June15 , 2024

    The Relevance of KYC Compliance; Identifying Customers in Businesses


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    What is Know Your Customer (KYC) verification?

    “Know Your Customer (KYC) requirements are a set of standards used to identify customers that the company deals with.”

    Online KYC verification helps prevent illegal processes such as corruption, false incorporations, bribery and money laundering, scams, and more defuse. Predict fraud and track customers. According to government guidelines, all companies must comply with the KYC standards set so far, which helps companies ensure secure customer onboarding and prevent fraudsters. These provide adequate information about customers, including the risks they pose and, more importantly, their financial situation.

    KYC in the financial sector

    KYC is a Customer Due Diligence (CDD) approach used by the banking sector and other financial institutions to monitor customer activities and anticipate risks. The KYC requirements for banks relate to the guarantee of authentic incorporation, which is done by asking customers for credentials that will be their proof of identity. That can be an ID card, face, and document verifications along with credit card and utility billing address for whereabout authentication. Anti-Money Laundering (AML) compliance is another requirement for businesses.

    Verification of KYC Documents

    The photo, full name, residential and official address, date of birth, employment letter, and nationality are all extracted from the uploaded documents requested by companies for client KYC verification.

    Proof of Individual Identity (POI)

    Documents used for verification vary depending on the company’s needs, but some generic documents accept almost every industry.

    • Passport
    • Driving License
    • Credit or Debit Card Details

    Proof of Address (POA)

    These documents and identity verification to ensure KYC compliance online are listed above, while those used for address verification are listed below; both should be no more than three months old.

    • Rental Agreement
    • Insurance Papers
    • Utility Bills
    • Bank Statements
    • Employment Letter
    • Tax Paid Bills

    Shift From Visual to EKYC

    How will businesses know if they are dealing with a genuine customer if the customer is not physically present?

    To meet the imposed obligations, businesses must implement KYC online verification, first to identify customers and ensure convenience, and secondly, to protect the respective company systems from fraudsters. To that end, online tools are available to assist businesses, particularly those in the financial sector.

    For those who are not evolved with the technology, this verification carries simply paper-based forms. Whereas, the majority of the businesses have been using digital processes that genuinely and authentically identify customers.

    Components Of KYC

    These are the three components of Know Your Customer (KYC) are;

    • KYC forecasts risk by ensuring Customer Due Diligence.
    • Identity verification in real-time
    • Continuous monitoring examines the client’s activities to determine whether they are legitimate or fraudulent.

    Know Your Customer (KYC) Verification Benefits

    The online document verification of customers is the need of the hour which fulfills the AIbacked tools that identify clients in real-time and that so within seconds. Customers are the backbone of any industry, and keeping their information safe and secure is paramount. The tools used to scan the customer’s documents and carry out the analysis by comparing the information in the databases. Verification is nothing new, it’s been around since the inception of the first company, albeit in a physical form that required a lot of human effort and a higher risk of error. Online verification has minimized the hassle and effort required by replacing the human eye with a camera and physical verification with OCR.

    Key Notes

    KYC has far-reaching implications for businesses and customers. Businesses, according to regulators’ guidelines, must comply with the standards in order to move forward. Financial institutions are the ones who need this verification most to ensure customer safety. Onboarding along with protecting your information and preventing fraudulent breaches. The standards help to overcome issues like money laundering, corruption, false accounts, illicit gains, terrorist financing, and other illegal activities.

    Have you ever been on the receiving end of a call and wondered, “Check out Whose number is this calling me?” Have you ever been in a situation where an unknown number continuously contacted you and bothered you while you were at work? For some people, this may not be a big matter, and they may ignore such calls, but for others, it may be concerning. You are allowed to ignore an unknown call once, but not twice or three times.