Reserve Bank of India (RBI) has issued a notification dated 09th January 2020, officially recognizing the Video-Based Customer Identification Process (VCIP) as a method of customer identification. This comes as a welcome relief to Banks and other Regulated Entities (RE), which fall under the regulatory purview of RBI, seeking an alternative to other recognized KYC solutions. This process enables presence-less customer onboarding by banks and other entities.
Master Direction- Know Your Customer Direction
The Know Your Customer Direction, notified by RBI and updated from time to time, is issued under the Prevention of Money Laundering Act, 2002 (PMLA). The said Master Direction mandates the Regulated Entities to follow certain Customer Identification Procedure, for undertaking transactions and establishing an Account-Based relationship.
Prior to this amendment, in addition to the traditional process for Customer Identification, Aadhaar-based KYC Authentication was the only online mode available to Regulated Entities under the RBI Master Direction. The said Aadhaar online KYC authentication (OTP-based) process had the following drawbacks-
- For account-opening, such a process can be used for opening a deposit account of less than Rs.1,00,000/- (Rupees One Lakh Only).
- For Borrowal Account only Term Loan can be sanctioned for an amount less than Rs.60,000/- (Rupees Sixty Thousand Only).
- Such an account shall not be allowed for a period of more than 1 year.
In the month of September 2018, by a mammoth 1448 page Judgment, the Hon’ble Supreme Court of India restricted the operation of Section 57 and held the use of Aadhaar Authentication by Private Entities to be unconstitutional.
In the month of May 2019, Offline Verification using Aadhaar was introduced as a method of customer identification for customers of Regulated Entities by RBI, through the method of an amendment to the Master Direction to KYC.
The said amendment notification brought about the following changes-
- Banks were allowed to carry out Aadhaar Authentication/Offline Verification of Individuals with consent.
- Proof of Possession of Aadhaar Number, in a form specified by UIDAI, was identified as Officially Valid Document.
- RE, other than Banks, were to identify a customer solely through offline verification under the Aadhaar Act with his/her consent.
- In case OVD furnished by the client did not contain an updated address, certain deemed OVDs for the limited purpose of proof of address can be submitted provided that the OVD updated with the current address is submitted within 3 months.
- The Regulated Entities shall ensure that the customers (Non-DBT beneficiaries) while submitting Aadhaar for Customer Due Diligence, redact or blackout their Aadhaar number
Prevention of Money-laundering (Maintenance of Records) Third Amendment Rules, 2019.
In the month of August 2019, The Ministry of Finance released the Prevention of Money Laundering (Maintenance of Records) Third Amendment Rules,2019. The aforesaid amendment introduced the concept of Digital KYC and defined Digital KYC as the following-
“Digital KYC” means capturing live photo of the customer and officially valid document or the proof of possession of Aadhaar, where offline verification cannot be carried out, along with the latitude and longitude of the location where such live photo is being taken by an authorized officer of the RE as per the provisions contained in the Act.
The said procedure was not completely digital in nature as it involved manual procedure of printing the Digitally signed (Customer Application Form) CAF and physical signature of the customer on the same. It also envisaged the customer’s physical presence in the Regulated Entities’ office or vice versa.
Video-Based Customer Identification Process (VCIP RBI)
“Video-Based Customer Identification Process (VCIP)” a method of customer identification by an official of the RE by undertaking a seamless, secure, real-time, and consent-based audio-visual interaction with the customer, to obtain identification information including the documents required for Customer Due Diligence purpose, and to ascertain the veracity of the information furnished by the customer. Such a process shall be treated as a face-to-face process (the equivalent of OSV – Originally Seen and Verified process) for the purpose of this Master Direction.”
How does it work?
The process envisaged by the latest amendment is completely remote –
- For Banks intending to use VCIP RBI, it is mandatory that customer Identification is done by way of Aadhaar Authentication Only, either online or offline.
- For Regulated Entities, it is mandatory that customer identification is undertaken by way of offline verification of Aadhaar only.
- In either of the aforesaid cases, capturing PAN Card is mandatory, and PAN authentication is to be carried out by the issuing authority.
- Audio- Visual interaction is to be held between the official of RE and the customer.
- A series of questions in random order need to be posed to the customer by RE to ensure the liveness of the recording during the video call.
- The video call should be initiated from the domain of the entity.
- Facial matching of the face in the PAN Card/Aadhaar with the face in the video is to be ensured.
The Amendment notification further mandates geo-tagging for ensuring that the customer is from India, obtaining customer consent before initiation of interaction, recording of audio-visual interaction, and storage of the audiovisual interaction. The amendment notification recommends the usage of face matching and Artificial Intelligence to make the system foolproof.
Benefits of VCIP RBI
Banks and NBFC now have an option to remotely authenticate and identify customers, and fulfill the OSV requirement remotely, without the presence of the customer. The amendment notification clarifies that this form of Video-Based Customer Identification process would be treated as a face-to-face process for the purpose of Master Direction.
The UIDAI approved Aadhaar number is considered as the proof of validation, thus ensuring a safe and secure submission from the user.
How can we help
SignDesk offers Scan.it – a real-time, AI-based onboarding application to verify customers at their convenience, complying with the RBI VCIP guidelines. Using Scan.it, the user can submit KYC information through a live-video and the financial institution’s representative can verify and approve the document online.