Date: 11/25/2014

KYC Banking Rules:

KYC is an acronym for Know your Customer, a term used for customer
identification process. It involves making reasonable efforts to determine true
identity and beneficial ownership of accounts, source of funds, the nature of
customers business, reasonableness of operations in the account in relation to
the customers business, etc. which in turn helps the banks to manage their risks
prudently. The objective of the KYC guidelines is to prevent banks being used,
intentionally or unintentionally by criminal elements for money laundering.
KYC policies incorporating the following four key elements:
Customer Policy;
Customer Identification Procedures;
Monitoring of Transactions; and
Risk management.
KYC follows laws by country:
USA:
The Secretary of the Treasury was required to finalize regulations before
October 26, 2002 making KYC mandatory for all US banks. The related
processes are required to conform to a customer identification program (CIP)
A Customer Identification Program (CIP) is a United States requirement,
where financial institutions need to verify the identity of individuals wishing to
conduct financial transactions with them and is a provision of the USA Patriot
Act. More generally known as know your customer the CIP requirement was
implemented by regulations in 2003, which require US financial institutions to
develop a CIP appropriate to the size and type of its business. The CIP must be
incorporated into the bank's Bank Secrecy Act/Anti-money laundering
compliance program, which is subject to approval by the financial institution's
board of directors.
The CIP is intended to enable the bank to form a reasonable belief that it
knows the true identity of each customer. The CIP must include new account
opening procedures that specify the identifying information that will be obtained
from each customer. It must also include reasonable and practical risk-based
procedures for verifying the identity of each customer. Financial institutions
should conduct a risk assessment of their customer base and product offerings,
and in determining the risks, consider:
The types of accounts offered
The methods of opening accounts.
The types of identifying information available
The institution's size, location, and customer base
AML Banking Regulations:

Money laundering is the process of making illegally gained proceeds (i.e.

"dirty money") appear legal (i.e. "clean"). Typically, it involves three steps:
placement, layering and integration.
First, the illegitimate funds are furtively introduced into the legitimate financial
system. Then, the money is moved around to create confusion, sometimes by
wiring or transferring through numerous accounts. Finally, it is integrated into
the financial system through additional transactions until the "dirty money"
appears "clean." Money laundering can facilitate crimes such as drug
trafficking and terrorism, and can adversely impact the global economy.
In order to stop money laundering, government has created the act in 1986
and 1994, which I have mentioned below:
Money Laundering Control Act (1986)
Established money laundering as a federal crime
Prohibited structuring transactions to evade CTR filings
Introduced civil and criminal forfeiture for BSA violations
Directed banks to establish and maintain procedures to ensure and
monitor compliance with the reporting and recordkeeping requirements
of the BSA
Money Laundering Suppression Act (1994)
Required banking agencies to review and enhance training, and
develop anti-money laundering examination procedures
Required banking agencies to review and enhance procedures for
referring cases to appropriate law enforcement agencies
Streamlined CTR exemption process
Required each Money Services Business (MSB) to be registered by an
owner or controlling person of the MSB
Required every MSB to maintain a list of businesses authorized to act
as agents in connection with the financial services offered by the MSB
Made operating an unregistered MSB a federal crime
Recommended that states adopt uniform laws applicable to MSBs

References:
http://en.wikipedia.org/wiki/Know_your_customer
https://www.db.com/en/media/Deutsche_Bank_Group_-_Anti_Money_Laundering_Policy.pdf
http://www.ffiec.gov/bsa_aml_infobase/documents/bsa_aml_man_2010.pdf
http://www.irs.gov/Businesses/International-Businesses/List-of-Approved-KYC-Rules

http://www.rbi.org.in/scripts/FAQView.aspx?Id=82