Know your customer (KYC) processes are put in place to establish a customer’s identity and to identify risk factors for financial crime. Complying with KYC regulations helps prevent money laundering, the financing of terrorism, and perpetration of fraud.
KYC stands for know your customer and is based on regulated businesses, such as financial institutions and financial services companies, knowing who their customers are and understanding what risks they pose to their business.
Know your customer processes are a legal requirement for regulated businesses. Regulations are designed to prevent money laundering, terrorist financing, and associated offenses like modern slavery and drug trafficking.
While KYC procedures enable organizations to understand risk and make decisions with confidence about whom to work with, they also help them understand customers more fully to create better experiences. For example, digital compliance journeys that are simple to complete can create brand loyalty.
A series of KYC checks can be extremely effective in stopping bad actors or illicit organizations from getting a foothold in the legitimate financial system. KYC is therefore a crucial part of any approach to anti-money laundering (AML) compliance.
How an organization chooses to structure and complete its KYC process is down to them. It will be based on factors such as risk appetite, the regulation an organization needs to comply with, which jurisdictions it operates in, and what type of customers are being onboarded or monitored.
Typically, KYC compliance processes will include:
The differences between AML vs. KYC; AML or anti-money laundering is the framework of the legislation and regulation governing regulated businesses. KYC is the process used to achieve compliance with the law, and it is a key part of the overall AML framework.
A KYC process is most successful when an organization builds a holistic risk profile of a customer during onboarding. Completing KYC due diligence is part of anti-money laundering and building better relationship with trusted customers. Profiles can be honed, refined, and developed overtime throughout the customer lifecycle – highlighting risk, but also where new business opportunities may lie.
Moody’s Analytics KYC is transforming risk and compliance, creating a world where risk is understood so decisions can be made with confidence about whom to work with.
Our customers build a unique compliance ecosystem using our workflow orchestration platform, leading datasets, analytical insights, and integrations with global providers to create flexible solutions to onboard customers at scale.
Harnessing our innovative technology and industry expertise, Moody’s Analytics automates accurate screening and swift onboarding of customers and third-parties. We continue our support throughout the customer lifecycle by enabling perpetual monitoring of risk across global business networks in near real-time.
Get in touch to talk about your KYC program – we would love to hear from you.