Know your customer (KYC)

Know yourYour customerCustomer (KYC) is a process of identifying and verifying customers, also sometimes referred to as customer due diligence, to help a financial institution understand and verify who a customer or client is and what risks doing business with the individual brings. The process is a standard due diligence process used by various financial institutions and other organizations, such as banks, credit unions, payment companies, insurance agencies, regulated industries (such as gambling facilities), cryptocurrency exchanges, digital wallet providers, asset management firms, real estate agencies, trust formation services, and dealers of high-value goods.

In many regions around the world, KYC has become a standard requirement from industry regulatory bodies. These regulations are part of a larger Anti-Money Laundering (AML) regulation, which seeks to protect financial institutions and customers of those institutions from fraud, liability, and association with money laundering. Due to many of these regulations, not complying with KYC requirements, or engaging in less than adequate KYC processes, extensive fines can result in extensive fines for the organization. KYC compliance and requirements dependsdepend on the region in which business is conducted. The KYC process is intended to prevent businesses engagefrom engaging with persons associated with terrorism, corruption, or money laundering, while fighting online fraud and financial crime, such as money laundering, corruption, and terrorist financing.

In various regions and regulatory schemes, thedocuments documentsare required by a customer to prove their identity. Often these documentsThese are typically government-issued identification documents, such as a driver's license, birth certificate, social security card, or passport. Often, these documents will be supported by additional documents, especially to confirm a customer's address or employment, which can be done with documents such as bills from utility providers or pay checkspaychecks, among others.

Depending on the region, the companies whichthat fall under this category, and the expectations placed on them by those regulations, will be different. However, generally, most regulations cover these various institutions in some way.

Know your customer (KYC) verification programs do not look the same at every level of a business nor in every industry required to engage in the process. Regulations vary widely by region as well. And in many cases, regulations can be vague to prevent companies from implementing the minimum processes necessary to stay compliant, instead favoring for vague language to suggest companies be as stringent as possible in their processes to avoid fines or potential exposure to fraud or crime. The general approach to KYC, regardless of jurisdiction or industry, involves three main risk-based approaches: customer identification programs (CIP), customer due diligence (CDD), and continuous monitoring.

A customerCustomer identificationIdentification programProgram (CIP) is, as the name suggests, a program for verifying the identity of a customer. How this is acehivedachieved varies. At a minimum, most organizations collect and verify a few pieces of identifying information, generally including the individual's name, date of birth, address, and identification number. However, this can include an additional layer of verification, such as using a selfie photo to compare to government-issued ID, running personally identifiable information (PII) through authoritative databases, and assessing other signals, such as IP addresses. This should be enough information for an organization to deem an individual or situation to be of greater or lesser risk. And it allows for leeway in the KYC program based on the industriesindustry's use cases, risk tolerances, or customer type, among others. Some other factors to consider for KYC include the following:

• How KYC is performed - generallyperformed—generally split between remote or in-person. Remote, also known as eKYC, is often faster and more convenient, especially as larger portions of populations have electronic identities. Further, what information is collected to verify identities can vary. For example, an organization can choose to select driver's licenses, passports, SSN cards, or utility bills; but they can also opt to add biometric data (such as a selfie) with other additional signals to ensure verification.
• When KYC is performed - orperformed—or how often an organization wishes or is required to run sanctions and adverse media lists against actions that merit KYC; with common actions, including creating an account, withdrawing money, or changing account details, among others.

Similar to CIP, customerCustomer dueDue diligenceDiligence involves assessing customer risk, and in some regions, is strictly enforced for financial instutionsinstitutions to follow. Often, it involves four requirements: identify and verify customer identities, identify and verify identities of beneficial owners (anyone who has 25 percent or more) of companies opening an account, understand customer relationships to develop risk profiles, and continuously monitor customers and transactions. Depending on the risk level presented by a customer or situation, organizations can use a different level of CDD, with there being three common levels:

• Simplified due diligence: thisdiligence—this is often performed in situations whichthat are considered to be at low risk for fraud, money laundering, or terrorism financing.
• Basic due diligence: thisdiligence—this is often considered the baseline for customers or situations whichthat involvesinvolve collecting and verifying basic information to decrease risk.
• Enhanced due diligence: thisdiligence—this is used to collect additional information for higher-risk individuals and situations, such as high-net worthhigh-net-worth individuals or politiciallypolitically exposed persons (PEP).

Having different levels of due diligence can be helpful for organizations, as it means risky customers do not have to automatically be turned away, and low risklow-risk customers do not have to go through a tedious and time-consuming process (which can turn those customers away). Instead, a progressive risk segmentation system can be used to modify the user's experience based on the signal'ssignals received during the verification process.

As the name implies, continuous monitoring is the ongoing monitoring of individuals and transactions over time and reporting anything suspicious to the appropriate reporting authority of the given jurisdiction. Some actions which oftenthat can trigger alarms for institutions include unexplainable activity spikes;, activity in areas known for money laundering and other financial crimes;, and new inclusions on PEP, sanctions, and adverse media lists.

Also known as Know Your Business (KYB), corporate KYC is the process of identifying the business a financial institution intends to work with, and the people behind the business. The process involved in corporate KYC is similar to the standard KYC process, and includes the following:

• Verifying the business - wherebusiness—where a financial institution collects and verifies corporate information such as the business name, address, registration number, and other relevant business registration documents.
• Identifying UBOs - whereUBOs—where ultimate beneficial owners (UBOs), defined as any individual who controls a business or has a 25 percent or greater ownership stake, are identified as potential risk factors.
• Performing KYC on the business's UBOs - and the—the final setep isstep, where a financial institution performs in-depth KYC checks on anyone previously found to be ana UBO.

Anti-Money Laundering (AML) regulations offer a framework used by governments, international regulatory bodies, and businesses to prevent both money laundering by criminal organizations and the funding of terrorist organizations. AML programs tend to be bildbuilt upon five pillars:

To comply with AML regulations, businesses are required to run watchlistwatchlists and sanction reports continuoslycontinuously on an individualindividuals to ensure they are not associated with lists or groups they are not supposed to serve;. Also, individuals already onboarded with a financial institution can norbe monitored to determine that individuals already onboarded with a financial institutionthey are not added to such a list - orand enablingenable the institution to take action onceif they are.

KYC and AML are closely related, as KYC is often considered to be a part of an overall AML strategy, but falls under the AML umbrella of actions. Further, KYC is often grouped, for this reason, with AML strategies;, especially as KYC allows an institution to be continuously monitoring and verifying individuals, which can help filter out individuals linked with money laundering and financing terrorism. Further, AML and KYC strategies can help a financial institution stay compliant with local regultionsregulations and increaseimprove theirits business reputation with regulators and with theirits customers. These strategies also help these institutions keep those same customer'scustomers safe from fraud, amongand other financial crimes.

KYC was created as a response to anonymous owners of cryptocurrency. According international banks agreement “Travel rule” every financial organization must know who and whom they transfer money. It helps to fight illegal transactions and financing terrorism.

Know your customer (KYC) is a process of identifying and verifying customers, also sometimes referred to as customer due diligence, to help a financial institution understand and verify who a customer or client is and what risks doing business with the individual brings. The process is a standard due diligence process used by various financial institutions, such as banks, credit unions, payment companies, insurance agencies, regulated industries (such as gambling facilities), cryptocurrency exchanges, digital wallet providers, asset management firms, real estate agencies, trust formation services, and dealers of high-value goods.

When crypto exchanges were decentralized (DEX) many government regulators were trying to ban them for his anonymity. But when exchange became centralized (CEX) government regulators required to deploy the verifications process or they will ban them. And companies start to create different processes of verification, given the common name “Know your customer” (KYC).

In many regions around the world, KYC has become a standard requirement from industry regulatory bodies. These regulations are part of a larger Anti-Money Laundering (AML) regulation which seeks to protect financial institutions and customers of those institutions from fraud, liability, and association with money laundering. Due to many of these regulations, not complying with KYC requirements, or engaging in less than adequate KYC processes, can result in extensive fines for the organization. KYC compliance and requirements depends on the region in which business is conducted. The KYC process is intended to prevent businesses engage with persons associated with terrorism, corruption, or money laundering, while fighting online fraud and financial crime such as money laundering, corruption, and terrorist financing.

In various regions and regulatory schemes, the documents required by a customer to prove their identity. Often these documents are government-issued identification documents, such as a driver's license, birth certificate, social security card, or passport. Often, these documents will be supported by additional documents, especially to confirm a customer's address or employment, which can be done with documents such as bills from utility providers or pay checks, among others.

Depending on the region, the companies which fall under this category, and the expectations placed on them by those regulations, will be different. However, generally, most regulations cover these various institutions in some way.

Today only the biggest crypto companies created KYC. The middle and small size companies didn't. It helped to save their clients. Some companies even attract new clients, promise won’t deploy this process in the future. But it means that these companies won’t get a legal license and can’t to working with legal finance institutes.

The simplest and most popular way to verify is to send SMS to the phone. Another - take a photo with your ID card and your crypto wallet number. Also can use a private driver's license or passport. Another way is Face ID. In online mode, you must film yourself on camera, following the tips.

Know your customer (KYC) verification programs do not look the same at every level of a business nor in every industry required to engage in the process. Regulations vary widely by region as well. And in many cases regulations can be vague to prevent companies from implementing the minimum processes necessary to stay compliant, instead favoring for vague language to suggest companies be as stringent as possible in their processes to avoid fines or potential exposure to fraud or crime. The general approach to KYC, regardless of jurisdiction or industry, involves three main risk-based approaches: customer identification programs (CIP), customer due diligence (CDD), and continuous monitoring.

A customer identification program (CIP) is, as the name suggests, a program for verifying the identity of a customer. How this is acehived varies. At a minimum, most organizations collect and verify a few pieces of identifying information, generally including the individual's name, date of birth, address, and identification number. However, this can include an additional layer of verification, such as using a selfie photo to compare to government-issued ID, running personally identifiable information (PII) through authoritative databases, and assessing other signals, such as IP addresses. This should be enough information for an organization to deem an individual or situation to be of greater or lesser risk. And it allows for leeway in the KYC program based on the industries use cases, risk tolerances, or customer type, among others. Some other factors to consider for KYC include:

• How KYC is performed - generally split between remote or in-person. Remote, also known as eKYC, is often faster and more convenient, especially as larger portions of populations have electronic identities. Further, what information is collected to verify identities can vary. For example, an organization can choose to select driver's licenses, passports, SSN cards, or utility bills; but they can also opt to add biometric data (such as a selfie) with other additional signals to ensure verification.
• When KYC is performed - or how often an organization wishes or is required to run sanctions and adverse media lists against actions that merit KYC; with common actions including creating an account, withdrawing money, or changing account details, among others.

Similar to CIP, customer due diligence involves assessing customer risk, and in some regions is strictly enforced for financial instutions to follow. Often it involves four requirements: identify and verify customer identities, identify and verify identities of beneficial owners (anyone who has 25 percent or more) of companies opening an account, understand customer relationships to develop risk profiles, and continuously monitor customers and transactions. Depending on the risk level presented by a customer or situation, organizations can use a different level of CDD, with there being three common levels:

• Simplified due diligence: this is often performed in situations which are considered to be at low risk for fraud, money laundering, or terrorism financing.
• Basic due diligence: this is often considered the baseline for customers or situations which involves collecting and verifying basic information to decrease risk.
• Enhanced due diligence: this is used to collect additional information for higher-risk individuals and situations, such as high-net worth individuals or politicially exposed persons (PEP).

But all these ways are not reliable. And companies don't hurry to improve this process because fearing that many clients unfollow them. A good example here is Binance. It welcomed government oversight. At the same time, the firm was withholding information from regulators, maintaining weak checks on customers, and acting against its own compliance department’s recommendations, a Reuters investigation has found.

But on the other hand, some countries have been watching closely for this process. In South Korea, the crypto exchange Bithumb has banned the transfer of crypto assets to unidentified wallets. All other exchanges in the country must do the same by March 25, 2022. Users can now only register their personal wallets. When registering, users will have to undergo KYC verification, meaning they will be required to take a picture of their wallet number along with their ID card.

Having different levels of due diligence can be helpful for organizations, as it means risky customers do not have to automatically be turned away, and low risk customers do not have to go through a tedious and time-consuming process (which can turn those customers away). Instead, a progressive risk segmentation system can be used to modify user's experience based on the signal's received during the verification process.

As the name implies, continuous monitoring is the ongoing monitoring of individuals and transactions over time and reporting anything suspicious to the appropriate reporting authority of the given jurisdiction. Some actions which often can trigger alarms for institutions include unexplainable activity spikes; activity in areas known for money laundering and other financial crimes; and new inclusions on PEP, sanctions, and adverse media lists.

Also known as Know Your Business (KYB), corporate KYC is the process of identifying the business a financial institution intends to work with, and the people behind the business. The process involved in corporate KYC is similar to the standard KYC process, and includes:

• Verifying the business - where a financial institution collects and verifies corporate information such as the business name, address, registration number, and other relevant business registration documents.
• Identifying UBOs - where ultimate beneficial owners (UBOs), defined as any individual who controls a business or has a 25 percent or greater ownership stake, are identified as potential risk factors.
• Performing KYC on the business's UBOs - and the final setep is where a financial institution performs in-depth KYC checks on anyone previously found to be an UBO.

Anti-Money Laundering (AML) regulations offer a framework used by governments, international regulatory bodies, and businesses to prevent both money laundering by criminal organizations and the funding of terrorist organizations. AML programs tend to be bild upon five pillars:

• A designated compliance officer
• An internal AML policy
• Employees trained in said policy
• Tests and audits on the program or policy
• The implementation of risk-based procedures for conducting ongoing customer due diligence

To comply with AML regulations, businesses are required to run watchlist and sanction reports continuosly on an individual to ensure they are not associated with lists or groups they are not supposed to serve; nor that individuals already onboarded with a financial institution are not added to such a list - or enabling the institution to take action once they are.

KYC and AML are closely related, as KYC is often considered to be a part of an overall AML strategy, but falls under the AML umbrella of actions. Further, KYC is often grouped, for this reason, with AML strategies; especially as KYC allows an institution to be continuously monitoring and verifying individuals, which can help filter out individuals linked with money laundering and financing terrorism. Further, AML and KYC strategies can help a financial institution stay compliant with local regultions and increase their business reputation with regulators and with their customers. These strategies also help these institutions keep those same customer's safe from fraud, among other financial crimes.

The simplest and most popular way to verify is to send SMS to the phone. Another - take a photo with your ID card and your crypto wallet number. Also can use a private driver's license or passport. Another way is Face ID. In online mode, you must film yourself on camera, following the tips.

KYSKYC was created as a response to anonymous owners of cryptocurrency. According international banks agreement “Travel rule” every financial organization must know who and whom they transfer money. It helps to fight illegal transactions and financing terrorism.

Today only the biggest crypto companies created KYC. The middle and small size companies didn't. It helped to save their clients. Some companies even attract new clients, promise won’t deploy this process in the future. But it means that these companies won’t get a legal license and can’t to working with legal finance institutes.

The simplest and most popular way to verify is to send SMS to the phone. Another - take a photo with your ID card and your crypto wallet number. Also can use a private driver's license or passport.

But all these ways are not reliable. And companies don't hurry to improve this process because fearing that many clients unfollow them. A good example here is Binance. It welcomed government oversight. At the same time, the firm was withholding information from regulators, maintaining weak checks on customers, and acting against its own compliance department’s recommendations, a Reuters investigation has found.

But on the other hand, some countries have been watching closely for this process. In South Korea, the crypto exchange Bithumb has banned the transfer of crypto assets to unidentified wallets. All other exchanges in the country must do the same by March 25, 2022. Users can now only register their personal wallets. When registering, users will have to undergo KYC verification, meaning they will be required to take a picture of their wallet number along with their ID card.

KYS was created as a response to anonymous owners of cryptocurrency. According international banks agreement “Travel rule” every financial organization must know who and whom they transfer money. It helps to fight illegal transactions and financing terrorism.

When crypto exchanges were decentralized (DEX) many government regulators were trying to ban them for his anonymity. But when exchange became centralized (CEX) government regulators required to deploy the verifications process or they will ban them. And companies start to create different processes of verification, given the common name “Know your customer” (KYC).

Today only the biggest crypto companies created KYC. The middle and small size companies didn't. It helped to save their clients. Some companies even attract new clients, promise won’t deploy this process in the future. But it means that these companies won’t get a legal license and can’t to working with legal finance institutes.