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Know Your Customer (KYC) verification – a part of the Customer Due Diligence (CDD) process – has become the gold standard in regulatory compliance. It’s not just the financial industry that requires this process. With potential fines and reputational loss at stake, businesses everywhere must be actively working on verifying their customers properly. Due diligence will ensure they’re not doing business with anyone who could cause them legal trouble down the road. It’s vital to understand what KYC verification is, why it’s necessary, and how it fits into your company’s business processes. This guide will go over everything you need to know about KYC, including how it works and how to get started implementing it in your business operations.

What is KYC

Know Your Customer (KYC) refers to a customer identification process used in many industries. This practice requires companies to identify their customers, verify their identity, keep records of their transactions, and report suspicious activities. It helps combat financial crimes such as money laundering by ensuring that businesses know who they are conducting business with. KYC verification is one of the most crucial security procedures. 

Origins of KYC

KYC is a long-established practice in the financial services sector. The process first emerged in banking but has since become a staple in corporate operations as well. The term Know Your Customer originates from an Anti-Money Laundering (AML) regulation developed by the US Treasury Department in the 1990s. The law required financial institutions to verify their customers or conduct basic KYC compliance checks as part of their anti-money laundering efforts. Today, corporations must adhere to regulatory compliance through KYC verification. The concept of KYC stems from:

  • CIP (Customer Identification Policy) a United States requirement where financial institutions need to verify the identity of individuals wishing to conduct financial transactions with them and is a requirement of the USA Patriot Act.
  • Customer Due Diligence (CDD)  is a process that monitors the customer and their activities.
  • Enhanced Customer Due Diligence (ECDD) applies additional checks on a potential customer.

How does KYC fit into business processes?

While banks have long used KYC practices, they’ve grown exponentially more important in recent years as regulators have stepped up efforts to prevent money laundering. And unfortunately, their requirements can be challenging to keep up with—especially if you’re new to the business.

A thorough KYC verification procedure should be conducted each time you onboard a new customer. The process can include identifying information such as name, address, and identity document. Apart from that, a company should also check if the potential customer is on any sanction lists or isn’t a politically exposed person.

KYC measures are often met with resistance by clients. Sharing personal information with businesses, especially financial institutions, does not come easily to people who are wary of identity theft and data breaches. They worry about their data being sold, but many also question whether their information is safe from hackers. For KYC standards to be successful for your organization, you must ensure that security and privacy concerns are addressed. Make sure you take the necessary steps to protect sensitive data so it will not be compromised or accessed by unauthorized parties. This is the best way to earn your customers’ trust and cooperation when it comes to providing personal information needed for KYC compliance.

Regardless of industry, all companies should have a proper Know Your Customer (KYC) verification process in place. KYC policies are meant to ensure that companies know exactly who they are conducting business with. Suppose the KYC verifications are not required. In that case, there is an increased risk of engaging in activities that could be problematic for companies or even illegal. 

How to conduct KYC verification properly?

KYC verification gives you details that help you create customer profiles. That can be a vital first step in developing customer relationship management procedures. Properly conducting KYC verifications is integral to building these systems. It would be best to consider doing what other industries have done: integrating KYC process as part of the anti-money laundering (AML) program. 

Thanks to globalization, money laundering regulations, and new types of fraud, online KYC verification has become increasingly important. The days of going to a bank or other institution and filling out stacks of paperwork to get access to services are behind us. Online verification allows companies to do their KYC checks quickly and easily. Businesses that do not perform proper customer identification program are vulnerable to fraud. Choosing an online KYC solution can rapidly reduce processing times, cut costs and increase customer satisfaction. 

Basics of conducting KYC verifications
  • Verifying the user’s identity

When companies learn about new customers, the first step of identity verification involves getting a sense of who the customer is. This phase usually verifies the user’s identity. 

  • Understanding customer’s intentions

The second step focuses on understanding how the customer plans to use the services—this helps prevent businesses from helping money launderers disguise their transactions.  

  • Assessing money laundering risks

The next step should be assessing money laundering risks. How does a given customer fit into an organization’s risk profile?

KYC verification offered by Fully-Verified

Fully-Verified is the leading KYC verification provider. We deliver a simple, fast, and secure way for companies to verify the identity of their users online. Our state-of-the-art technology uses live video and artificial intelligence to verify a person’s identity in real-time. We are trusted by companies and educational institutions around the world.  

Fully-Verified offers several options for KYC  identity verification, all powered by the same core technology but customized to meet each client’s individual needs.

  • Live Verify is a secure and seamless two-way video verification service that combines the strengths of human specialists and AI technology into a single solution. 
  • Self-Verify is an innovative automated identity verification solution that allows users to verify their identity without a human agent. The Self-verify system guides them through the process and records it so that a trained specialist can double-check it.

Apart from the KYC verification solutions, we provide standalone services like: 

  • Sanctions and PEP checks allow deciding who is appropriate to do business with. It includes lists issued by governments and financial authorities. We currently check over 350 databases around the world.
  • Proof of address verification confirms that the address stated for verification is actually a residence address and ties the user to a specific location.
  • Manual KYC service is a tailored service that can suit different business expectations.
  • Digital Onboarding refers to the process of engaging with new customers using an online medium.

Fully-Verified will help you ensure compliance with all the relevant regulations, so you can be sure that your business is operating safely and within the law.

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Fully-Verified was created as answer to its founders collectively losing over $150 000 to various types of fraud in their eCommerce businesses.

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