KYC (Know Your Customer) is a process to verify an individual’s identity and assets, and it is an essential component in the fight against money laundering and fraud.
To know a customer’s identity, a financial institution can perform a series of checks. For example, the bank can verify the customer’s national insurance number, driver’s licence, or passport number. This process can also be performed electronically. For details on AML ID VERIFICATION processes, consider w2globaldata.com/an-idiots-guide-to-aml-kyc-id-verification
Banks and other financial institutions must perform the KYC check before business with an entity. Afterward, the entity is given a risk rating. The highest-risk accounts have additional KYC verification before doing any business.
In addition, banks and other financial institutions can be held liable for fines or penalties if they fail to comply with AML laws. However, effective KYC is essential for protecting both the organisation and the customer.
As globalisation continues, the focus on KYC is increasing. This is partly due to the increased connections between financial organisations and the increased likelihood of financial crime.
The standards for effective KYC include assessing the risk of the customer. A financial institution is also required to monitor all transactions carried out by the customer. When it detects suspicious activity, it reports it to the relevant authority, such as the NCA or HMRC, for example
.KYC is an essential part of being compliant with AML. However, financial institutions must ensure that they deliver it cost-effectively, and they must avoid burdening their customers.