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What is KYC ?

27 February 2017

Business Insight

When you are opening a new account at a bank or payment institution, such as Lemonway, you might hear talk of KYC. What is KYC and why is it important when choosing your payment solution?

 

KYC stands for Know Your Customer. KYC is a regulatory and legal requirement for banks and other related institutions to identify and verify the identity of their clients. The term can also be used by businesses to denote their own similar processes.

 

Banks undertake such processes to comply with various anti-money laundering (AML) regulations and also regulations countering the financing of terrorism (CFT). KYC is a way to prevent banks from becoming involved with criminal or terrorist activity.

 

Banks accomplish KYC by verifying various documents obtained from reliable sources. These documents may include the passport or identity card of an individual, the business registration for a company and utility bills for proof of address.

 

The bank then needs to be sure where any funds are coming from. This involves knowing the type of business and knowing where existing wealth originated.

 

The process does not end with the identification with the person or company and source of wealth, instead it continues with the bank or institution keeping an eye on activity to be sure that it fits with the profile and expectations. The goal is to identify and investigate suspicious activity.

 

In addition to protecting the banks or institutions from inadvertently being used for criminal or terrorist activities, the KYC process also protects the clients as it helps avoid instances of identity theft and fraudulent activities on the accounts.