When talking about KYC (know your customer) checks, people usually refer to the procedure that occurs during onboarding, which involves identifying and validating your customer’s identification. A best-in-class KYC programme should be viewed as a continual process that assists you in meeting regulations while also feeding back into risk management and company strategy.
It’s a method for determining who your consumer is, what kind of activities you may expect from them, and the total danger they provide to your company. You can then keep track of the risk and take steps to limit it.
Is it the same around the world?
KYC is one of several three-letter acronyms used in legislation and standards to describe the steps clients must take to connect with your company. It stands for ‘Know Your Customer’.
CIP, IDV, CDD and EDD are others you may have heard of. Even more perplexing is the fact that they might vary by geography, with certain authorities favouring one set of terminology over another. KYC may be viewed as the umbrella phrase that encompasses all of the other terms.
How does KYC work?
A Customer Identification Program (CIP) is how US law refers to obtaining basic client information (name, address, date of birth, and ID number) in order to establish a “reasonable” belief that the customer’s genuine identity is known. Tools for identification verification (IDV) can be used to confirm that person’s identity. Electronic and non-documentary methods are becoming increasingly popular. A check against applicable sanctions lists would also be included in the CIP.
This is the first step of Customer Due Diligence (CDD), in which further information about the individual or business is acquired. Where the individual or corporation is headquartered, if they are a politically exposed person (PEP), the area of business they are in, or further information about their management or corporate structure are all things to examine. If any of this evidence indicates that the consumer is a “high-risk” customer, enhanced due diligence (EDD) may be used.
This data aids your company in determining predicted client behaviour, such as the amount, value, and frequency of payments across an account.
You may create transaction monitoring scenarios that suit your needs. When those thresholds are crossed during the relationship, you may inquire about the source of the unexpected behaviour, report it if suspicious, and realign expectations if this is to become the new normal for that customer. You may determine whether or not you want to keep this connection going on a regular basis.
KYC is a key component of an effective AML compliance programme, according to international rules. You won’t be able to organise your AML programme properly, use a risk-based strategy, comply with legislation, and prevent financial crime without KYC.
Tookitaki’s Solutions for AML – KYC Compliance
Tookitaki developed an end-to-end AML-KYC compliance platform called the Anti-Money Laundering Suite (AMLS). It offers multiple solutions catering to the core AML activities such as transaction monitoring, name screening, transaction screening and customer risk scoring. Powered by advanced machine learning, AMLS addresses the market needs and provides an effective and scalable AML compliance solution.
To know more about our AML solution and its unique features, speak to one of our experts.
