CKYC 2.0 a work in progress, to prevent KYC-related fraud: Sources

The government is working on CYKYC 2.0, an upgraded version of the government’s central repository of KYC or Know Your Customer records, Zee Business learned from sources. The development assumes significance as the Reserve Bank of India (RBI), the country’s banking regulator, has flagged the existing centralised KYC system, called CKYC or C-KYC, as “high-risk”, prompting a revaluation of its functioning and existing processes. 

CKYC is a system that facilitates and steamlines the onboarding of new clients for banks and other financial institutions. 

Under the new system, data of the exiting CKYC model will be migrated to Central KYC Records Registry 2.0 in a move aimed at strengthening the CKYCRR 2.0 financial system, according to the sources. 

In the existing CKYC system, multitudes of data entries are either incorrect or outdated, which several commercial banks and regulated entities find unreliable or untrustworthy. Alternatively, the use of solutions like video KYC, doorstep KYC and DigiLocker increases the costs for regulated entities, according to the sources.

The use of existing CKYC data also poses the risk of money laundering, they added. 

The CKYC was aimed at ensuring that regulated entities could use centralised KYC data in a seamless and reliable manner, but that did not work out as planned.  

The Central Registry of Securitisation Asset Reconstruction and Security Interest (CERSAI) - which maintains a registry of all security interests created on movable and immovable properties by borrowers to secure loans granted by financial institutions - is responsible for building CKYCRR 2.0, aimed at preventing fraud and strengthening the security system. 

The central online registry, CERSAI floated a tender for CKYCRR 2.0 from February to May this year. 

CKYCRR 2.0 data will be made accessible by every citizen for their KYC records.

Any attempt to use or update the data by regulated entities will be reported to the customer through mail or message, in a bid to prevent misuse. 

The CKYCRR 2.0 platform will also enable a complaint redressal mechanism to record reports of misuse filed by customers. CKYCRR 2.0 will also detect any mismatch in the customer’s basic details, such as name and address, in the officially valid documents. It will be able to flag any instance of a regulated entity’s customer being engaged in a fraud, according to the sources. 

What is KYC?

KYC - also known as Know Your Customer or Know Your Client - is a process through which businesses verify the identity of their clients or customers in order to prevent fraud, money laundering, terrorism financing, and other illegal activities. 

KYC procedures typically involve collecting personal information and verifying it against reliable and independent sources, such as government-issued identification documents (like passports or driver's licenses) and utility bills.