KYC (KnowYourCustomer) is a fundamental onboarding tool used by financial institutions and banks as a first line of defence to legitimation checks for new customers, ensuring compliance with AML laws.
๐๐ญ ๐ ๐จ๐๐ฌ ๐๐๐ฒ๐จ๐ง๐ ๐ฃ๐ฎ๐ฌ๐ญ ๐ญ๐ข๐๐ค๐ข๐ง๐ ๐ซ๐๐ ๐ฎ๐ฅ๐๐ญ๐จ๐ซ๐ฒ ๐๐จ๐ฑ๐๐ฌ:
- Prevent money laundering by identifying and mitigating risk
- Fighting terrorist financing
- Build stronger relationships with customers.
-Improved Compliance with AML Regulations
-Improved risk management
- Boost customer trust by providing transparency.
The KYC process has three steps to follow: โ (๐ข) ๐๐ง๐๐ฅ๐ฒ๐ฌ๐, โ (๐ข๐ข) ๐๐จ๐ฅ๐ฅ๐๐๐ญ, ๐๐ง๐ โณ (๐ข๐ข๐ข) ๐๐ฎ๐๐ข๐ญ, which are fundamental to KYC compliance.
Authentication and verification are the first steps in the process of beginning a relationship with a client. ๐
This process includes the following steps:
-Prior to opening a deposit account or providing other services, ensure that the customer is properly identified.
-Reviewing and verifying the source and where the source comes from
-Maintaining accurate and up-to-date records of all customer information is a continuous process, not a one-time activity, and involves:
-Regular reviews of customer information
-Implementing processes for customers to update their details
-Utilising data verification tools
KYC is a multi-faceted identity verification process that goes beyond just verifying identity to get a more complete picture of who the customer is โ . This includes checking transactions to ensure the accounts are used for legitimate purposes and to identify any suspicious activity that might indicate money laundering or other financial crimes
๐๐ซ๐จ'๐ฌ
โ Security and protection of assets
โ Bring confidence to customers
โ Assessment of the possible risk
โ Transparency of transactions
โ Fight against fraud
๐๐จ๐ง'๐ฌ
โ Time-consuming and inefficient process (if manual)
โ Implementation and maintenance costs
โ Lengthy KYC processes can deter potential customers, leading to a loss of business.
โ Noncompliance with AML/KYC regulations can result in hefty fines.
โ Inadequate KYC allows fraudsters to infiltrate the system, incurring financial losses.
โ Hefty fines for non-compliance
๐๐๐๐ฅ ๐ฅ๐ข๐๐ ๐๐ฑ๐๐ฆ๐ฉ๐ฅ๐: ๐๐ฎ๐๐ซ๐๐ง๐ญ๐ฒ ๐๐ซ๐ฎ๐ฌ๐ญ ๐๐๐ง๐ค ๐๐ ๐๐ญ๐ (๐๐ ๐๐๐ง๐ค) was issued a penalty of £7.6 million by the Financial Conduct Authority (FCA), for inadequate KYC and AML compliance controls ๐ฐ
๐ ๐๐๐ ๐ข๐ฌ ๐ง๐จ๐ญ ๐ฃ๐ฎ๐ฌ๐ญ ๐ ๐ง๐๐๐; ๐ข๐ญ ๐ข๐ฌ ๐ ๐๐จ๐ฆ๐ฉ๐ซ๐๐ก๐๐ง๐ฌ๐ข๐ฏ๐ ๐๐จ๐ฆ๐ฉ๐ฅ๐ข๐๐ง๐๐ ๐ฆ๐๐๐ฌ๐ฎ๐ซ๐ ๐๐จ๐ซ ๐๐ข๐ง๐๐ง๐๐ข๐๐ฅ ๐ข๐ง๐ฌ๐ญ๐ข๐ญ๐ฎ๐ญ๐ข๐จ๐ง๐ฌ