Not just KYC, banks should also know their employees: CVC vigilance manual

Banks should not only adhere to Know Your Customer (KYC) norms but also on ‘Know Your Employee’ to check frauds, says the recently-released vigilance manual by the CVC.

“Several frauds are insider jobs or perpetrated with the abetment of insiders. Banks have to take extra care to have continuous vigil on their staff,” it said.

The techniques of background check for antecedents, periodic rotations, vigilance assessments, internal audits, etc. have to be effectively employed to know the employees better, the CVC said suggesting the need of the “Know Your Employee (KYE)” and “Know Your Partner (KYP)” norms.

It said modern day banking necessitates to work in hand with partners, agents and vendors, etc besides outsourcing, peripheral and several operational activities involve deploying and trusting outside agency’s employees.

“Varied activities as diverse as cash logistics to IT and data management are being entrusted to third parties. Banking Correspondents and Banking Facilitators are emerging as another set of persons closely associated with a bank.

“If frauds are to be prevented, banks should have appropriate mechanism to screen their partners,” the manual said.

Due diligence on other professionals like Chartered Accountants, valuers and advocates involved in the loan assessment and sanctioning processes is also an essential safeguard, said the …read more