Know Your Customer (KYC) procedures are fundamental policies and processes implemented by businesses to mitigate risks and authenticate the identities of customers throughout their entire lifecycle. These protocols are especially critical in regulated industries, serving as a safeguard against money laundering, terrorism financing, fraud, and other illicit activities. FullCircl has put together a comprehensive guide to KYC procedures.
In the UK, adherence to KYC & Anti-Money Laundering (AML) regulations is overseen by various regulatory bodies, including the Financial Conduct Authority (FCA), Prudential Regulation Authority (PRA), National Crime Agency (NCA), and HM Revenue and Customs (HMRC).
In today’s dynamic geopolitical and economic landscape, businesses, particularly those operating within the banking and financial sectors, must adopt a KYC checklist approach to ensure compliance. By incorporating KYC checks, businesses can streamline customer onboarding, continuous monitoring, and real-time adherence to evolving regulatory standards.
According to NASDAQ’s Global Scale of Financial Crime report, approximately $3.1tn of illicit funds circulated through the global financial system in 2023, with money laundering comprising a significant portion of these transactions. Additionally, global fraud schemes and bank frauds resulted in projected losses of $485.6bn.
With 59% of organisations anticipating an increase in financial crime levels in 2024, the necessity for robust KYC measures is more apparent than ever.
In an environment characterised by evolving risks, businesses must fortify their defences against illicit activities.
The repercussions of inadequate KYC compliance are severe, with penalties for non-compliance reaching staggering figures. In 2023, firms faced penalties totalling $6.6 billion, underscoring the financial consequences of regulatory violations.
Beyond regulatory compliance, effective KYC checks enable businesses to comprehend customer preferences, build trust, deliver superior service, and reduce customer acquisition and servicing costs.
A guide to the facets of a strong KYC procedure
A KYC checklist serves as the cornerstone of best practice KYC compliance, tailored to the specific risks associated with different industries and sectors. These checklists encompass the entire customer lifecycle, from initial identification to ongoing monitoring.
Customer identification forms the initial stage of KYC checks, involving the collection and verification of customer data such as name, address, and date of birth. For entities, this process extends to validating company registration documents, business licenses, and ownership structures.
Customer Due Diligence (CDD) measures are undertaken during the establishment of new business relationships or when suspicions arise regarding customer information accuracy. Enhanced Due Diligence (EDD) is employed for high-risk customers, incorporating advanced investigative techniques to mitigate potential risks.
Ongoing Monitoring, also known as Continuous Due Diligence, involves the systematic evaluation of customer profiles, business activities, and risk events to ensure ongoing compliance with regulatory standards.
How FullCircl can help
For businesses seeking assistance with KYC compliance, FullCircl offers a comprehensive suite of solutions, including automated data collection, identity verification, watchlist screening, and ongoing monitoring capabilities.
Through seamless integration and scalable verification processes, FullCircl empowers businesses to navigate the complexities of KYC compliance efficiently.
Read the full blog from FullCircl here.
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