Everyone is familiar with the Know Your Customer Process, commonly used in banks or other financial institutions to open your account to access their services. But why need Re-KYC? Let’s understand it through an instance. A user inactive in various trading segments becomes a dormant account by the service provider. If the user wants to commence trading once again, they need to activate the segment through the Re-KYC online process. For example, the user can check the status in the segment section in the Zerodha App.
What is Re-KYC?
Re-KYC, or Re-Know Your Customer, is a process financial institutions use to update and verify the identity and information of their existing customers. It is essential for maintaining the accuracy of customer records, complying with regulatory requirements, and preventing fraud and money laundering. Re-KYC typically involves customers providing updated documents, personal information, and undergoing identity verification checks.
This periodic review ensures that the institution has the most current and accurate information about its clients, helping to assess and mitigate potential risks associated with customer accounts and transactions.
How to Perform the Re-KYC process?
When users need to update their KYC details, many top-notch service providers offer a digital way to automate the KYC modification without physical documents.
- Step-by-step method of Re-KYC Method
- Fill in your mobile number for client verification.
- An instant OTP will be sent to the registered number.
- The KYC process will proceed through Digi-Locker if the client status is dormant.
- The basic details of inactive customers will be fetched from the backend.
- The client can update their mobile, email, bank or address in case of any change.
- Bank validation will be done through Penny Drop; upload your documents if Penny Drop fails.
- The user can change email or mobile through OTP.
- So, client account modification can be completed in a very user-friendly manner.
How is ReKYC important for organizations and customers’ perspectives?
No doubt, Re-KYC process solution is a critical part of security measurement to protect your finance business against fraud, money laundering, and other criminal activities. Banks need to meet regulatory requirements and maintain compliance with financial regulations. These financial institutions must ensure to regulatory authorities that their customer details are up-to-date according to regulatory norms.
When customer information is up-to-date in the bank or finance database, they can set up rules and regulations based on their customer risk profile against fraudulent activities. On the other hand, it improves the image of the finance company, and their customers can enjoy their service with a better experience.
When Financial Institutions may need Re-KYC of their customers
Re-KYC is typically required under certain circumstances:
Regulatory Requirements: When regulations change or a customer’s profile undergoes significant changes, such as a change in address or legal status, Re-KYC is mandated to ensure compliance with updated rules.
Suspicious Activity: If a customer’s transactions raise suspicion of fraud or money laundering, the financial institution may initiate Re-KYC to validate the account’s legitimacy.
Periodic Review: Many institutions conduct periodic Re-KYC checks to maintain accurate customer records and enhance security.
Technology Upgrades: Upgrading security technology or implementing advanced identity verification systems may necessitate Re-KYC.
Data Breaches: In the event of a data breach, Re-KYC may be required to reestablish customer trust and prevent identity theft.
However, Re-KYC for any customer can help the RBI prevent illicit activities such as money laundering, terrorist financing, and other financial crimes.