Know your customer

The know your customer or know your client (KYC) guidelines in financial services require that professionals make an effort to verify the identity, suitability, and risks involved with maintaining a business relationship. The procedures fit within the broader scope of a bank's Anti-Money Laundering (AML) policy. KYC processes are also employed by companies of all sizes for the purpose of ensuring their proposed customers, agents, consultants, or distributors are anti-bribery compliant, and are actually who they claim to be. Banks, insurers, export creditors, and other financial institutions are increasingly demanding that customers provide detailed due diligence information. Initially, these regulations were imposed only on the financial institutions but now the non-financial industry, fintech, virtual assets dealers, and even non-profit organizations are liable to oblige.
Standards.
The objective of KYC guidelines is to prevent businesses from being used by criminal elements for money laundering. Related procedures also enable businesses to better understand their customers and their financial dealings. This helps them manage their risks in a well-judged manner. Today, KYC principles apply to banks as well as different online businesses. They usually frame their KYC policies incorporating the following four key elements:
The stringent regulatory environment establishes KYC as a mandatory and crucial procedure for financial institutions as well as non-financial institutions. As it minimizes the risk of fraud, by identifying suspicious elements earlier on in the client-business relationship. For the purposes of a KYC policy, a "customer/user" may be defined as:
KYCC.
KYCC or Know Your Customer's Customer is a process that identifies a customer's customer activities and nature. This includes the identification of those people, assessing their associated risk levels and associated activities the customer's customer (business) is involved in.
KYCC is a derivative of the standard KYC process, that was necessitated from the growing risk of fraud originating from fraudulent individuals or companies, that might otherwise be hiding in second-tier business relationships. i.e. (a customer's customer).
KYB.
Know Your Business or simply KYB is an extension of KYC laws implemented to reduce money laundering. KYB is a set of practices to verify a business. It includes verification of registration credentials, location, the UBOs (Ultimate Beneficial Owners) of that business, etc. Also, the business is screened against blacklists and grey lists to check if it was involved in any sort of criminal activity such as money laundering, terrorist financing, corruption, etc. KYB is significant in identifying fake business entities and shell companies. it is crucial for efficient KYC and AML compliance.
eKYC.
Electronic know your customer (eKYC) involves the use of internet or digital means of identity verification.
Controversies.
Controversies over this legislation/regulation/policy include: