Eldon Broady

What You Need to Know About the KYC Process

What's a KYC process? And what do AML and GDPR have to do with it? Let's face it; acronyms can be confusing. But for many businesses, especially in the financial sector, these acronyms are commonplace. So let's explore what you need to know about the KYC process.

For starters, what does it mean? KYC stands for "know your customer," but the process refers to a set of due diligence measures that regulated companies, such as financial institutions, must perform to verify important customer information before entering into a business relationship with them. KYC regulations differ across various countries, and their jurisdictions do too. It's up to each financial institution to ensure their KYC process meets or exceeds local regulatory standards.

These regulations are often reflected in anti-money laundering (AML) policies designed to stop the practice of … you guessed it … money laundering. These policies generally follow the FATF Forty Recommendations, which were proscribed by the Financial Action Task Force on Money Laundering in 1990 after conducting extensive research to combat it. Member states must update their national AML systems to meet or exceed the most current FATF recommendations. And like KYC regulations, AML jurisdictions are local. But that doesn't mean they won't have an impact on international commerce.

In 2018 the European Union (EU) passed the General Data Protection Regulation (GDPR), which raised the bar for how businesses must handle sensitive customer data. On the one hand, the GDPR reduced the unethical mishandling of customer information. On the other hand, it introduced a lot more red tape and complicated hoops for the financial sector to jump through. Because many financial institutions are international, with sizable European client bases, maintaining GDPR compliance is a must, even if the bank's headquarters isn't within the EU.

Failing to implement a KYC process that sufficiently meets the various regulatory standards can lead to hefty fines. The EU alone can fine a business up to 4% of its annual global turnover for violating the GDPR, and for big financial institutions, that 4% equates to millions in lost revenue. Electing to use KYC software to ensure your ID verification process is compliant is one of the best ways to save yourself time and lost profits.

Author Resource:-

Eldon Broady writes about identity verification and business verification service. You can find his thoughts at identity verification system blog. If you are looking for an online id verification service, visit this website.