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Customer Identification Program
Simply put, Customer Identification Program (CIP) is the process of identifying a customer's identity prior to their onboarding. A customer's identity must be proven with government issued documents and facial verification.
Customer Due Diligence
Customer Due Diligence (CDD) is basically an investigation of the potential customer's financial or legal background and activities, in addition to the creation of a Customer Risk Profile. The Customer Risk Profile assesses the potential risk a customer may pose to the safety of the institution or company and its existing customers. CDD is a critical step in the KYC process that requires thoroughness and accuracy.
Enhanced Due Diligence
Enhanced Due Diligence (EDD) follows the initial customer onboarding. Once the customer's identity has been verified and their risk profile is created, analysed, and finally accepted, EDD is responsible for the ongoing account monitoring and risk management. If any suspicious transactions or activities occur, these will be red flagged and should immediately be reported to the appropriate regulatory authority.
KYB
KYC is applicable to more than just customers. It is also mandatory for financial institutions and companies to follow through with a KYC check for businesses prior to account creation or the approval of a business partnership. This is referred to as Know Your Business (KYB) or Corporate KYC. So, KYB is a variation of KYC. Because verifying a business is far more complex than an individual customer, KYB requires a more advanced process.
eKYC
Electronic KYC, or better known as eKYC, is the digitalised version of the standard KYC process. Companies that switch their KYC or KYB policies to a digital format require a KYC service provider to provide a compliant and compatible solution for their use case and specific needs.
eKYC solutions are generally more cost-effective, faster, more accurate, and convenient for both the business and the end user. The ability to perform KYC Checks in a remote environment enables institutions and companies to scale-up and easily collaborate with customers and other businesses around the world.
Key elements of a good KYC service provider
Regardless of whether a KYC service provider offers end-to-end KYC services, a specialised KYC service, or a full suite of KYC services, there are a few key elements that every potential KYC service provider should deliver. These key elements can serve as a guideline to help you identify the best option for your company.
- Advanced AI technology and/or Biometric Facial Recognition technology for accurate and swift identity verification and document verification.
- Compliance on an international scale. Check to see which countries' government databases the KYC service provider can access to uphold compliance with their jurisdiction. Compliance across many countries means a greater capacity for companies to scale up and remain compliant without delay.
- Frictionless UX and easy-to-use UI for ultimate customer satisfaction. Delays, technical difficulties, or unclear processes reduce customer conversion and ROI. Make sure the KYC service provider guarantees a proven method that customers will enjoy.
KYC & KYB
KYC Compliance
KYC Compliance
Throughout most of the world, KYC is a legal obligation for all financial institutions. However, with the advancements of technology and the rapid increase in identity theft, fraud, money laundering, and other forms of financial crime, KYC is now mandatory for companies in other industries as well. For example, companies or organisations that process monetary transactions or that require identity or age verification for restricted content or purchases are also obliged to comply with relevant KYC regulations. These may include non-profit organisations, online casinos and gambling platforms, insurance agencies, crypto exchange platforms, and online gaming platforms.
Regulatory KYC guidelines differ based on the type of business, services offered and the specific jurisdiction of each country. To ensure that your business is compliant, KYC service providers have legal teams and KYC experts to assist your company in choosing the appropriate guidelines for your company.
As each country has its own take on what the KYC requirements should be, finding the right KYC service provider is also a critical decision that affects the accessibility of financial institutions and other companies. Ideally, the KYC service provider will offer a solution that is tailored to your use case and is compliant with the KYC regulations of any relevant jurisdiction.
KYC Check
KYC Check
A KYC Check is the actual application of KYC regulations. It consists of three fundamental steps: Customer Identification Program (CIP), Customer Due Diligence (CDD), and Enhanced Due Diligence (EDD). To begin, a customer's identity must first be verified by matching the required documents, which must also be verified as legitimate with the customer's live presence.
A KYC service provider accomplishes this by scanning or taking photos of customer documents, in addition to scanning their face or taking a short selfie video. From there, the AI or biometric technology built into the platform will match the information extracted from the documents and facial recognition to government databases to confirm the customer's identity.
Next, a new customer is to carry out Customer Due Diligence, which involves research into the customer's financial and legal history, performing a sanction check, and ensuring that they are not a Politically Exposed Person (PEP).
KYC Checks sound time-consuming and complicated, and they are; however, that is the very reason why KYC service providers exist. You can rest assured when you have a KYC service provider to tackle the seemingly daunting task of KYC Checks.
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Document Requirements for KYC
Document Requirements for KYC
The minimum document requirements for a KYC check include:
- Proof of Identity (POI), such as a government-issued ID card, birth certificate, passport, or residence permit;
- Proof of Address (POA), such as a utility bill, lease agreement, or a house deed.
In some cases, usually with financial institutions such as credit agencies or banks, Proof of Income will also be required. Usually an income letter from an employer will meet this requirement. For those who are self-employed or need supporting documents, bank statements, pay stubs, and a recent tax return statement are all acceptable Proof of Income documents.
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KYB Check
KYB Check
Generally speaking, KYB checks follow the same process as a KYC check. The most obvious difference is the document requirements. Financial institutions and companies will require official documents from other businesses, such as articles of incorporation, business registration, or a shareholder registry. Moreover, CDD for KYB is both more intensive and extensive than KYC.
Document Requirements for KYB
Document Requirements for KYB
The minimum document requirements for a KYB Check include:
- Any official document confirming the legal existence of the business, such as a certificate of business registration or articles of incorporation.
- Proof of Identity for all Ultimate Beneficial Owners (UBOs), such as a shareholder registry, an incumbency certificate, or trust agreement.
If the corporation has intermediate holding companies or subsidiaries, similar documents for each of those companies will also be required.
Final Thoughts
KYC service providers are essential for all institutions, organisations, and corporations that are required to perform KYC or KYB Checks and maintain compliance with KYC regulations. Backed by the support of legal counsel and KYC compliance experts, you can rest assured that your company, organisation, or institution will maintain compliance with relevant KYC regulations, provide your customers with a premium, unimpeded UX, and increase ROI while scaling your business.