The importance of KYC

What precisely is KYC?

The full form of the question is “Know Your Customer” or “Know Your Client”

KYC is a well-designed process that improves user safety and is required for any financial service. 

Its purpose is to assist organizations in identifying and verifying customers by maintaining customer due diligence and identity verification, thereby reducing the risk of unwanted illegal activity with people involved.  

KYC aids in the prevention of identity theft, money laundering, financial fraud, and other financial crimes as well as the creation of fake accounts and identity thefts based on forged or stolen documents. 

Financial institutions face challenges in preventing financial crime and must comply with a set of regulations for customer identity verification. 

KYC better identifies suspicious activity by first verifying a customer’s identity and intentions at the time of account opening, and then understanding their transaction patterns. 

Who needs KYC?

KYC is required for financial institutions that interact with customers during the account opening and maintenance of an account.  

Regardless of whether a business onboard a new customer or current customers both are required KYC. 

KYC should be applied to financial institutions; its purpose is to monitor customer risk and verify customers’ identity to ensure they are who they claim to be. 

KYC procedures help to prevent identity theft, money laundry and financial fraud, such as Banks, financial technologies (FinTech applications), Cryptocurrencies,  and other financial institutions must comply with KYC protocols. 

 KYC requirements are intended to combat Financial Crimes

Financial institutions require KYC in order to validate a customer’s identity and identify risk factors. 

To combat identity theft, money laundering, and financial fraud, current KYC procedures take a risk-based approach: 

Theft of Identity: KYC assists financial institutions in establishing legal proof of a customer’s identity. This can help to prevent fake accounts and identity thefts caused by forged or stolen identity documents. 

Money Laundering: KYC prevents, banks for example, from being used in criminal activities allowing banks to better understand their customers and financial dealings to reduce risks. 

Financial Fraud: KYC is intended to prevent fraudulent financial activities such as using fake or stolen IDs. 

 

KYC significance in Banks and Financial Institutions

KYC in financial institutions has strict procedures in place to ensure that their clients are not involved in money laundering or criminal organizations financing. 

KYC is a critical process for determining customer risk and whether the customer meets the requirements of the institution to use their services and ensuring that their customers are protected. 

Documents required to complete KYC Verification

Here are some lists of documents for Identity Proof

  • Passport 
  • Driving License 
  • Identity Cards issued by public Financial Institutions or Banks 
  • Identity Cards or documents issued by Regulatory  

Why does KYC matter in Compliance?

Banks and other financial institutions must comply with KYC regulations when implementing KYC procedures. 

It’s their responsibility to comply with the KYC, noncompliance can result in serious consequences. 

Regulatory protections emphasize the importance of customer identification and are primarily focused on the protection of personal data in AML. 

Streamlined Onboarding

KYC is an asset for your company because it allows you to attract new clients while also building trust and loyalty and increasing acceptance rates. 

The importance of KYC is in removing any risk of onboarding customers involved with money laundering, fraud, and other illegal activities  

KYC should not be a source of confusion; it is intended to improve security and help understand potential risks during the customer onboarding process. 

It’s time to capitalize and build potential customers, FACEKI is an excellent example of a KYC solution provider who can assist you in increasing the acceptance rate and reducing abandonment.