The complexity of regulating customer knowledge is perceived by companies as an increasingly heavy burden. Compiling client files in accordance with anti-money laundering laws is becoming a daily problem. However, new technologies have emerged that can turn this commitment into an opportunity.
KYC: definition
Everyone is talking about KYC (Know Your Customer). But before you know how to implement it, you also need to know what it is.
KYC is a process by which companies verify the identity and authenticity of their customers, legal entities, and individuals (as well as, if any, the beneficial owners of transactions) based on global KYC standards.
This vigilance commitment is aimed at combating illegal transactions: terrorist financing, money laundering, fraud tax, corruption, and identity theft.
In practice, for a company, KYC assumes:
- Implementation of control when entering into a relationship with a third party (client registration);
- Updating customer information at regular intervals to ensure its accuracy;
Who does KYC concern?
The implementation of KYC procedures applies to all organizations that are somehow connected with the execution of financial transactions.
KYC mainly concerns the sectors of banking services and financial institutions, insurance, mutual insurance companies, and pension institutions.
Other service organizations that can also make large money transfers are also required to comply with KYC rules: real estate companies, accounting firms, law firms, etc.
Advantages and disadvantages of KYC
While compliance with KYC rules is indeed a regulatory obligation that mobilizes resources, organizations can also benefit from it in many ways.
- Prevention of risks for the company and its customers;
- The essence of KYC rules is to prevent companies from entering into relationships with risky customers and conducting illegal transactions with them;
Thus, for the company, compliance with KYC allows:
- Reduce business risk;
- Strengthening the fight against fraud;
- To increase customer confidence in the security of the services provided;
- Avoid penalties for non-compliance
For customers, KYC also offers some important benefits:
- Avoid Identity Theft/Account Hacking;
- Safe money transactions;
- Protect the confidentiality of personal data;
As we have seen, there are many advantages to complying with KYC requirements. However, their implementation is not so simple.
Customer requirements for efficiency
The development of digital technologies implies the ability to monitor documents in real-time and immediately inform the customer whether his documents have been properly taken into account or not. Otherwise, you risk seeing him leave your platform.
The rise of fraud attempts
The digitalization of exchanges makes it easier for scammers to work. And the document (fake document, falsified document, stolen document) is their preferred entry point. Therefore, companies must not only carry out identity checks but also ensure the authenticity of the supporting documents required for these checks.
Automation of the KYC process
Faced with these new limitations, manual processes become unusable. Hence the desire of many organizations to automate the stages of document collection, KYC checks, and customer reminders as much as possible.
How to identify and authenticate clients using automation?
It is now possible to enforce KYC without compromising customer service and operational efficiency. This was made possible through the use of automation technologies and intelligent document processing based on artificial intelligence (AI).
Documents at the heart of KYC procedures
The more the solution that the company relies on can master numerous intelligent document processing technologies, the greater the automation of identity, completeness, and security checks will be.
These technologies are important because the document is central to KYC processes, and the scope of application of documents is extensive and changing. To illustrate, here is a non-exhaustive list of possible KYC documents:
- Proof of identity: passport, residence permit, driver’s license, etc;
- Proof of domicile: various invoices/certificates from energy, telecommunications, etc;
- Bank supporting documents: RIB, IBAN, account statement, etc;
- Proof of income: tax notice, payroll, etc;
- Other supporting documents: registration document, social insurance certificate, mutual insurance card, etc;
Conclusion
In conclusion, global KYC standards play a crucial role in ensuring the security and integrity of financial transactions by verifying customer identities and preventing illegal activities. Despite the challenges and complexities involved in implementing these standards, advancements in technology, such as AI and automated document processing, have made compliance more efficient and less intrusive.
Adopting these practices not only helps companies mitigate risks and enhance customer trust but also fosters a safer and more transparent financial environment globally.
