Manner of conducting KYC

PURSUANT TO THE AMENDMENT TO RBI MASTER DIRECTIONS AMENDED AS OF JANUARY 2020

  • This is an updated version of our previous post that covered the KYC flows pursuant to the PMLA amendment in Aug 2019
  • Please note that the below is applicable for RBI governed entities only

Earlier this month, the Reserve Bank of India amended its Master Directions for KYC to incorporate, amongst other things, the amendment made to the Prevention of Money Laundering Act (Maintenance of Records), Rules.

Please see below an analysis of the amendment below.

Highlights:
  1. The Master Directions have introduced Video KYC as an option for presenceless KYC and that is a huge win! However, there may be some friction in its adoption for the start up community and that has been further discussed below.
  2. PAN verification is a mandatory step.
  3. Aadhaar number is to be redacted/blacked out where it is provided.
  4. Please note: The flow below is for customers that are Not seeking subsidy under a scheme notified under Aadhaar (Targeted Delivery of Financial and Other subsidies, Benefits and Services) Act, 2016
Evaluation of Video KYC:

While Video KYC is a definite welcome step towards achieving a presenceless KYC experience, the defining features below have veered away a little from the vision that the startup community had for Video KYC and may provide to be a challenge in its adoption

  • The process is real-time, i.e: the verification process needs to happen in real time
  • It contemplates only Aadhaar and PAN and not other OVDs.
  • The process is to be conducted by an official of the RE. This is being read as employee of the RE and will exclude third party agents of the RE.
  • All accounts opened through V-CIP shall be made operational only after being subject to concurrent audit.
Conclusion

While we have certainly come a long way in our KYC process in the last year, there is possibly some way to go before each of these path breaking processes- such as Digilocker and Video KYC can be truly adopted by the industry.

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