Know Your Customer in Banking

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Anti-Money Laundering (AML) and Counter-Terrorist Financing (CTF) pose significant risks to financial institutions. KYC (Know Your Customer) is the most critical aspect of customer identity. KYC is an essential factor in the fight against financial crime and money laundering. It is the most critical aspect of customer identity as it is the first step in the process and lets you know who the customers are. Check plays a crucial role in eliminating the risks associated with money laundering, terrorist financing, corruption, fraud, bribery, and other illegal financial activities. 

Know Your Customer in Banking?

KYC in banking ensures that its customers, agents, consultants are anti-bribery. Financial service providers such as banks, payment companies, lending companies, investment companies, money transfer companies, crypto exchanges, export creditors, and other financial institutions increasingly demand that customers provide detailed due diligence information. KYC is also a mandatory process to periodically identify and verify the customer's identity when opening an account. 

KYC has become a prerequisite for accessing many banking services and other sectors over the past 15 years. This means that banks have to use KYC legally to ensure their customers are the people they claim. Banks may refuse to open an account or stop the business relationship if they do not meet the minimum KYC requirements.

Why Is KYC in Banking Important?

It is essential to provide customers with an easy and fast accreditation or identification experience. However, collecting and processing identity documents may be difficult for the customer as a procedure. Simultaneously, strengthening the identification rules complicates the customer experience by forcing banks to manage and control multiple channels.

This causes the process to slow down even if It is not desired; therefore, it can be turned into a situation that can cause the customer to decrease his satisfaction with the registration period and stop working with you. This loss of customers would be a disaster for banks, so the benefits KYC offers to banks are incredible to identify your customers' easy and fast accreditation or identification experience.

It allows the collection, processing, and secure data storage, reducing the risk of internal counterfeiting and transaction errors. Hence KYC is an integral part of the banking process.

What Is KYC in Banking Process?

The KYC Know Your Customer process, which is intended to provide tools to prevent financial terrorist acts, includes identity verification, face verification, document verification such as invoices as address proof, and biometric verification. To comply with international Know Your Customer regulations against money laundering and terrorist financing, the Know Your Customer procedures should be applied at the first stage of any business relationship when registering a new customer.

Banks should frame their KYC policies to include the following four main elements:

  • Customer Acceptance Policy
  • Customer Identification Procedures
  • Tracking of Transactions
  • Risk management


Why Is KYC in Banking Compulsory?

It is a critical aspect of combating all kinds of illegal financial activities, such as terrorist financing and sanctions, so financial institutions are required to take due care to understand who their customers are, for instance, and what kind of transactions they are taking.

KYC procedures in banks include all necessary actions to ensure that their customers are real and assess risks. These processes help prevent and identify money laundering, terrorism financing, and other illegal corruption plans. Banks must comply with KYC regulations and anti-money laundering regulations to limit fraud. KYC compliance responsibility belongs to banks. In case of non-compliance, severe penalties may be imposed.

To give a specific example, in the USA, Europe, the Middle East, and the Asia Pacific, a penalty of $ 26 billion has been collected in the last decade (2008-2018) for non-compliance with AML, KYC, and sanction penalties. Sanction Scanner can provide banks' needs in this area end-to-end due to its API, integration, and ability to create local lists. It reduces your operational costs and development efforts. 

As the Sanction Scanner, we are determined to protect all financial companies, large or small, from financial crimes. We aim to provide the best support and service to our customers, so we develop our AML solutions as soon as possible based on customer feedback. You can contact us for information about our AML solutions. You can reach Know Your Customer Software with us.

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