In this tech-centric world, where massive amounts of data and digital transactions are conducted daily, the number of organisations that require KYC verification is growing as time goes by. It has already been a long-time requirement for financial institutions to comply with the KYC/AML regulations. Security and protection are paramount, especially when thieves, scammers, and hackers have also multiplied.
As a business owner, you must have a clear understanding of this procedure to ascertain if this is a service that your company needs. Let’s take an in-depth look at this process, so you don’t feel like you are navigating uncharted grounds.
KYC simply stands for “Know Your Customer.” It is a process of verifying the identity of your customer. In order to participate in whatever company activity, each person is supposed to pass the KYC procedure and provide the right credentials. This is a necessary and crucial measure to ascertain that you are engaged in transactions with legitimate and verified entities. These defining standards are preventive measures that deter fraudulent activities, especially now with the extensive use of the Internet and new technologies.
How Does It Work?
KYC is identifying and verifying your customer based on a set of safety measures and protocols so you can avoid having transactions with corrupt people, engaged in money laundering, related to terrorism, and the like. The process involves making sure that your clients are actually who they say they are before giving them access to your products and services. Verification is carried out through different methods, so the user who wants to engage in business with your company can demonstrate legal and binding evidence that certifies the veracity of the client’s identity.
One example is a client will show the scanned copy of a government-issued ID like a passport or driver’s license. Then a selfie holding this document must be taken and later submitted. This method may seem tedious, but it prevents a fake identity from being used, and it deters the creation of duplicate accounts. Some companies that have stringent policies also require other documents that confirm the address.
Another method is video identification via streaming or video conferencing. The client shows his pertinent documents, proves authenticity vis-a-vis facial recognition. At times, other biometrics and security checks are added. Note that the Know Your Customer process can be conducted online or in-person at your office.
Global KYC Regulations
Laws and regulations vary across countries and jurisdictions, so KYC/AML regulations differ depending upon the country. But in general, regulatory requirements exist for banking and insurance companies. These requirements are in place because financial institutions face a lot of risks. They are susceptible to attacks from hackers and are frequent targets for online fraud. They could also fall prey to terrorist financing and money laundering. As for non-financial organisations, there is no legal obligation to comply with this, but as a business owner, it is in your best interest to conduct integrity screening so you can really say you “know your customers.”
KYC will help ensure the transparency of your transactions, and it will prevent scammers from participating in your projects, mitigating malicious intent. It will combat criminal activities like money laundering and provide additional safeguards to protect your investments. With KYC systems in place, you will boost your company’s reputation, and most of all, you will establish credibility with your financial partners.