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KYC / AML
Banking / Economy Awareness · Banking System & RBI
Useful for: IBPS Banking
Overview
Know Your Customer rules verify identity and address; anti-money-laundering rules require monitoring and reporting of suspicious transactions.
Key points
- Officially valid documents include passport, driving licence, Aadhaar, voter ID, NREGA job card and NPR letter.
- Prevention of Money Laundering Act, 2002 (PMLA) is the main law.
- Banks report suspicious transactions (STR) and large cash transactions (CTR, over ₹10 lakh) to FIU-IND.
- KYC is updated periodically based on customer risk.
- Video-based Customer Identification Process (V-CIP) allows remote KYC.
Explanation
- Customers are classified as low, medium or high risk.
- Beneficial owners of companies must be identified.
- Small accounts have simplified KYC with limits.
- Never share KYC documents through unverified links.
Step by step
- Identify the institution, rule or instrument asked.
- Recall its definition, year, limit or function from a table.
- Eliminate options from similar institutions or older rules.
Examples
- The law against money laundering → PMLA, 2002.
- Banks report suspicious transactions to → FIU-IND.
- Remote video-based KYC is called → V-CIP.
Traps and advanced points
- Trap: Thinking PAN alone is always enough.
- Trap: Reporting STRs to RBI instead of FIU-IND.
- Trap: Sharing documents by unknown links.
Quick revision
- OVD list.
- PMLA 2002; FIU-IND.
- CTR > ₹10 lakh cash.
Practice MCQs
In banking/finance, what does “credit score” refer to most accurately?
- price of one currency in terms of another
- summary indicator derived from credit-history data
- interest calculated on principal plus accumulated interest
- Real Time Gross Settlement
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Answer: (b) summary indicator derived from credit-history data. Banks use it with income, obligations and policy criteria; it is not the sole lending criterion.
The main anti-money-laundering law in India is the —
- RBI Act
- IBC
- PMLA, 2002
- FEMA, 1999
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Answer: (c) PMLA, 2002. PMLA.
Suspicious transaction reports are sent to —
- FIU-IND
- SEBI
- NPCI
- NABARD
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Answer: (a) FIU-IND. Financial Intelligence Unit.
Cash transaction reports cover cash transactions over —
- ₹5 lakh
- ₹10 lakh
- ₹50 lakh
- ₹1 lakh
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Answer: (b) ₹10 lakh. ₹10 lakh.
Which is an officially valid document for KYC?
- passport
- library card
- school ID only
- gym card
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Answer: (a) passport. Also Aadhaar, voter ID, driving licence.
KYC is updated periodically based on —
- branch size
- customer risk
- customer age only
- bank holidays
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Answer: (b) customer risk. Risk-based.
STR stands for —
- Suspicious Transaction Report
- Standard Tax Return
- Secure Transfer Receipt
- Savings Total Record
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Answer: (a) Suspicious Transaction Report. STR.
CTR stands for —
- Cash Transaction Report
- Credit Transfer Record
- Customer Tax Return
- Cheque Truncation Rule
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Answer: (a) Cash Transaction Report. CTR.
The purpose of KYC is to —
- sell products
- reduce staff
- verify customer identity and prevent misuse
- increase fees
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Answer: (c) verify customer identity and prevent misuse. Identity verification.
An NREGA job card can be used as —
- a passport
- an officially valid document
- a credit card
- a cheque
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Answer: (b) an officially valid document. OVD list.
More topics in this chapter
Notes and questions are written by Kundali IQ for practice. They are not official papers; always check the latest official notification for the syllabus and pattern.