Know Your Customer (KYC)
KYC (Know Your Customer) is the basis of effective customer research and compliance. It helps organizations manage risks and comply with the AML- legislation.
What is KYC (Know Your Customer)?
Know Your Customer, often abbreviated as KYC, is the process by which companies determine who a customer is and whether that person poses a risk for money laundering or terrorist financing. KYC is therefore about identification and verification. For organizations that fall under AML, KYC is a mandatory part of the customer acceptance process.
What's involved in a KYC process?
KYC focuses on collecting and verifying basic information about a (potential) customer. The goal: to ensure that someone is who they say they are. The process usually consists of:
- Identification: collecting data from a customer or representative
- Verification: checking whether this data is reliable and up to date
- Document verification: checking official documents, such as a passport, extract from the local chamber of commerce, or shareholder structure
- Risk indication in broad terms: are there clear signs indicating increased risk?
Relationship between KYC and CDD
Why is KYC mandatory?
The AML requires companies to know who they are doing business with. Without a completed KYC check, you are not allowed to start a business relationship. KYC forms the foundation of compliance:
- It prevents anonymous or uncontrollable transactions;
- It protects companies against reputation and integrity risks;
- It ensures that you comply with legal identification and verification requirements.
When should you perform a KYC check?
A KYC check is mandatory when:
- You enter into a new customer relationship
- An existing customer changes its structure or representative (UBO);
- Doubts arise about previously submitted data;
- You see signs that indicate an increased integrity risk.
