KYC
What is Know Your Customer (KYC)?
Know Your Customer (KYC) or Know Your Customer is the name given to all of the identity, document and biometric recognition processes applied to an individual who interacts with the institution for the first time. KYC is an important and necessary element in the fight against financial crime and money laundering today, and is critical as it is the first step to better performance in other aspects of the organization such as customer verification, and digital service delivery.
Tackling the global anti-money laundering (AML) and financing of terrorism (CFT) landscape is of paramount importance, especially for financial institutions. International regulations influenced by standards such as the Financial Action Task Force (FATF) are now also enforced, including strong directives such as AML 4 and 5, and preventive measures such as "KYC" for customer identification.
Why is the KYC process important?
KYC procedures defined by banks include all necessary processes to make sure their customers are genuine, to assess and monitor risks. These processes help prevent and identify money laundering, terrorist financing, and other illegal corruption schemes.
The KYC process includes identity card verification, face verification, document verification such as invoices as proof of address, and biometric verification.
Banks must comply with KYC regulations and anti-money laundering regulations to limit fraud. KYC compliance responsibility belongs to banks (institutions).
Failure to comply with this may result in heavy penalties.
In the US, Europe, the Middle East and Asia Pacific, $26 billion in fines have been collected over the past decade (2008-2018) for non-compliance with AML, KYC and sanctions.
Documents Required for KYC
KYC checks are done through an independent and reliable source of documents, data or information. Each customer is required to provide credentials to prove identity and address.
In May 2018, the US Financial Crimes Protection Network (FinCEN) added a new requirement for banks to verify the identity of natural persons of clients of legal entities that own, control and generate profits from companies when these organizations open accounts.
Note: When a company opens a new account, it will be required to provide Social Security numbers for its employees, board members, and shareholders, along with a photo photo ID and a photocopy of the passport
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