KYC: the meaning
Every European financial institution must screen its customer prior to acceptance. KYC (Know your Customer) aims to combat money laundering, fraud and terrorism. In the first place, the actions that you need to perform in order to ensure a sound KYC procedure are background checks. This article helps explain what KYC is all about, what a KYC procedure entails, and how Customer Due Diligence matters.
What does a KYC procedure look like?
The procedure involves background checks to be performed as part of a risk-based strategy. The KYC procedure involves verifying the client's identity using various documents such as a photo ID.
This verification, the KYC check, can be performed manually using physical documentation. Today, however, it is faster and more reliable to perform this check electronically using data collected online.
KYC guidelines and measures are laid down in Dutch and European legislation. Financial institutions such as banks, accountancy, law, and financial firms as well as insurance companies are required to pursue a KYC/CDD policy. To do this, they must screen everyone they are working with. These organisations must report anything they find remarkable during the process.
Is Customer Due Diligence part of KYC?
Customer Due Diligence (CDD) is a form of KYC. In daily practice, these terms are often mixed up, while there is an essential difference, being: the degree of identification of the client. A CDD process is a longer process that continues after the client's onboarding. It includes checks such as sanction and PEP screening to continuously assess the level of risk a client poses to a company. Both KYC and CDD are, in turn, crucial aspects of an AML audit.
RegLab for KYC
Do you also spend a lot of time on a Know Your Customer and Customer Due Diligence policy to comply with AML requirements? Despite the frustrations they may generate, the KYC principles are becoming increasingly important. RegLab helps organisations quickly, safely and easily comply with Know your Customer policy laws and regulations.
Themed file: fully prepared for the supervisor’s audit
This article is part of a number of articles and downloads that will help you prepare yourself for the supervisor’s visit. This content is based on a supervisor's FAQs during an audit. Do you want to be 100% AML-proof and ready for the supervisor’s visit? Find all FAQs in our Knowledge Centre.