Know Your Customer (KYC)

Know your customer (KYC) is the process of a business verifying the identity of its clients. The term is also used to refer to the bank regulation which governs these activities. Know your customer processes are also employed by companies of all sizes for the purpose of ensuring their proposed agents, consultants, or distributors are antibribery compliant

KYC is a legal and regulatory requirement for financial services providers to prevent fraud, money laundering, and terrorist financing.
The KYC process involves collecting and verifying customer information, assessing customer risk, and monitoring customer activity.
KYC information is confidential and must be protected to maintain customer privacy and security.

About FullCircl

FullCircl is a Customer Lifecycle Intelligence (CLI) platform that helps B2B companies in financially regulated industries do better business, faster. Its solutions allow front and middle office teams to win the right customers, accelerate onboarding and keep them for life.

FullCircl has merged with ID&V platform provider W2 Global Data to provide regulated entities with the next generation of regulatory compliance.

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KYC Meaning

Know Your Customer (KYC) definition - An important process that financial services providers must undertake to verify the identity of clients and assess their potential risks before entering into a business relationship with them. KYC is a legal and regulatory requirement in many jurisdictions, and failure to comply can result in significant fines and reputational damage.

KYC Process

KYC requirements vary depending on jurisdiction but they typically involve collecting and verifying customer information, assessing customer risk, and monitoring customer activity. The information collected during the KYC process includes the customer's name, address, date of birth, and other identifying information. This information is then matched against data from Credit Reference Agencies and other global data sources to find a match and confirm the customer's identity.

The KYC process also includes Anti-Money Laundering checks, fraud detection, collecting KYC documents through document verification software, and Enhanced Due Diligence (EDD) for high-risk customers.

In the last decade, KYC technology has emerged as an efficient method to verifying the identity of individuals. The traditional KYC process involves manually verifying the identity of customers by plugging into data sources directly. However, with regulation becoming more stringent coupled with rising customer expectations, regulated entities are finding it more efficient to use an automated KYC check meaning that individuals are verified in real-time and without friction.

Financial services and other regulated entities must ensure that the KYC information they collect is protected and kept confidential. This is to maintain customer privacy and security, as well as to comply with legal and regulatory requirements related to data protection.

KYC regulation

Global Know Your Customer (KYC) regulations have seen significant evolution over the past five years, spurred by a growing necessity to combat financial crimes like money laundering and terrorist financing. Initiatives such as the Financial Action Task Force (FATF) recommendations set standards for KYC practices worldwide. In 2021, the European Union introduced the Sixth Anti-Money Laundering Directive (6AMLD), expanding KYC obligations to virtual currency exchanges and custodian wallet providers. Similarly, the Financial Crimes Enforcement Network (FinCEN) in the United States proposed a rule in 2020 to enhance Customer Due Diligence (CDD) requirements for financial institutions.

These regulations demand thorough identity verification processes, customer risk assessments, and ongoing monitoring to ensure compliance. They've spurred the adoption of advanced technologies for more robust Know Your Customer meaning that traditional processes are no longer fit for purpose. As financial crimes become increasingly sophisticated, global KYC regulations continue to evolve, emphasising the importance of collaboration among regulators, financial institutions, and technology providers to safeguard the integrity of the financial system.

Difference between KYC and KYB

While KYC typically focuses on individual consumers, Know Your Business (KYB) is a similar and related process aimed at verifying the identity of a business entity and assessing its potential risks. KYB involves collecting and verifying information about a business's ownership (UBO), structure, and beneficial owners (UBO), as well as assessing its potential risks for money laundering, terrorist financing, or other financial crimes. In summary, KYC focuses on individuals, while KYB focuses on businesses.

In conclusion, KYC is an essential process for financial services providers to verify the identity of their clients and assess their potential risks before entering into a business relationship with them. The process helps to prevent fraud, money laundering, and terrorist financing, and ensures that financial services providers comply with legal and regulatory requirements.

How FullCircl can help

FullCircl offers an identity verification orchestration platform which helps 700+ clients satisfy the KYC process whilst ensuring that customers enjoy an efficient onboarding experience. Our KYC platform covers 160+ countries and facilitates the onboarding of 200,000+ customers annually. Find out more about our KYC software here.