Understanding KYC and the Intricacies of Customer Identity and Verification for Businesses

 The US Census Bureau estimates the world population to be around 7.8 billion this March 2020. With many people getting financial services, it’s imperative to verify identities to mitigate possible problems from flooding and crippling the financial industry.

KYC is a significant abbreviation in finance, denoting to “know your customers.” The process of verifying customer information is a critical process for credit companies, bank institutions, and insurance agencies, providing them with crucial details about client identities. Such a process ensures a possible client is not involved in money laundering, corruption, and bribery.

KYC policies were expanded over the years, becoming a crucial part of the financial world. Several issues were brought to light for its implementation, including world safety brought by terrorist financing and the prevalent money laundering acts of institutions and government officials. The Know Your Customer guideline has contributed to financial safety to implementing countries by verifying the identities of possible account holders and mitigating all possible risks.

The Know Your Customer (KYC) Process is an Important Legal Requirement

Countries in the Asia Pacific region, such as Singapore, Japan, India, and Australia guide financial services to make them accurate and reliable for customers. Other countries in the west have also implemented the KYC guidelines, including Canada, some European countries, the United States, a few African countries, and Mexico.

KYC compels financial organisations to take precautionary measures against illegal activities involving incredible amounts of money. It helps governments and businesses track suspected and malicious movement of finances before they are circulated within the world’ banking system and become part of the bank reserves.

Questionable financial transactions are caught first-hand while dubious personalities and individuals are put to prosecution and charged with the appropriate legal cases. The principles behind the existing guidelines typically apply to all financial service companies, including their subsidiaries.

The Australian Transaction Reports and Analysis Centre (AUSTRAC)was established in the late 1980s to help the financial industry monitor transactions within the country. The organisation is responsible for setting the client identification and all possible requirements needed to establish the integrity of their identities.

Establishing Your Identity under the KYC Guidelines

Financial institutions running theKYC report either hire third-party service providers or stand-out products to process customer files. Such information is collected real-time and presented to companies requiring customer profiling from their database inquiries. Such agile and comprehensive data helps your business understand all your obligations brought by the Anti-Money laundering and the Counter-Terrorism Financing Act of 2016.

The KYC ruling encompasses its KYCC or Know Your Customer’s Customer counterparty, which details the identity of a customer and the activities related to his source of income. Such guidelines ensure the truthfulness of his records and the integrity of his character. It also ascertains a customer’s non-involvement in terrorist financing crimes and possible money laundering activities.

Required Documents Solidify Your Proof of Identity and Financial Capacity

A person or entity opening an account is required to submit several details before a bank or financial institution allows them to do transactions. Most of this information relates to your identity as the account holder. And this is to establish facts and prove your capacity to hold such amounts of money.

Some of the crucial requirements needed include:

  • The necessary government-issued IDsm including your voter’s identification, driver’s license, and passport, among others.
  • Proof of address, like utility bills, government-issued notices, bank account statements, or land receipts is part of the required documents.

Verification of documents is always part of the process, including the self-attesting process.  As per the current Australian financial guidelines, the KYC guideline is an enforced mandatory requirement to open bank and financial accounts.