Know Your Customer (KYC) is a process where businesses must verify the identities of their clients. This gives businesses the ability to accurately assess the potential risk associated with doing business with a specific client.
KYC regulations were put in place when the Patriot Act was passed in 2001. The legislation did not state specific standards that should be used to verify customers. Regulators thought that by doing this, they would prevent businesses from simply striving to meet the basic requirements for KYC. This has caused many businesses to create individualized procedures in place to meet KYC. Banks and other businesses do this to prevent large financial fines.
KYC processes are a key component for monitoring customer risk. They are also a requirement for effective anti-money laundering (AML) compliance. If an effective KYC process is not put in place, this can lead to hefty fines, sanctions or even public ridicule.
KYC is meant to address the following issues:
Simplified Due Diligence is in situations where there is a low risk of money laundering or terrorist financing associated with a customer account, so CDD is not necessaryBasic Customer Due Diligence is where information is obtained from all customers for the purpose of identity verification and risk assessment
Enhanced Due Diligence is where additional information is collected from higher-risk customers. This gives businesses a deeper understanding of the customer’s activity and how they can mitigate the risk associated with that customer
IDMERIT has access to official data sources in over 90+ countries. This means IDMERIT can delve more deeply into the individuals being checked and assess risk based on key indicators. These indicators will flag potential problems pertaining to money laundering, fraud, and the possibility of misdirection of funds to finance terrorism. IDMERIT can further assist global businesses by delineating compliance regulations and best practices by region or specific country as regulatory legislation varies.
KYC, which is used mostly in verifying identity for fraud and risk management and background checks, should not be overlooked. It is an important process for creating revenue through a seamless customer service process. IDMERIT’s KYC Platform offers easy integration with any online system and can be customized for your specific needs to accommodate (to) all B2B and B2C applications. IDMERIT provides a variety of solutions meant to address key problems within various components of the KYC process.