Know Your Customer (KYC) is the process that businesses do to verify their identity before doing business with their customers. KYC regulations help companies protect themselves from illegal financial transactions. KYC processes are also used by companies of all sizes to ensure that their proposed customers, representatives, consultants, or distributors are anti-bribery and claimants.
Banks, insurers, and other financial institutions are increasingly demanding customers to conduct detailed due diligence. Initially, these regulations were applied only to financial institutions, but now the non-financial industry, FinTech, and even non-profit organizations are obliged. KYC plays an important role in eliminating the risks associated with money laundering, terrorist financing, corruption, fraud, bribery, and other illegal financial activities.
Why Is KYC Important?
KYC is an arrangement that requires companies to learn and verify their customers. Regulated financial institutions are required to comply with a risk-based approach to Customer Due Diligence (CDD) and continuous monitoring in accordance with the Money Laundering Regulations. Customer relations pose a risk of money laundering and terrorist financing in front of regulated financial services. It includes all necessary actions to ensure that its customers are real, assess, and monitor risks. With this arrangement, you protect your business against illegal activities such as corruption, money laundering, terrorist financing, and bribery. KYC regulations gained international importance due to the increase in illegal financial transactions.
With KYC regulations; The company can easily understand whether the transaction is standard or illegal by following the customers' financial transactions. Regulations include customer authentication, face verification, document verification such as invoices as proof of address, and biometric verification. It requires identification and periodic updating of information. Requires monitoring on international lists, as needed. When these are followed, it is easier to notice when the client does something unusual.
Companies usually start to recognize their customers with their general credentials. The customer is then evaluated for reliability. Customer Due Diligence (CDD) helps us in this situation. It protects you against criminals, terrorists, and Politically Exposed Persons (PEP), which can pose a risk. At the same time, Financial Institutions help us with Enhanced Due Diligence (EDD) for high-risk customers. Finally, you need to monitor regularly (Ongoing Monitoring).
What Is The Goal of KYC?
KYC directives have been implemented by the Financial Action Task Force (FATF) for countries on FAFT's lists within the framework of the recommendations on the Anti-Money Laundering (AML standards and the Combating the Financing of Terrorism (CFT)). The Money Laundering Act requires banks, financial institutions, and brokers to ensure that they meet a certain minimum KYC and AML standard. Otherwise, fines and imprisonment may be imposed. Affected companies often suffer a reputation. In severe cases, work permits may be revoked. A notable striking example, in the USA, Europe, the Middle East, and the Asia Pacific, over the past decade (2008-2018) accumulated fines of $ 26 billion were collected for failure to comply with AML, KYC, and sanctions.
KYC will be provided during the renewal as well as opening a new account. Depending on the account's execution, it may be necessary to obtain additional information from existing customers with changes in the account or fixed periodic renewal cycles according to the customer's risk categorization. Furthermore, financial institutions may have the right to refuse to open an account or to maintain an existing relationship if they fail to meet the Minimum KYC requirements.
Sanction Scanner is an AI-oriented AML / KYC compatibility software. Sanction Scanner offers advanced global enforcement, PEP, and Adverse Media Screening Software. You can check your customer with the Sanction Scanner. Due to its API and integration capability and the ability to create local lists, it meets the end-to-end needs of organizations in this field. 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 respond to customers' feedback as quickly as possible. For more information, please contact us on our website.