KYC or ‘Know Your Customer’ is a process which almost every one of us will be subjected to at some point in our lives. Opening a bank account, taking out insurance or a myriad of other financial transactions, require KYC procedures and checks before anything else can take place
In fact, even from a recreational point of view, adults engaging in various activities including gambling or sports betting online will need to complete KYC procedures so that those online gaming service providers can be in compliance with relevant laws and guidelines such as Age Verification or Responsible Gaming.
Unfortunately for many, KYC remains somewhat of a mystery and does cause a fair degree of anxiety for those still unfamiliar with the procedures. The following 5 frequently asked questions may help you to better understand the KYC process and what is normally expected of you by KYC service providers.
The main objectives of Know Your Customer guidelines, is to ensure that banks and other financial institutions are not, knowingly or unknowingly, used by third parties to launder money through them.
KYC essentially helps banks (and other entities) to better understand their customers as well as their customer’s financial habits and dealings. However, KYC procedures are not only available to the banking sector and financial institutions, but can be used by a wide range of businesses including the insurance and the online gaming industries. These businesses, both in the real world and online spheres, can use KYC for effective risk management, customer due diligence (CDD), Anti-Money Laundering (AML), Countering the Financing of Terrorism (CFT), fraud prevention and other regulatory or business needs.
In general, KYC policies contain four main elements that pertain to client due diligence, verification, authentication, security and risk management:
These four key elements combine to form a stringent process which has become a mandatory step for financial institutions and businesses seeking a more secure risk management system. KYC maximises the chances of effective fraud prevention through early identification of any suspicious behaviour or patterns that may occur during the course of transacting in the business/client relationship.
Traditionally, KYC forms would have to be collected from the relevant financial institution but, thanks to the internet, KYC can now be completed online. One of the most popular forms of E-KYC (Electronic KYC) or E-KYB (Know Your Business) include biometric authentication.
When users apply for KYC, in some cases they are rejected, which often leaves applicants feeling confused as to why. In reality, there are a number of reasons why your Know Your Customer application may be rejected.
One of the most common reasons for the rejection of a KYC application has to do with customer due diligence issues, including the identification elements required for a successful KYC procedure. For example, an out of date or blurry ID photo, passport or driver’s license photo will automatically be rejected during the screening process. When applying for KYC, all photo identification needs to be as recent as possible.
Another common issue found on rejected KYC applications is a discrepancy between the name used on the application and the name that is found on the supporting documents. In addition, invalid proof of address documents will certainly cause your KYC application to be rejected.
Government regulations regarding KYC require regular reviews of all financial institutions and business’ complete client bases. When it comes to KYC risk management review of clients, there are three main levels which apply to them, which will also dictate their review cycle (on average):
KYC remediation on the other hand deals more with a given company or institution correcting any legacy issues relating to a client that could potentially put that company or institution at considerable risk.
Effective and consistent KYC remediation practices are designed to ensure that companies protect themselves from the risk associated with money laundering, corruption or the financing of terrorist organisations.
The main goal of regular KYC remediation, is to quickly and effectively identify those clients that are deemed most likely to be at risk of committing crimes relating to money laundering, funding terrorism or other forms of corruption. It also helps to clearly identify other clients that require closer monitoring.