What does KYC mean?

The meaning of KYC

KYC stands for Know Your Customer. It is a mandatory process for financial and legal institutions to screen clients before providing services. The goal is to prevent money laundering, fraud, and terrorist financing. 

What does a KYC procedure look like?

A KYC process consists of background checks and identity verification of the customer. The following are checked: 

• The authenticity of identity documents, such as a passport or ID card 
• The origin of funds or assets
• Potential risks associated with the customer
• This verification can be done manually, but it is increasingly being carried out automatically using online tools and databases. This is faster, more accurate and more secure
  
  

Mandatory KYC policy according to legislation  

The AML Act and EU regulations provide clear guidelines. Banks, accountants, lawyers, notaries, tax and financial advisors, and insurers must screen all (potential) clients. Suspicious activity must be reported. In the Netherlands, this is reported to the FIU. 

Difference between KYC and Customer Due Diligence (CDD) 

Although the terms KYC and Customer Due Diligence (CDD) are often used interchangeably, there is a difference between them: 

• KYC focuses on identifying the customer before the start of the collaboration. 
• CDD goes further: it is an ongoing process in which customers are continuously screened, for example via sanctions lists and PEP checks.  

Both are part of a broader AML check.  

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 firms quickly, safely and easily comply with Know your Customer policy laws and regulations.