This blog is about 500 words long, or a 2.5–minute read.CTO at Veryfi
Know Your Customer (KYC) has become a cornerstone of financial security and regulatory compliance in recent years. This post explores the growing significance of KYC and introduces the wide range of documents that KYC processes deal with. As we go into each topic, think about what can be automated. What if we’re moving towards a world where some of these processes that currently rely heavily on manual data extraction and manual checks can be automated?
What is KYC?
KYC, or “Know Your Customer,” is a crucial process used by financial institutions to verify the identity of their customers. This practice ensures compliance with Anti-Money Laundering (AML) laws and protects both the company and its clients from illegal activities such as money laundering, fraud, terrorist financing, and corruption.
The Purpose of KYC
According to a report by KPMG, KYC obligations have grown increasingly complex over time. Financial institutions are expected to keep pace with ever-changing regulations, often leading to the addition of more controls and process layers because The Financial Crimes Enforcement Network (FinCen) is actively working to strengthen and modernize anti-money laundering and counter-terrorism financing (AML/CFT) programs in line with the Anti-Money Laundering Act of 2020. This regulatory landscape underscores the importance of robust KYC processes for all firms engaged in business transactions.
To comply with regulations, a customer must provide proof of identity and proof of income. Examples of KYC documents include:
Proof of Identity: passports, driver’s licenses, identification cards
Proof of Address: utility bills, rental agreements
Proof of Income: bank statements, salary slips
Corporate KYC is KYB (Know Your Business)
Corporate KYC, or Know Your Business (KYB), is an extension of standard KYC regulations that focuses on verifying businesses instead of individuals. The type of KYC documents required for companies and other legal structures can depend on the specific legal structure of the company and may include:
Copy of the certificate of incorporation.
Copy of the company PAN (permanent account number) card.
Recent audited accounts.
Copies of proof of identification and proof of address, in addition to the permanent account number (PAN) of managers, officers, or employees having power of attorney to conduct business on its behalf.
In our next article, we’ll explore effective strategies for approaching the KYC verification process. In the meantime, discover how Veryfi solutions are making an impact across various industries.
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