KYC (Know Your Customer) today is a significant element in the fight against financial crime and money laundering, and customer identification is the most critical aspect as it is the first step to better perform in the other stages of the process.
The global anti-money laundering (AML) and countering the financing of terrorism (CFT) landscapes raise tremendous stakes for financial institutions.
International regulations influenced by standards like The Financial Action Task Force (FATF) are now implemented in national laws encompassing strong directives like AML 4 and 5 and preventive measures like “KYC” for client identification.
KYC means Know Your Customer and sometimes Know Your Client.
KYC or KYC check is the mandatory process of identifying and verifying the client’s identity when opening an account and periodically over time.
In other words, banks must make sure that their clients are genuinely who they claim to be. Banks may refuse to open an account or halt a business relationship if the client fails to meet minimum KYC requirements.
KYC procedures defined by banks involve all the necessary actions to ensure their customers are real, assess, and monitor risks. These client-onboarding processes help prevent and identify money laundering, terrorism financing, and other illegal corruption schemes.
KYC process includes ID card verification, face verification, document verification such as utility bills as proof of address, and biometric verification. Banks must comply with KYC regulations and anti-money laundering regulations to limit fraud. KYC compliance responsibility rests with the banks. In case of failure to comply, heavy penalties can be applied.