Learn what KYC is and the steps users should take to onboard smoothly.
Fraud, especially sophisticated fraud, is gaining pace. In 2023, the US Federal Trade Commission received more than 1 million reports of identity theft through their website alone. Fraudsters often use stolen personal information to create fake accounts or gain unauthorized access to existing accounts. Identity theft, along with synthetic identity fraud, account takeover, online payment fraud, and document forgery, are the types of fraud online businesses most often encounter during the onboarding process.
The first line of defense protection against various kinds of fraud at the onboarding stage is “Know Your Customer” (KYC). Let’s dive into this crucial verification procedure and the steps a user should take to successfully pass it.
“KYC” is an abbreviation for “Know Your Customer”, which is the process of identifying and verifying customers. This process is needed by both regulated and unregulated businesses. For the former, it’s to comply with Anti-Money Laundering (AML) regulations; for the latter, it’s to prevent and combat fraud and the losses it causes.
User identification involves gathering a customer’s personal data, while verification entails ensuring the accuracy of this data.
To identify a customer, businesses typically require at least the following information:
To verify this data, businesses can use a document-based verification approach. This involves examining the customer’s identity documents and proof of address (such as a utility bill) to confirm their authenticity and validity.
In many jurisdictions, however, a document-free verification approach is gaining popularity. Check here to learn what this is and where it’s compliant.
According to Anti-Money Laundering (AML) obligations, businesses must ensure customers are trustworthy by checking global sanctions lists, watchlists, blocklists, or adverse media.
For more detailed information, check out other articles by The Sumsuber:
KYC verification works by first collecting essential personal information from the customer. Various automated and manual verification checks are then used to validate user identity. This includes ID verification, proof of address checks, and more. Advanced vendors like Sumsub offer extra products such as workflow customization, reporting, dashboards, collaboration tools, and many other optimization measures useful for a compliance team.
For businesses that choose to use a document-based verification approach, the process involves scrutinizing the documents for authenticity and cross-referencing them against various databases. In many jurisdictions, however, a non-documentary verification is enough to ensure that the client is who they say they are and comply with local regulations.
Additionally, under Anti-Money Laundering (AML) regulations, businesses must ensure that the customer is not involved in illegal activities. This is done by checking the customer’s information against global sanctions lists, watchlists, blocklists, and adverse media reports. By conducting these thorough checks, businesses can prevent fraud and comply with regulatory requirements, ensuring that they only engage with legitimate and trustworthy customers.
Let’s go over the exact steps to passing KYC verification with Sumsub.
Make sure your web or mobile camera is connected and working. Then, click “Start” and follow the instructions displayed on the screen. You may begin verification on desktop and switch to mobile midway through, if necessary. To do so, press “Continue on your phone” to switch to mobile using a QR code or a link.
Step 1. Privacy Terms
Please review and accept our privacy terms by ticking the corresponding boxes. This gives Sumsub consent to process your personal data.
Step 2. ID Document
Select the issuing country and document type of the ID you wish to use.
Upload photos of the ID document. You can use any official government document—ID-card, passport, driving license, etc.—valid for at least one month after the present date.
You can find more details on Sumsub’s ID document requirements at this link.
When taking photos, please note that:
Step 3. Liveness Check
Face the camera and slowly rotate your head in a full circle to complete our liveness verification.
Liveness verification confirms that we are dealing with the document owner, rather than an imposter. Please keep your face within the frame throughout the procedure.
Learn more about what Liveness Detection is and how it works in this article:
Suggested read: Liveness Detection: Choosing a Solution That Won’t Let Fraudsters in
Step 4. Proof of Residence
Submit photos of proof of residence documents for validation—the same way you uploaded your ID document.
When taking photos, please note that:
Step 5. Submitting your application
Now you’ll just have to wait while Sumsub checks your data. This won’t take long and the status of your application will be updated automatically. If something goes wrong, you’ll get a message with clear instructions on how to resolve the issue.
KYC is necessary both for AML-regulated and unregulated businesses to verify the identity of their customers, ensuring they are legitimate and trustworthy. KYC helps prevent fraud, money laundering, and other illegal activities by confirming that customers are who they claim to be. Additionally, complying with KYC regulations protects businesses from legal penalties, license revocation, and reputational harm.
Just recently, the Reserve Bank of India (RBI) barred Kotak Mahindra Bank from onboarding new customers through online and mobile banking channels due to serious deficiencies and non-compliances observed in IT inventory management, patch and change management, user access management, vendor risk management, and data security. Additionally, the regulator directed the bank to stop issuing new credit cards.
Suggested read: The Biggest Money Laundering Scandals of the Last 10 Years
Since KYC falls under AML requirements, any business subject to AML regulations must perform KYC procedures. Typically, these include financial institutions, crypto businesses, and iGaming platforms that offer their services continuously and without limitations.
However, KYC is also crucial for non-regulated businesses, such as marketplaces and car-sharing platforms. It helps filter out suspicious individuals and risky suppliers.
For business clients, it’s also crucial to conduct a “Know Your Business” procedure.
Suggested read: Understanding KYB and How it Relates to KYC (2024)
To save on KYC costs, businesses can consider the following strategies:
The price for KYC depends on multiple factors, including extra features like questionnaires, the level of support, and more. In Sumsub’s case, you can start with as little as $1 per online KYC verification.
Sumsub offers you a full-cycle verification solution that not only verifies users at onboarding, but also provides ongoing monitoring. According to our internal research, 70% of fraud happens after the onboarding stage, therefore constant monitoring is crucial to prevent fraud, money laundering, and financial losses.
Moreover, you can adjust the platform according to your needs, set up verification logic with no code, and achieve the highest pass rates.
In 2024, the key KYC trends include increased use of AI/ML for real-time verification, enhanced biometric authentication, and greater emphasis on continuous monitoring to prevent fraud and ensure compliance with evolving regulations.
30 seconds is the average verification time with Sumsub.
In order to pass KYC, users usually need to upload an ID document (except in countries where Non-Doc verification is already accepted and compliant) and pass a liveness check.