KYC (Know Your Customer)

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What is Know Your Customer (KYC)?

Know Your Customer (KYC) refers to the policies and procedures put in place by businesses to manage risk and verify the identities of customers, clients and suppliers.

KYC processes are particularly relevant to the financial industry, ensuring compliance with national and international regulations targeting criminal activity such as money laundering, terrorism financing, fraud and corruption.

Therefore, KYC compliance is about customer due diligence.

  • Researching company data and investigating senior executives and directors.
  • Verifying the individual or company doesn't appear on any sanctions lists or watchlists.
  • Checking the individual isn't listed as a politically exposed person (PEP), potentially opening them up to corruption or bribery.

To achieve KYC compliance, banks and other financial services companies need to have in place stringent KYC policies incorporating the following four key elements:

  • A customer acceptance policy: The criteria for determining whether a customer or client can be accepted to open an account – or if the level of risk requires additional due diligence.
  • Risk management: The criteria for classifying customers as low, medium or high risk.
  • A Customer Identification Program: The verification of documents to effectively know your customer.
  • Ongoing monitoring: Monitoring of client or customer accounts for any unusual or unexpected financial transactions that might require their risk profile to be reassessed.