KYC Interview Questions and Answers (Basic to Expert)

Basic to Expert-Level KYC Interview Questions and Answers

This detailed list covers frequently asked KYC (Know Your Customer) interview questions across levels. It’s organized from beginner to expert level and tailored for candidates preparing for banking, NBFC, fintech, and compliance roles.

✅ Easy Level (Beginner)

Question 1: What is KYC? Why is it important?
Answer: KYC stands for Know Your Customer. It is important because it helps prevent fraud, money laundering, and financial crime by verifying customer identity.

Question 2: What documents are collected for KYC?
Answer: PAN card, Aadhaar card, passport, voter ID, driving license, utility bill, or bank statement.

Question 3: What is the difference between KYC and AML?
Answer: KYC verifies customer identity. AML (Anti-Money Laundering) is broader and includes detecting and reporting suspicious activity. KYC is part of AML.

Question 4: What is CDD?
Answer: Customer Due Diligence – the process of assessing customer identity and risk level before onboarding.

Question 5: Give examples of ID proof and address proof.
Answer: ID: PAN card, passport. Address: Aadhaar card, electricity bill, rental agreement.

Question 6: Why is a PAN card important in KYC?
Answer: It verifies identity and helps track financial transactions to prevent tax evasion.

Question 7: When is KYC required?
Answer: At account opening, during periodic reviews, and for large or suspicious transactions.

Question 8: How is Aadhaar used in KYC?
Answer: Aadhaar enables quick e-KYC verification using UIDAI APIs.

Question 9: What is the full form of AML and CDD?
Answer: AML – Anti-Money Laundering, CDD – Customer Due Diligence.

Question 10: Who regulates KYC in India?
Answer: RBI, SEBI, IRDAI, and PFRDA.

✅ Medium Level (Intermediate)

Question 11: What is the difference between CDD and EDD?
Answer: CDD is basic due diligence for low/medium-risk customers. EDD (Enhanced Due Diligence) is for high-risk customers requiring deeper checks.

Question 12: How do you verify a customer’s identity?
Answer: Check official ID, match name/photo/address with submitted documents and databases.

Question 13: What is a periodic KYC review?
Answer: A routine process (every 1–3 years) to re-verify customer details and update risk profiles.

Question 14: What if a customer fails KYC verification?
Answer: Their account can be blocked, frozen, or closed until updated information is provided.

Question 15: What is a red flag in KYC?
Answer: Examples: fake ID, unverifiable address, suspicious behavior, links to high-risk countries.

Question 16: How are Politically Exposed Persons (PEPs) handled?
Answer: PEPs undergo EDD, require senior management approval, and ongoing monitoring.

Question 17: Explain the customer onboarding process.
Answer: Collect documents → verify identity → assign risk → get approvals → open account.

Question 18: How to handle incomplete documents?
Answer: Ask customer to resubmit or provide alternatives. Escalate if not resolved.

Question 19: Difference between retail and corporate KYC?
Answer: Retail: PAN, Aadhaar. Corporate: company registration, UBO, board resolution.

Question 20: Which tools are used in KYC verification?
Answer: LexisNexis, WorldCheck, Actimize, Amlock, in-house systems.

✅ Advanced Level

Question 21: What are the key risks of weak KYC practices?
Answer: Fraud, regulatory fines, reputational damage, and involvement in financial crimes.

Question 22: How is EDD performed?
Answer: Collect source of funds, background checks, site visits, senior-level review.

Question 23: What is a Suspicious Transaction Report (STR)?
Answer: A report filed to FIU-IND when suspicious behavior or unusual transactions are detected.

Question 24: How does FATF affect KYC regulations?
Answer: FATF provides global AML standards. Banks must follow to avoid penalties or greylisting.

Question 25: What is the 3 lines of defense model?
Answer: 1st line: Operations, 2nd line: Compliance/Risk, 3rd line: Internal Audit.

Question 26: What are sanctions?
Answer: Restrictions on entities/persons by governments. Banks use screening tools to detect them.

Question 27: How to detect shell companies?
Answer: Look for no real operations, complex ownership, vague addresses.

Question 28: How to manage high-risk jurisdictions?
Answer: Apply EDD, enhanced monitoring, and get senior management approval.

Question 29: Steps to escalate a suspicious case?
Answer: Document issue → inform compliance → submit STR → monitor regularly.

Question 30: How is FATCA/CRS compliance maintained?
Answer: Collect tax information, W-9/CRS forms, and report to tax authorities.

✅ Expert Level (Senior/Leadership)

Question 31: How do you design a risk-based KYC framework?
Answer: Segment customers by risk levels, assign controls (CDD/EDD), automate monitoring, and perform regular reviews.

Question 32: What challenges exist in automating KYC?
Answer: Data standardization, system integration, regulatory updates, high false positives.

Question 33: How do you ensure global compliance?
Answer: Align policies with FATCA, GDPR, OFAC, and update based on jurisdictional laws.

Question 34: What does a KYC audit involve?
Answer: Review samples, identify policy gaps, evaluate compliance, and issue findings.

Question 35: Have you identified systemic issues?
Answer: Yes, e.g., missing UBO data across profiles. Solved by SOP update and team training.

Question 36: How to prevent KYC breaches?
Answer: Conduct training, enforce SOPs, perform quality checks, and report gaps early.

Question 37: How do you manage regulatory audits/inquiries?
Answer: Prepare documentation, respond timely, and ensure transparency.

Question 38: Which KYC metrics/KPIs are important?
Answer: Turnaround time, overdue files, review accuracy, red flags cleared.

Question 39: How do you train your compliance team?
Answer: Use real-world cases, regular refreshers, policy updates, quizzes, and feedback sessions.

Question 40: Experience with screening tools?
Answer: Hands-on with WorldCheck, Dow Jones, LexisNexis for PEP, sanctions, adverse media screening.

Tip: Always stay updated with RBI, FATF, and FIU-IND guidelines. Tailor your answers with examples if you're attending interviews.

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