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Know Your Customer (KYC)

What is Know Your Customer?

The term Know Your Customer stands for the business verification process. Alternatively, the term goes as KYC or Know Your Client. So, the KYC procedure stands for clients’ identity verification and decides if the party is suitable or not. This notion is typical for financial, banking, and investment industries.

In banking, it stands for anti-laundry and bank regulations. KYC in investment defines clients’ investment knowledge and risk tolerance, plus their financial state. For companies, KYC means anti-bribery compliance for agents, clients, or distributors.

Nevertheless, the main know your customer’s goal is to prevent the business from money laundry or illegal activities. That includes both intentional and unintentional actions. This methodology also helps companies to know their clients better.

For instance, know your customer usually includes four elements:

  • client’s acceptance policy,
  • client’s identification procedures,
  • transactions’ monitorings,
  • risk management.

KYC is a vital procedure for both financial and non-financial establishments. It identifies the suspicious activity at the early stages. That helps to minimize fraudulent activity.

All in all, the KYC procedure includes the following parts:

  • Collection and analysis of the information that can be identified
  • Determination of the public exposure status according to the watch-list
  • Determination of customers’ risks
  • Creation of “Customer’s profile” according to customer’s transaction behavior
  • Monitoring of customer’s transactions compared to determined behavior

There is an enhanced Know You Customer option – Know Your Customer’s Customer.

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