Kow your Customer
Know Your Customer (KYC) is a standard due diligence process of identifying who your investors are and their wealth status, verifying the sources of the client's funds (if they are legitimate or not), and requiring detailed anti-money laundering (AML) information from the clients. Getting the detailed information about your customer protects both parties in a business transaction and relationship. KYC serves an important purpose for providing superior service, preventing liability, and avoiding association with money laundering, and types of fraud.
Truly knowing your customers is about more than identity. It’s also about preferences, needs and the contextual knowledge of time and place. In the digital world, customers expect to be known as individuals with distinct preferences, not just as one member of a segment. Understanding digital habits and demographic data is just the beginning.
Financial institutions around the world must meet KYC compliance requirements to minimize the risk of bad actors carrying out financial crimes. That means they need to verify all customer identities, understand the nature of each customer’s financial transactions, and assess each customer’s potential risk of engaging in money laundering, terrorism financing and sanctions circumvention activities. Banks that fail to maintain adequate KYC controls can incur significant financial penalties and, in some cases, be ordered to cease operations.