Robust KYC Regulations -Beyond Technical Identity Verification

In today’s world, where the internet is convenient for everyone, people may misuse it for scheming activities KYC Regulations. Protecting personal information, avoiding data breaches, and preserving security for one’s business and identity are crucial in the digital space. In the United States, more than 3,205 cases stood for data compromises in 2023. More than 353 million individuals were affected by data compromises, including data breaches, leakage, and exposure, in the same year.

To avoid such deceitful actions, maintaining KYC regulations is essential for conserving a peaceful and secure environment. KYC regulations are a global standard for identity verification that eliminates specific differences between countries. They ensure the most suitable approaches for identity verification and demonstrate why compliance is essential.

Let’s delve into this article that will discuss the KYC Regulation, its procedures, and its requirements.

Table of Contents

KYC-Know Your Customer

Know Your Customer is a standard identity verification process that companies and financial institutions accommodate. Know Your Customer shields the economic health of the organization and protects the customers’ credentials. It is a necessary process that must be carried out to ensure essential security and prevent any kind of financial loss.

KYC Regulations preclude terrorist financing, money laundering, and other activities affecting the economic system. Moreover, the KYC regulations apply to all organizations licensed to make dealings under the Banking Act. The traditional KYC, which was in practice, only requested the name, birth date, address, and ID card number. However, the advanced KYC requires:

Facial Authentication
Address Verification
AML Screening
Document Verification
Phone Verification
2-Factor Authentication (2FA)

KYC Requirements For Robust Identity Verification

KYC regulations require the clients’ personal and legal information to verify the identities of potential customers. To fulfill the KYC requirements, the financial institution or the organization may request the customers to submit the following documents:

Social security number
ID card
Passport
Driver’s license
Voter’s identity card
Utility bills
Housing contracts and rental agreements
Social security card
Bank account statement
Proof of residence
Maintenance bills

What are the KYC Procedures?

KYC procedure is a critical approach that enables financial institutions to protect themselves against fraud and suspicious activities. The KYC procedure has simply complied with regulatory requirements. The process includes three essential steps that are:

Customer Identification and Risk Assessment

Customer identification is the initial step of the KYC procedure, which involves collecting the customers’ information and then verifying it. Customers are generally asked to submit documents such as a government-issued identity card, proof of residential and permanent address, proof of income, and other documents. In addition, financial institutions conduct risk assessments with each customer. The evaluation is certainly about their occupation, nature of business, and country of origin.

Customer Due Diligence (CDD) and Enhanced Due Diligence (EDD)

The subsequent step of KYC verification is Customer Due Diligence (CDD). In this process, financial organizations gather more detailed information about high-risk customers. This information includes the source of their income, the purpose of their transaction, and analyzing the patterns of their transactions.

Besides this, the Enhanced Due Diligence (EDD) is executed for customers with a higher risk profile.

Ongoing Monitoring and Updating of Customer Information

The final and last step for the KYC procedure is continuously monitoring customer activities and updating their information frequently regularly regularly. Monitoring customer’s activities regularly assists businesses in detecting suspicious transactions quickly.

KYC Regulations US and their Significant Impact

The Federal Trade Commission(FTC) calculated almost $5.8 million in financial fraud losses in the year 2021, which is 70% higher than in 2020. The KYC regulations US are under the Financial Crimes Enforcement Network (FinCEN). It is a regulatory management authority that works under the US Department of the Treasury and that is accountable for monitoring AML and KYC regulations. FinCEN gathers and analyzes information about the economic transactions of the financial institutes to fight against domestic and international monetary criminal activities.

Know Your Customer Solutions for Authentication

KYC regulations have been a primary requirement for banks to open accounts for their customers and for organizations to get involved with individuals financially. This deliberately increases the demand for KYC verification and proposes Know Your Customer solutions for the authentication of identities. To verify the identities accurately and efficiently, the updated KYC solutions ensure the process is validated seamlessly.

To Conclude

KYC regulations are essential for any organization or financial institution that involves individuals in its transactions. KYC regulatory compliance is adequate in reducing money laundering and financial fraud. The KYC procedure is uncomplicated and efficient. It collects data, verifies it, and monitors it regularly. Documents are also legally government-generated and used for compliance with KYC regulations. Moreover, the United States has its own KYC regulations that involve FinCEN.