What is KYC in Banking?

what is Know Your Customer and how is it used in finance and financial technology is the acronym for “Know Your Customer.” It’s a mandatory requirement by regulators that banks verify their client identities, both at account opening and through periodic updation. This is achieved through a combination of document and database verifications. It’s also important that banks continuously assess their clients’ money laundering risks through ongoing monitoring.

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Unlike AML checks, which are required by law across all industries, KYC is a specific requirement for financial services providers. This is because the potential impact of a financial crime in this sector could have wider implications for both other customers, markets and economies.

The exact definition of KYC varies depending on regulations and industry, but it typically involves collecting all of a customer’s credentials, including identity documents, addresses and more. It’s also important that banks verify whether the customer is a Politically Exposed Person (PEP) and whether they are on any sanctions or blacklists. Enhanced Due Diligence (EDD) is another level of KYC that is often required for high-risk or high-net worth customers.

Ultimately, KYC and AML checks aren’t just about security and protection; they’re also an important part of the customer experience. As such, banks and fintechs must be able to offer speedy KYC processes that ensure compliance without damaging the customer experience. This is why they need to use automated identity verification solutions that provide a seamless, secure and fast customer journey. This can be done through selfie verification and document verification solutions that are able to automatically extract data from uploaded ID documents. They can even scan public records to detect any adverse media that would trigger additional verification.