The Role of Central KYC Records Registry in Customer Due Diligence

As the world becomes more interconnected, financial institutions and intermediaries face increasingly complex challenges to prevent money laundering, terrorist financing and other forms of financial crimes. To combat these crimes, governments around the world have introduced laws and regulations that require financial institutions to perform customer due diligence (CDD). Central KYC Records Registry is a tool that has been created by the Government of India to enable better CDD by financial institutions. This article will discuss the role of Central KYC Records Registry in customer due diligence and its impact on financial institutions.

What is Central KYC Records Registry?

The Central KYC Records Registry (CKYCR) is a centralized database maintained by the Central Registry of Securitization and Asset Reconstruction and Security Interest of India (CERSAI). The database contains the Know Your Customer (KYC) details of individuals and entities that have been collected by financial institutions during the account opening process. The CKYCR allows financial institutions to access the KYC information of customers who have been onboarded by other institutions. This eliminates the need for customers to submit KYC details multiple times and reduces the burden on financial institutions.

Obligations of Reporting Entities

Reporting entities are organizations that are required to comply with the Prevention of Money Laundering Act, 2002 (PMLA). Reporting entities include banks, financial institutions, intermediaries, and other entities that are engaged in financial activities. Section 12, 12A, and 12AA of the PMLA describe the obligations of reporting entities. These obligations include:

• Maintaining records of documents evidencing the identity of clients and beneficial owners as well as account files and business correspondence relating to clients.
• Identifying the beneficial owner of clients, if any.
• Taking additional steps as may be prescribed to record the purpose behind conducting the specified transaction and the intended nature of the relationship between the transaction parties.
• Where any specified transaction or series of specified transactions undertaken by a client is considered suspicious or likely to involve proceeds of crime, the reporting entity shall increase the future monitoring of the business relationship with the client, including greater scrutiny of transactions in such manner as may be prescribed.
• Reporting entities must also perform a certain level of due diligence before indulging in any client transaction.

The CKYCR helps reporting entities to fulfill their obligations by providing a centralized database of KYC information that can be accessed by multiple institutions.

Impact of Central KYC Records Registry on Reporting Entities

The CKYCR has had a significant impact on reporting entities in India. By providing a centralized database of KYC information, the CKYCR has eliminated the need for customers to submit KYC details multiple times. This has reduced the burden on reporting entities and has made the account opening process faster and more efficient.

The CKYCR has also helped reporting entities to comply with their obligations under the PMLA. By providing access to KYC information collected by other institutions, reporting entities can perform due diligence more effectively. This has helped to reduce the risk of money laundering and terrorist financing.

Furthermore, the CKYCR has helped to improve the accuracy of KYC information. Since customers are not required to submit KYC details multiple times, there is less chance of errors or inconsistencies in the information provided. This has helped reporting entities to perform due diligence more effectively and has reduced the risk of financial crimes.

Conclusion

The Central KYC Records Registry is a tool that has been created by the Government of India to enable better customer due diligence by financial institutions. By providing a centralized database of KYC information, the CKYCR has eliminated the need for customers to submit KYC details multiple times, reduced the burden on reporting entities, and made the account opening process faster and more efficient. The CKYCR has also helped reporting entities to comply with their obligations under the PMLA by providing access to KYC information collected by other institutions. This has reduced the risk of money laundering and terrorist financing and has improved the accuracy of KYC information.

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