The objective of the KYC guidelines is to prevent identity theft, financial fraud, money laundering and terrorist financing. Money laundering is the process of concealing the source of money usually obtained through illegal sources such as drugs and arms trafficking, terrorism, extortion and theft.
KYC or Know your Customer: is the regular process undertaken by Banks/Mutual Funds whereby the identity of an investor is verified based on written details submitted by him/her on a form, supplemented by an In Person Verification (IPV) process. Once the verification is successfully completed, the relevant investor data is entered into the KRA Registration Agency (KRA) system and subsequently uploaded to their database.
Central Know Your Customer (CKYC) is an initiative of the India Government where a centralized registry of KYC records of customers in the financial sector is maintained. The objective of the initiative is to have a structure in place that allows investors to complete their KYC only once, thereby reducing the burden of producing KYC documents every time a new investment is made with various entities, CKYC is managed by CERSAI (Central Registry for Securitisation Asset Reconstruction and Security Interest of India).