Businesses interact with many customers; however, not all of these customers have good intentions, as some can have ill motives. Therefore, as part of risk management and customer understanding, you need to know your customers (KYC) in advance before interacting with them.
KYC is a detailed process involving the business collecting personal and all the relevant customer details to conduct due diligence and know them in the best way.
Nearly all organizations interacting with customers must conduct the process to abide by regulatory concerns stipulated by the government, security agencies, and international financial bodies. Failure to do the KYC could render the organization liable to discoveries like customers involved in terrorism financing or money laundering.
From the details above, KYC is compulsory; you can either do it as an organization or hire a third party to do it. Here are some details for the business due diligence activities to ensure the entire process is successful.
End-to-End KYC Process
The KYC process is an end-to-end process consisting of various phases and processes to capture all the details and ensure extensive due diligence. here are the different stages;
1. Customer Data Collection
The KYC is a complete process that involves various processes and activities. It all begins with the client data collection or submission for ID verification. Clients submit their data digitally or manually to the business or website during the process.
This is the beginning of the due diligence as all documents are certified and verified to be authentic, and there are no fakes or forgeries. At this stage, one of the roles is checking for document completion, which involves inspecting to ensure the customers submit all the relevant data.
2. Document Compliance Check
The next process is a compliance check, which involves verification to ensure all documents comply with government regulations. At this point, the documents are compared with data from other sources like government databases to ensure they are the genuine data in that database.
In this phase, the main concern is customer data and detail verification to ensure the data submitted is authentic. One of the main activities is customer ID verification to verify consumer documents and personal details for authenticity. The information must be similar to that within the company database.
Besides the government database, the data can also be compared to that in the global financial databases like Interpol, World Bank, and IMF.
3. Customer Compliance with Regulations
The next process is to ensure the documents comply with the government regulatory guidelines and strategies. The entire customer’s activities are compared to ensure they abide by the financial regulatory guidelines, and so must the documents. After this period, the customer is considered as verified.
4. KYC Lifecycle
Besides the initial end-to-end process, the KYC should extend beyond to ensure customer details are updated and verified. Notably, KYC is a continual process that consists of various activities like remediation, which involves considering past and out-of-date data to ensure the customer risk remains consistent.
Documents Required for the Verification
A complete and extensive KYC should focus on customer details, including personal details and various documents to verify one’s identity.
The first set of documents needed are identity proof documents, including a driver’s license, passport details, national identity card, and social security number. These documents will vary based on the country’s regulations and due diligence guidelines.
Additional documents like financial statements and bank details can be necessary for institutions like banks and insurance companies. These details are necessary to understand the nature of customer businesses’ financial expenditures. This can help detect fraud, money laundering, and financing terrorism.
Personal and Address Details
The next sort of details customers should provide are personal and address proofs. The customers should provide a photograph of their passport for validation and verification. Ensure the client provides the most recent photograph for document updates and verification.
Next, they should have the address used for businesses, residences, and where other official documents are addressed. If your customers need loans for business ventures, they should provide extra details like property tax receipts and other residential agreements and details. Besides all these details, you can also capture details like biometrics, i.e., thumbprints and facial identity data for authorization and system access needs.
Industries That Need KYC Assessments
Various industries would benefit from the KYC end-to-end processes. These companies include those in the financial industry, including insurance, banks, hedge funds, and other investment businesses. The other agencies are security and immigration agencies, which must have all the customer details to avoid issues like facilitating terrorism.
Employers could benefit from KYC by hiring the right employees, especially if they run global operations and services. Other organizations include healthcare organizations, telecommunications companies, casinos and online gambling companies, credit unions, mortgage companies, and travel businesses.
Best KYC Practice
The company should implement extensive due diligence to ensure the entire process is relevant and meets all the guidelines. EDD is driven by technology to ensure all the processes are done with the aid of technology, beginning from the first to the last process. Technology is necessary to collect all the data, speed up the entire process, and ensure customers can easily submit their data.
Therefore, having a KYC identity verification database helps you obtain relevant data from other databases like government and international financial organizations. With such data, you can easily compare document authenticity, get more details on customer transactions, and meet all the regulatory guidelines.
During the KYC, ensure you utilize the power of technology to help you streamline the end-to-end process and entire lifecycle. Invest in data collection to have complete details essential for due diligence, ID verification, and risk profiling.
Finally, rely on continual monitoring to update customer data and the profiles to identify future risks.