What the.. KYC?
KYC (Know Your Customer) — the operational principle of financial institutions, which obliges them to verify the identity of a person before he can carry out transactions.This identification serves many purposes: understanding your clientele, monitoring transactions, reducing risks, and combating bribery and corruption.Thanks to this principle, for example, a bank determines who can become its client. It can also obtain basic data about the client, monitor and evaluate his transactions, and improve the security of these transactions.
KYC software works on the principle of collecting information to compile a database. Specialized software helps firms manage the identity verification process, allowing them to automatically identify high-risk customers while reducing the likelihood of human error and false positives.
How does KYC work in practice?Let's take a look at a standard transaction between a bank and a client:
1. The user registers on a banking website or app, providing his personal data, such as full name, date of birth, address, etc.
2. The bank uses various tools to verify the authenticity of this data. This could be checking against government databases, credit bureaus, or even social media.
3. After successful identity verification, the bank requests additional information about the purpose of the transaction and the source of funds.
4. If the information meets the requirements and is not suspicious, the transaction can be completed.
5. In case the information is suspicious or does not meet the requirements, the bank may request additional documents or even refuse to carry out the transaction.
Thus, KYC allows banks and, in general, any organizations to verify the identity and credibility of their customers before conducting financial transactions.
For example, cryptocurrency exchanges use KYC to verify the identity of their users and prevent money laundering.And even large tech companies that provide rental or transportation services use KYC to verify the authenticity of their users.
Their clients feel completely safe, whether they are renting a family home on a long-awaited vacation or calling a taxi late on a Friday night.
KYC is the key to customer trust and company reliability.
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