirements for anti-fraud and anti-money laundering. Banks with a risk-based system of categorising customers determine the frequency of Re KYC.
From time to time, Re-KYC is done according to the rules and regulations, and for this, a risk-based approach is followed. Therefore, Re-KYC frequency is noticed depending on the customer risk categories, high, medium, and low, based on factors such as identity, social status, financial position, business, travel plans, and geographical location in the process of Re-KYC.
Re-KYC is essential in maintaining regulatory compliance, customer safety, and fraud prevention. Financial institutions mitigate risks and align with regulatory standards by regularly updating customer data, fostering trust and security. For banks, Re-KYC is essential in reducing money laundering and maintaining accurate customer profiles.
Re-KYC known as periodic Know Your Customer updates, remain relevant to ensure all customer records are up-to-date and meet legal requirements. Banks typically initiate Re-KYC under several circumstances:
The structured way helps ensure the banks can handle all the risks affiliated with a particular customer segment and address all the regulatory requirements.
| Aspect | KYC | Re-KYC |
| Purpose | Conducted at the time of new business obtained to verify the genuineness of a customer, their address, and risk profile | Whenever undertaken to verify the latest customer information and identify risk profile changes, |
| Timing | This will be performed once a new account opens or a new application is made for financial products. | Applied at regular intervals for which different risk categorisation applies or whenever changes in customer information are significant. |
| Process | Complete verification and collection of original documents, ID proof of address, and in-person verification are required. | It needs current information and can also be done digitally. For example, if the change is minimal, it can be done through email or video verification. |
| Risk Management | This forms the very first risk assessment based on customer profile and background. | This forms an updated risk assessment over any change of status or behaviour of the customer. |
| Compliance Focus | It ensures compliance at the initial stage of a customer relationship. | It ensures continuous compliance through periodic customer data updates, as regulatory authorities require. |
The Re KYC process, or the periodic updation of KYC details, ensures that customer data remains current and accurate. Here’s a step-by-step breakdown of how Re KYC is generally done:
Trigger: The bank notifies customers when it’s time for Re KYC based on the customer’s risk category (every 2, 8, or 10 years).
Channels: Notifications are typically sent via email, SMS, or in-app.
Customer Action: Upon receiving a notification, customers must complete the Re KYC form with updated personal details (if applicable).
Form Access: Forms are often available at the bank branch, ATM kiosks, or on the bank’s website and mobile app.
Documents required for Re-KYC generally mirror those needed in the initial KYC process, such as:
1. Proof of Identity: Passport, driver’s license, or national ID card.
2 . Proof of Address: Utility bill, bank statement, or rental agreement.
3. Additional Documents: High-risk profiles may require income statements or employment details.
The Re-KYC process is governed by various regulations that depend on the jurisdiction and financial institution. Regulatory bodies worldwide have mandated Re-KYC to help institutions maintain accurate records and minimise financial crime risk. For example, in the EU, the Anti-Money Laundering Directive (AMLD) provides clear guidelines, while in the U.S., the Financial Crimes Enforcement Network (FinCEN) oversees similar compliance requirements.
For select customers, banks have developed Re-KYC or V-CIP, which stands for Video Customer Identification Process. Re-KYC through V-CIP is only available for customers of or above 18 with proof of Indian address. All one needs to avail of the video Re-KYC is a camera-enabled device, PAN Card, Aadhaar, and internet access, with the help of which a bank official transmits the Re-KYC.
They have become established to be effective for FIs in improving security, sharing an optimistic perception with users, and meeting complex standards of legal propositions. This technology offers several advantages over traditional methods:
This means the video KYC process is a much more effective and convenient way for customers to pass re-identification. One of the benefits of using this online process is that customers do not have to move around visiting branches to open an account. This simple structure impacts the higher level of satisfied and loyal customers.
Video KYC helps reduce fraud and risk associated with KYC when individuals are involved. Customer identity verification using facial recognition and liveness detection makes FIs realize fraudulent activities in near real-time. Also, the technology assists in compliance with AML and CTF by properly collecting the latest customer information.
KYC through video can result in substantial savings among FIs. Since branches have high operational costs, eliminating the need for branches frees space, finances, and employees for other core activities. Further, the flexibility of video technology enables FIs to conduct the KYC process for increased customer volumes with minimum added costs of scaling up.
Video KYC stands well in line with global norms and perspectives of customer identification and verification. By implementing this, the FIs can show clients and supervisors they are serious about following regulations and avoiding fines. In addition, through video KYC, it is easier for FIs to meet some of the region’s regulatory compliances where they operate and in such laws.
KYC Hub offers an advanced digital KYC solution that streamlines the process for financial institutions. With AI-powered document verification, video KYC, and real-time data updates, KYC Hub enables institutions to maintain accurate records while providing a seamless customer experience. The platform’s robust compliance tools help institutions efficiently meet regulatory requirements, supporting a safer, more transparent financial landscape.
In an era where regulatory compliance is paramount, Re-KYC is essential for institutions, ensuring data accuracy and customer safety. By implementing efficient Re-KYC processes and leveraging digital solutions, institutions can reduce risks and maintain strong customer relationships, promoting trust and regulatory adherence.
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