Ever since the Patriot Act was passed, know your customer (KYC) processes constantly became more and more important. This is because they are meant to:
- Verify customer identification.
- Assess terrorism financing and money laundering risks.
- Understand business relationship legitimacy and fund sources.
Because of the law, financial institutions, banks, and even cryptocurrency platforms need to implement very strict know your customer processes. In addition, KYC has to be paired with AML (anti-money laundering) checks. This guarantees that business relationships are not misused for activities that are illegal. To put it as simple as possible, all this means that small and large financial institutions have to know customers by first collecting personal data. Then, the process verifies identification documents.
There is no surprise to see that KYC document checklist and checks increase every single year for businesses from literally all around the world. It does not matter if the business performs really well. KYC costs can explode and can easily become a huge cause for concern. Brand new regulations are constantly being developed, like the well-known GDPR.
One thing that needs to be known about KYC is that customers will not care about regulatory pressures that affect businesses. They always want a fast and really intuitive experience for on-boarding. Because of this, the businesses that need to run KYC checks will suffer. AML laws are very strict and the complexity of the procedures added should never be neglected.
Is KYC Mandatory?
The good news is that most businesses out there do not need to implement very strict KYC regulations. However, this does not mean that you do not want to know your customers. You need to make sure that you are aware of who you do business with or you would be faced with huge problems.
Just think about the situation in which your business is used to launder money without you being aware of it. This can be much more common than you might believe. The use of KYC software might be something that you need even if the business is not in the banking or financial sectors.
What Is The Information Customers Have To Share With You?
KYC processes always vary from one industry to the next and by country. Usually, financial services involve really diligent checks, with telecommunications companies having some lax requirements. Customers need to share verifiable information even so. Usually, the bare minimum is date of birth, a full name, and the residential address.
Remember that whenever you collect such information about your customers, you absolutely need to protect it. You do not want to be faced with the unwanted situation in which you are hacked since this is going to lead to fines, jail time, and even bankruptcy. On the whole, the choice of whether or not KYC checks should be implemented should not be taken by you. Work with a specialist that fully understands security and that can help your business to make the correct choices. You simply cannot trust yourself to make … Read More...