The Reserve Bank of India (RBI) has issued certain and important guidelines to follow in order to improve customer protection against ongoing and rising to Know Your Customer (KYC) frauds. Customers have been suffering victim to scams conducted in the guise of KYC updation, according to data received by RBI. Regarding KYC fraud, RBI has said in a statement issued on 13th September 2021 that "The usual modus operandi in such cases include receipt of unsolicited communication, such as, calls, SMSs, emails, etc., by customer urging him/her to share certain personal details, account / login details/ card information, PIN, OTP, etc. or install some unauthorised/ unverified application for KYC updation using a link provided in the communication. Such communications are also reported to carry threats of account freeze/ block/closure."
By advising banking customers the apex bank went on to say that "Members of public are hereby cautioned not to share account login details, personal information, copies of KYC documents, card information, PIN, password, OTP, etc. with unidentified persons or agencies. Further, such details should not be shared through unverified/unauthorised websites or applications. In case they receive any such requests, customers are requested to get in touch with their bank/branch."
RBI has also declared that "It is also clarified that while the Regulated Entities (REs) are required to undertake periodic updation of KYC, the process of periodic updation of KYC has been simplified to a large extent vide circular dated May 10, 2021. Further, vide circular dated May 5, 2021, REs have been advised that in respect of customer accounts where periodic updation of KYC is due and pending as on date, no restrictions on operations of such account shall be imposed till December 31, 2021, for this reason alone, unless warranted under instructions of any regulator/ enforcement agency/court of law, etc."
RBI cautions against frauds in the name of KYC updationhttps://t.co/rg6eEb56h5— ReserveBankOfIndia (@RBI) September 13, 2021
Furthermore, according to the annual report (2020-2021) of RBI, the Department of Supervision (DoS) has mentioned that "The Department will further strengthen the process of collecting supervisory data relating to KYC/anti money laundering (AML) which would facilitate better risk discovery, risk assessment and risk based supervision (RBS) processes in respect of KYC/AML supervision, and the preparation of a model to risk profile the banks for carrying out risk-based KYC/ AML inspection."
DoS has also added that "As part of their internal governance structure, banks are required to have a sound risk management strategy for addressing the KYC/ AML risks. The Reserve Bank, on the lines of recommendations of Financial Action Task Force (FATF), has developed RBA for supervision from KYC/AML perspective. A model for generation of risk scores, based on the KYC/AML data submitted by the banks, has also been developed. A specialised on-site assessment is also being carried out for select banks based on their KYC/ AML risk scores/rating. RBA will facilitate better risk-discovery and improved risk-assessment besides effectively addressing and mitigating the money-laundering and terrorist financing risks in the banking sector."
The guidelines issued by RBI must be followed by Indian banking customers not to become a victim of KYC fraud. A simple mantra is not to share your confidential or personal details with anyone. Banks and Indian government or private institutions never ask you to share your personal details for KYC updation or to complete any other banking-related tasks. If someone is calling or texting you from an unknown number and asking you for your personal credentials simply report the fraudster at Cyber Crime portal (https://cybercrime.gov.in/).