Who needs KYC?
When a business onboards a new client, or when a current client acquires a regulated product, standard KYC procedures generally apply. KYC regulations are relevant to almost all institutions that deal with money (i.e., pretty much any business), including especially banks and financial services providers:
- Credit unions
- Asset management firms and broker-dealers
- Financial technology apps (fintech apps), depending on the activities they engage in
- Private lenders and lending platforms
Criminal activity in this sector can affect not just the financial institution involved but also other customers, and wider markets or economies.
However, a KYC check is not only required for companies in the financial sector, but rather for organizations in all industries. Even for Politically Exposed Persons (PEPs) who have relationships with politicians or government agencies, Customer Due Diligence (CDD) must be conducted as part of the KYC process due to the increased risk of corruption and bribery.
What are the KYC requirements?
The basic requirements for the KYC process are specified by law and regulations. The exact KYC requirements (e.g., KYC documents) vary depending on the industry, with financial services providers and banks generally having to implement the most strict KYC processes.
How does the KYC process work?
As the KYC process has been digitized, the KYC verification is carried out through different methods or technologies (e.g., NFC, AI), security features (e.g., hologram), and various security checks (e.g., biometrics, liveness). It can comprise of the following stages or processes:
Document Verification – The government-issued ID document of the individual is verified for forgery or any other issue.
Face Verification / Liveness Check – To identify any spoof attacks on time, face verification checks are performed to ensure the live presence of the customer.
Address Verification – Proof of Address (POA) is obtained that verifies the address on government-issued identity documents against POA.