Find out why KYC is important for financial institutions. They use a KYC process for customer identification and verification to authenticate customer identity and prevent cybercrime.
In today’s world of digitization, cybercriminals employ various tactics to fulfill their ill intentions. Using sophisticated technology to hijack the identity of legitimate customers, bad actors deceive financial businesses such as banks, insurance firms, and credit unions.
To address the problem of identity theft and to safeguard against money laundering, financial organizations are required to perform Know Your Customer checks before creating business ties with customers and partner entities.
KYC falls under Anti Money Laundering (AML) obligations enforced by regulatory watchdogs to make sure enterprises are kept safe from financial crime. Doing KYC verification is a mandatory requirement for banks to protect themselves from the illicit flow of money through their platforms.
What Is the KYC Process?
A KYC process is a set of procedures to check whether an onboarding customer is real. The process initially begins with acquiring identity information about the client, verifying and evaluating what was submitted, and assessing the overall risk related to the customer to prepare for ongoing or background checks.
Why Is KYC Important for Financial Institutions?
A purpose of a KYC process is to ensure transparency between the business and a customer when they perform a transaction. Here are some advantages a financial business can get by practicing KYC compliance:
