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KYC Verification: 3 Process Steps To Effective Compliance

3 Steps To Effective KYC Compliance

All financial services companies need a KYC or "know your customer" program. 

KYC compliance goes beyond keeping your company's legality in the clear; effective KYC processes produce favorable results such as helping curbing fraud risks, preserving your company's reputation, and avoiding costly fines and sanctions.

For financial service providers and a growing assortment of fintech industry participants, effective KYC compliance can be the difference between growing market share and shutting down for good. 

Taking appropriate steps to learn more about your company's customers, including their reasons for transacting with you and the amount of risk their transactions may present for your business, helps keep your company out of hot water. 

Step 1: Identify 

Identification is the first critical step in the KYC compliance process. It is essential that you fully verify new and existing customers before you process transactions in order to understanding the risks they may represent. your customer's identity before they engage in any major transactions with your firm. This enables your organization to make wiser decisions that better support AML objectives. It also means that you’ll need a verification system that ensures that your customers are precisely who they say they are. 

For fraudsters, identity validation of any sort, can signal disaster for their criminal schemes, moving them to abandon the process or attempt to bypass it. Sleuthing out these fraudulent characters comes down to doing enough due diligence on your customers to know who is who and what they are actually up to.

Step 2: Customer Due Diligence

Due diligence for your customers centers on acquiring accurate information about them and involves cross referencing the information you have with the purpose of their relationship with your organization. 

Key questions must be asked and answer confirmed such as:

  • Who the primary beneficiaries of transactions are 

  • What the purpose of the transaction is and what it will entail 

  • Proof of identity for the person making the transaction. 

Once all of the above has been addressed, you can move on to more detailed analysis of your customer, using enhanced due diligence techniques.

Step 3: Enhanced Due Diligence

This approach to due diligence on your customers is normally encouraged as a way of learning about those who are deemed to be high risk. High risk customers exhibit unique traits and behaviors that differentiate them as such. These include those whose nations of origin are considered to be of higher relative risk than others, those who work in business sectors viewed as being inherently threatening, and those whose account activity can be classed as abnormal in some way. 

Enhanced due diligence steps up the depth of research conducted on a given customer's background as well as the consistency with which their interactions with your organization are monitored in an effort to offset the augmented risk they represent.

Partner with Experts

KYC is a complex and multifaceted process that poses significant risks to otherwise successful organizations if not handled properly from the start. The KYC process involves the following key components (among others) such as ID verification, and biometric verification.

With any process, such as KYC, its important to get the first step right. Intellicheck can verify an ID with 99.9% accuracy versus the industry average of 60% or less.  Intellicheck’s high accuracy means that you can start out a relationship knowing that you can trust the person you are working with. We offer a variety of solutions that you can turn on and use, to API-based solutions that can tightly integrate with your systems and experience. We work with 5 out of the top financial institutions and credit card issuers as well as thousands of other businesses. Contact us to see how we can help you. 

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