Q&A Series| What is KYC?

Why is Anti-Money Laundering Important?
July 8, 2020

“What is KYC and how do I ensure my firm fulfils its KYC Obligations?"



AML. KYC. CDD. EDD - there are a lot of acronyms in the regulatory compliance space. Each reflect regulatory entities obligations in relation to preventing financial crime through various due diligence measures

KYC is a particularly misunderstood compliance activity that focuses specifically on client verification. To clear up confusion, we have rounded up the most common client queries surrounding KYC below

What is KYC?

KYC stands for Know Your Customer/Client.

It is a term used within the regulatory landscape to detail the process of ‘knowing’ your customers, clients and suppliers through verification means.

It helps to encompass the idea that to prevent fraud, money laundering and other forms of financial crime – the regulated entity must always know who they are dealing with.

This means verifying the individual’s identity before any business relationship establishes or service is given.

Why is KYC important?

The KYC process is vital to ensuring that the customer is who they say they are & that their documents and the information provided by them are real.

Performing a KYC check helps companies to mitigate compliance risks & prevent unknowing involvement with fraudulent individuals and activity.

How is KYC linked to AML?

KYC is a compliance process focusing on the verification of the individual at hand. However, AML is the larger picture and details the various regulatory requirements of preventing Money laundering.

Both solutions form the toolbox used to help regulated firms to mitigate the risk of financial crime exploitation.

What is the KYC process?

It always requires proof of identity, proof of address and other relevant information for identity verification purposes. The process or individual steps taken will likely differ depending on the nature of the business, however, all usually follow a risk-based approach.

Having a clear procedure in verifying individuals that is risk-based ensures that each client is treated fairly an appropriately to the risk that they propose. It also ensures that extra personal information is only gathered and processed when necessary.

What is a KYC Check?

With a KYC check, customers must provide proof of identify, proof of address and sometimes other appropriate identity documentation. Additionally, you can check to see whether they appear on any politically exposed person (PEP) or sanctions lists.

An electronic KYC check can verify this information in seconds.

What are the benefits of KYC?

There are two obvious benefits of KYC verification.

  • It establishes the customer/client identity
  • It establishes a clear compliance methodology within your firm and mitigates corruption risk on an individual basis

Often KYC is seen as a compliance tick-box exercise, something that must be done because the law mandates it.

However, delve deeper and KYC verification can have many positive secondary benefits.

By leveraging and investing in KYC, organisations can inevitably focus more on their customers, ensuring increased conversion and retention, and enhancing customer satisfaction and engagement overall by optimizing touchpoint experience.


You might like: How to ensure your KYC process is client friendly

How can Veriphy help?

With our intuitive checks’ platform, Veriphy can provide a host of solutions to ensure your KYC due diligence controls are robust and efficient.

Veriphy KYC checks will allow you to know that your customers are who they say they are with certainty and ensure that you’re complying with mandatory regulatory obligations.


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