Know Your Customer (KYC) - Basic Concepts
Know Your Customer (KYC) - Basic Concepts
Know your customer or KYC, is what businesses do in order to verify the identity of their clients either before or during the time that they start doing business with them. Basically, KYC means to properly identify the clients of the company.
What is KYC?
Know your customer, alternatively known as know your client or simply KYC, is the process of a business verifying the identity of its clients and assessing their suitability, along with the potential risks of illegal intentions towards the business relationship.
How is KYC performed?
Many financial institutions begin their KYC procedures by simply collecting basic data and information about their customers,such as names, Social ID numbers (PAN, Adhaar etc), birthdays, and addresses which can be very useful when determining whether or not an individual is involved in a financial crime.
Once this basic data is collected, banks generally compare it to lists of individuals that are known for corruption, on a list of sanctions, suspected of being involved with a crime, or at a high risk of partaking in bribery or money laundering. Financial institutions also look at lists of Politically Exposed Persons, or PEPs.
Why is KYC required?
With issues pertaining to corruption, terrorist financing, and money laundering becoming so prevalent, KYC policies have now evolved into an important tool to combat illegal transactions in the international finance field. KYC allows companies to protect themselves by ensuring that they are doing business legally and with legitimate entities, and it also protects the individuals who might otherwise be harmed by financial crime.
