What is a KYC check?
KYC stands for "Know Your Customer" and means something like "know your customer". Know your customer checks and the KYC principle is mainly used by banks and other financial service providers when registering new customers and describes the process of verifying the identity of customers - either before or during the start of doing business with them.
What is the purpose of the KYC principle?
The KYC principle is primarily used to prevent money laundering and fraud. The KYC process serves to protect the controlling financial institution and protect the common good and our economy.
Anti-money laundering (AML) aims to prevent the transfer of money and assets from illegal activities into the legal, financial and economic cycle. In particular, the further use and financing of further crimes or even terrorism should be prevented.
Fraud prevention is about protecting society and market participants from, for example, identity theft with the help of a forged or stolen identity document.
Who must carry out a KYC check?
In principle, the KYC obligation applies to all relevant transactions with an increased money laundering risk. In addition to banking transactions, this can also include, for example, the purchase of real estate or a work of art.
Primarily, banks and other financial service providers are required to screen their clients through a KYC process. They are the backbone of our economy and have the ability to control payment flows.
In addition to the financial sector, other relevant merchants such as insurance companies, real estate agents, art dealers, crypto exchanges, or gambling providers may also be required to have a KYC process.
In addition, the KYC obligation may also apply to market participants accompanying relevant transactions. These may be tax advisors, lawyers, or notaries, for example.
What data is requested in the KYC check?
There is no one Know Your Customer Check. The composition and requirements depend primarily on the country and the respective supervisory authority.
The KYC check and the scope of the data requested also depend on the type of client and the business relationship. For example, corporate clients are subject to more complex requirements than private individuals.
At the heart of every KYC process is the verification of the customer's identity. In addition, further data such as the employment relationship, the proof of address, but also the source of funds can be requested. In the context of anti-money laundering screening, the customer can also be checked against international sanctions lists in order to identify known criminals or so-called politically exposed persons (PEPs).
IDnow offers the right solution for different markets and areas of application. In addition to the BaFin from Germany and the FMA from Austria, IDnow also offers compliant solutions for all other EU markets.
How does a digital KYC check work?
In the past, the KYC process was traditionally carried out on-site by a bank clerk in the branch. Today, there are digital alternatives that allow you to identify yourself from home or on the road. Compared to a physical one, a digital KYC process offers the user much more convenience while maintaining a high level of security.
Which identity verification method is right for my KYC?
Via the IDnow identity verification platform, IDnow offers various methods for verifying identity as part of the KYC process. The offer ranges from video chat-based to selfie-based to NFC-based solutions. The different methods fulfil different security and convenience requirements.