Relevance of KYC Compliance; Identifying Customers in Businesses

KYC online verification helps in mitigating illicit processes, for instance, corruption, fake onboarding, bribery, money laundering, scams, and more. It foretells frauds and keeps track of customers. As per guidelines provided by the authorities, every business has to comply with the KYC standards set so far which assists companies in ensuring safe customer onboarding and preventing fraudsters. These provide adequate information of the customers including the risk they possess and most importantly their financial condition.


KYC in Financial Sector

KYC is a Customer Due Diligence (CDD) approach used by the banking sector as well as other financial institutions to monitor customer activities and foresee risks. KYC requirements for banks refer to the assurance of authentic onboarding which is carried out by asking clients to provide credentials which will be their identity proofs. They can be an ID card, face, and document verifications along with credit card and utility billing address for whereabout authentication. Another standard that companies have to comply with, is Anti-Money Laundering (AML) compliance. In the UK, applications that are forsaken because of the KYC friction are 25% in number.

Verification of KYC Documents

Data is extracted from the uploaded documents, asked by companies for client KYC verification, it includes the photo, full name, residential and official address, date of birth, employment letter, and nationality.

Proof of Individual Identity (POI)

Documents used for verification vary depending on the requirement of the company, however, some generic documents are accepted by almost every industry.

  • Passport
  • Driving License
  • Photo-based ID Card Issues by the Particular Government
  • Credit or Debit Card Details

Proof of Address (POA)

These documents used for identity verification to ensure KYC compliance online, are mentioned above, whereas, those used for address-check are as under, both should not be older than three months;

  • Rental Agreement
  • Insurance Papers
  • Utility Bills
  • Bank Statements
  • Employment Letter
  • Tax Paid Bills

Shift From Visual to E-KYC

If a customer is not physically present, how will the companies know whether they are dealing with the authentic one or not?

To meet the obligations being imposed, it is mandatory for the businesses to inculcate KYC online verification, firstly; to identify the customers ensuring convenience, and secondly; to protect the respective company systems from fraudsters. To do so, online tools are available to back businesses especially the financial sector.

For some, who have not evolved with the technology, this verification is simply paper-based carried out by filling in the forms. Whereas, majority of the businesses have been using digital processes that genuinely and authentically identify customers.

Components Of KYC

Three components of the Know Your Customer (KYC) are;

  1. The KYC predicts the risk level by ensuring Customer Due Diligence
  2. Verification of the identity in real-time
  3. Continuous monitoring checks the client’s activities, either clean or fraudulent.

Benefits of Online Know Your Customer (KYC) Verification

The online document verification of customers is the need of the hour which is fulfilled by AI-backed tools that identify clients in real-time and that so within seconds. Customers are the backbone of any industry and the security and protection of their information are what matters the most. So much so identities can be faked to manipulate benefits and fake onboarding which demands Know Your Customer verification. As per guidelines issued by authorities, companies are obliged to comply with this very standard. Tools that are used, scan the documents of the customer and run the analysis by matching the information within databases. Verification is not a new thing rather it has existed since the first business was established, however, it was in physical form which required a lot of human effort along with increased chances of error. Online verification has minimized the hassle as well as the effort required by replacing the human eye with a camera, and physical check with OCR.

Key Notes

KYC has far-reaching implications for businesses as well as customers. Companies as per guidelines by regulatory authorities have to comply with the standards in order to progress. Financial institutes are the most in need of this verification to ensure safe customers onboarding along with protection of their information and preventing fraudulent breachings. These standards have been set to overcome the issues like laundering, corruption, fake accounts, illicit benefits attainment, terrorism funding, and other illegal activities.

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