Know Your Customer in Banking

Anti-money laundering (AML) and terrorist financing (CTF) pose great risks for financial institutions. KYC (Know Your Customer) is also an important factor in combating financial crime and money laundering, and it is the most critical aspect of customer identification as it is the first step in the process.  


What is KYC in Banking?


KYC in banking is to ensure that its customers, agents, consultants are anti-bribery. Banks, insurers, export creditors and other financial institutions are increasingly demanding that customers provide detailed due diligence information. KYC is also a mandatory process to periodically identify and verify the identity of the customer when opening an account and over time.


KYC has become a prerequisite for accessing a large number of services in banking services and other sectors over the past 15 years. This means that banks have to use KYC legally to make sure their customers are the people they claim. Banks may refuse to open an account or stop the business relationship if The customer does not even meet the minimum KYC requirements.



Why KYC in Banking is ─░mportant?


It is important to provide customers with an easy and fast accreditation or identification experience because, as a procedure, the collection and processing of identity documents may be difficult for the customer. At the same time, strengthening the identification rules complicate 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. For banks, this loss of customers would be a disaster, 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 storage of data, 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 process, which is intended to provide a set of 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 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 KYC in Banking is 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, as defined by banks, include all necessary actions to ensure that their customers are real, to assess and monitor 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 of this, 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 the needs of banks 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.

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