What Are The Requirements For KYC?

KYC (know your customer) is a really important part of modern business. It refers to the due diligence activities a financial institution needs to perform in order to ascertain information from clients. This is necessary whenever doing business. A KYC solution is needed for more companies than you might think. The term is also used to describe bank regulations that govern activities. 

KYC processes can also be used by a regular company in order to guarantee the fact that their consultants, distributors and agents go through anti-bribery compliance. Insurers, export credit agencies and banks now demand customers to offer detailed information to be protected and verify integrity or probity. 

While KYC is quickly becoming the norm in all financial institutions and even in others, there are many things that are still not known by people and businesses. This is why we should focus on the following facts. 

Who Needs To Enforce Know Your Customer Rules?

Every single regulated company and financial institution is responsible for building and maintaining KYC policies. Regulations practically require the entities to use KYC procedures or they end up fined. In extreme cases, such companies can even be closed. 

KYC is useful for businesses because it assists in understanding/knowing customers, together with financial dealings. It becomes simple to monitor transactions. Suspicious transactions are prevented and identification becomes simple in the digital world. 

We have to acknowledge the fact that more and more transactions happen these days across the internet. In many cases they cover a large distance and involve people from different countries. Whenever this happens, the use of KYC regulations helps get much higher security for business operations. Also, the company ends up protected against fraud and money laundering. 

Key KYC Recommendations

KYC typically controls the following aspects of business operation:

  • Basic identity information collection and analysis – This is normally defined by official regulations and are forced under a CIP (Customer Identification Program) practice. 
  • Determining how risky a customer is when referring to the possibility of committing money laundering, identity theft and/or terrorist finances. 
  • Checking to see if the name of the customer is on a list of the known parties, like the PEP (politically exposed persons).
  • Creating exceptions of transactional behaviors by a customer. 
  • Monitoring the transactions of a customer against expected behavior or/and recorded profile. This is also done in comparison with peers in similar situations. 

KYC Jurisdiction

Another really important thing to be aware of is the fact that KYC regulations can be really different from one location to the next. This is because they are usually local and only defined at a country level. The exact same thing can be said in regards to KYC jurisdiction. 

Whenever you have to employ KYC regulations, it is important to work with a specialist that knows everything about it. This is because these are vital for proper business operations. As the world is learning how to deal with globalization and easy transactions from one country to the next, KYC regulations become more and more complex. This will just become more and more complicated in the future.