What are the best practices for performing KYC?

In a time where the number of people using online services is swelling like never before, the need for businesses to perform in-depth and detailed KYC checks has taken a key role.

Know Your Customer processes are carried out when a customer’s identity needs to be verified before they are provided access to a financial product that could be used for money laundering.

Recent work by RegTech firm PassFort has underlined some of the key tenets of KYC as well as the best practices for performing KYC.

With KYC being key to whether an identity is confirmed or not in many cases, the act of KYC can unsurprisingly cover a lot of ground and the data collected can vary massively depending on the customer base of a financial institution, the jurisdiction it operates in and the appetite for risk.

PassFort detailed how KYC can include anything from checking identities to making enquiries into an ownership structure or the financial position of a customer or business. Each process, however, is about building a picture of risk and helping the financial institution develop trust in the entity they are transacting with.

Such protocols, the firm underlines, are necessary for financial institutions to be compliant with anti-money laundering regulation, as well as protecting banks, investment advisors, payment providers and wealth managers from onboarding financial criminals.

According to PassFort, there are seven best practices for performing KYC and managing risk. The company said that while each institution will have its own KYC process and customer journey, financial institutions with the best KYC processes will commonly have the same seven attributes.

These attributes include using RegTech to automate KYC processes before providing access to financial services as well as building an onboarding journey that delivers compliance efficiency and great customer experiences. Creating a risk policy that is right for everything involved – business, products, customers and jurisdictions – as well as defining what low, medium and high-risk customer profiles look like is also key.

PassFort also cited automating data checks to create a profile of risk for each customer with the use of trusted and reliable data sources and setting team responsibilities for progressing tasks, deciding outcomes and escalating cases for review as vital attributes. Companies should also test the KYC policy and refine it on an ongoing basis to maintain compliance and excellent customer experiences.

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