Are you concerned about financial cybercrime and want to know how your bank is protecting your money? Meet KYC – the ‘Know Your Customer’ standard that is essential in the fight against financial crimes. In this blog, we’ll explain what KYC is, why it’s mandatory for financial institutions, and how it works to keep your money safe.
What is KYC and Why is it Important?
KYC is a mandatory process that institutions like banks, advisors, stock traders, gambling companies, and governments use to verify their customers’ identity. It was first introduced in the US in the late 1990s as a way to combat financial crimes such as fraud and money laundering, and has since spread as the accepted global framework. The process includes ID card verification, document verification, and facial or biometric verification, and it’s crucial for financial institutions in understanding their customers and their transactions in order to identify suspicious activities and protect against crime.
How KYC Verification Works
KYC verification starts with customers filling out an online KYC registration form with their personal information. They then need to confirm this information by providing physical documents as evidence. These documents are then uploaded and verified to ensure they are authentic – this might be done with human document verification experts, or with sophisticated AI analysis software. Once verified, the financial institution can proceed with the verification process to ensure the documents have not been tampered with.
Documents Required for KYC
To prove their identity, customers must provide certain documents. These include:
- Proof of identity: Birth certificate, passport, or driver’s licence (two separate documents are typically required – one for proof of name and one for proof of address).
- Proof of address: Utility bill, bank statement, tenancy agreement, or council tax bill (must be less than three months old).
- Proof of income: Salary statement, income tax return, or bank statement.
Together, all the documents supplied must meet at least 100 points of ID, though some institutions may ask for more.
Industries That Must Comply with KYC
Financial Services
The financial services sector is a prime target for criminals, leading to significant losses, loss of client confidence, and damage to industry reputation. KYC in banking is particularly important as this industry is at a higher risk of financial fraud and money laundering. Financial institutions must perform verification procedures for their customers to reduce fraudulent activities.
It’s not just new customers who are subject to KYC – existing customers must also periodically update their KYC information. By doing so, financial institutions can ensure that their customers are not involved in any financial crimes or criminal organisations. Additionally, KYC also helps prevent the financial institution from being used for money laundering or other illegal activities.
Gambling
The gambling industry has grown rapidly since the development of online gambling in the late 1990s. People are increasingly turning to online gambling as a way to have fun and potentially make some money. However, the gambling industry is not immune to financial crimes. To combat these illegal activities, many online gambling websites have implemented KYC systems.
KYC checks in online gambling sites can take up to 72 hours once the required documents are submitted by the gambler. By verifying their customers using KYC processes, gambling operators can prevent money laundering, terrorist funding, and other illegal financial activities. While some players may prefer anonymous gambling sites, these are becoming less common as authorities crack down and more operators adopt KYC policies.
Investments and Crypto Trading
Cryptocurrency has become a popular form of online payment since its introduction in 2009. However, the anonymity of cryptocurrency transactions can make it a potential haven for criminals. To minimise identity theft and fraud in crypto trading, many virtual asset service providers have established robust KYC policies.
KYC systems on crypto exchanges typically require new users to provide personal details such as legal names, ID cards, and up-to-date addresses. Additional documents may be required depending on the location and services provided by the exchange. By verifying users’ identities, investigators can track financial criminals and prevent illegal activities.
KYC and Docuvett
Docuvett is a powerful tool for facilitating KYC checks for both financial institutions and their customers. Docuvett allows users to securely upload their important identification documents one time, then provide access to them through the Docuvett platform rather than a webpage, email, or cloud sharing. This speeds up the process significantly for anyone applying for multiple products or services, as well as for the agents who might need to access the info multiple times throughout the setup process. Docuvett’s security features also ensure that nobody who might illegally gain access to a financial institution’s data will be able to access your documents.
In conclusion, KYC is a crucial tool in the fight against financial cybercrime. By understanding and complying with the standard, financial institutions can protect their customers’ money and prevent fraud and money laundering.