Know Your Customer practice is a controversial topic for online businesses. On the one hand, the process of knowing your customer or, simply put, KYC, is an obligation for many online businesses to verify the identity of their clients before having any kind of business relations with them. On the other hand, KYC or easier practices to verify clients’ identities may impact significantly on conversion and thereafter on the income or capitalisation.
That is why finding the right balance between compliant KYC and needed traction is becoming a crucial challenge. Crypto exchanges, e-wallets, ICOs and even banks have to make sure that they have trusted detailed information about their customers — they are not involved with corruption, money laundering or terrorism funding.
How to find the balance
Technologies and methods for fast, accurate and compliant KYC are becoming more and more important globally. Companies need a complex solution with a mix of technologies and variety of data, since corruption, terrorist financing, and money laundering are going to be serious problems for the global market. Right KYC tools help businesses protect the reputation and finances. In order to protect it the solution needs to ensure that the company is doing business legally with legitimate partners, and the right KYC solution also makes the process easier for users and for the companies themself.
Many financial, gaming and blockchain organisations use electronic KYC platforms which are collecting basic data and information about the customers, ideally with simple UX and pre-built identity verification flow.
What compliant KYC should include
Customer identification should consist of saving names, social security numbers, birthdays, and addresses — all this information helps to understand whether a user was involved in a financial crime or not.
When general information is already in your database, your KYC or data provider should match it with the lists of individuals or entities that are associated with corruption or crime, being under sanctions or involved in money laundering schemes. Lists of Politically Exposed Persons, or PEPs, are also important to check, especially for financial institutions.
Then your data or KYC provider should estimate, how much is the risk to have a deal with a particular client — how much is probable involvement with the corruption or illegal activities. After all these procedures, a company can create its conclusion of a future risk associated with the client’s account. Another needed tool — ongoing monitoring, which continuously monitors the client’s account activity and determines if something suspicious appears.
The same procedure with an individual’s peers also helps financial institutions. Clients with very similar backgrounds and business fields, which also interact respectively, can be similar in other actions.
What you should look in KYC:
- Easy KYC flow for both — companies and users
- Time- and cost-effectiveness
- The speed — no matter if you a bank or an ICO, KYC compliance should be fast as just opening a new app.
- Regulators’ approvement and compliance with anti-money laundering (AML) and know your customer (KYC) legislation expertise
- Data security (including GDPR compliance).
Our Know Your Customer (KYC) platform will help you comply with Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations. Learn more.