Know Your Customer (KYC) is a term used for customer identification process which is used for opening an account with any financial entity. It constructs a trustworthy, reliable and safe relationship between the customer and financial institutions.
Illegal activities like fraud and money laundering and unethical transactions can be neglected with the implementation of KYC. It is not restricted just to the financial institutions but is now being adopted in sectors like retail, and Fintech as well.
Benefits of KYC
KYC builds a credible relationship between the financial provider and the businesses. Identity verification is the key feature of the KYC norms, and therefore all the companies must remain ethical if they need financial help. The idea behind KYC is to confirm that the client is not on any prohibited lists and also assess risk factors like terrorism financing, money laundering, etc. Apart from this KYC is helpful in gathering more information about the nature of customer's activities and is considered as a source of compliance and safety that eliminates the illegal activities from almost all the sectors.
KYC is authentic and therefore ensures financial security. It's a practice which is still being perfected and is still in its infancy stage. Three reasons why KYC is an essential criterion.
1. Electronic ID verification is the solution for all the global organizations which aims at implementing smarter, more straightforward fraud prevention measures in the KYC process to improve their client experience and also protecting their corporate assets.
2. KYC enables data to stay up to date and significant, which gives verification of identity documentation to reflect any changes. If any changes are made in the obligatory reports, financial foundations can quickly look for help and roll out improvements likewise.
3. Even though KYC has opened a radical new stage of client verification, it's better to know who your clients are and what they're up to with regards to illegal exchanging or business exercises. KYC is thought to be a fundamental piece of keeping up a dependable organization, along these lines by working consistently.