What is KYC?

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What is KYC? 

To assess customer risk, many companies implement what is known as a Know Your Customer (KYC) procedure. For individuals or companies, KYC usually involves manual, often time-consuming processes to comply with regulations and reduce risk. What is the definition of KYC? What are its benefits? How is it implemented in practice in companies? Answers in this article!

KYC: definition

The KYC procedure consists of verifying the identity and integrity of customers. A protocol that is in fact already necessary for companies due to the implementation of European regulations aimed at preventing fraud, money laundering, corruption, etc.

Data is collected and analysed to verify the identity of an individual. This process is implemented from the first contact with the customer, but also throughout the relationship between the company and the customer. In a bank, this includes the examination of transactions to assess those that are potentially risky. The definition of KYC concerns banks, but also companies in the consulting or investment business, for example. We can also mention professionals in the legal and insurance sectors, etc. 

With increasingly strict regulations on the obligations of companies to check the identity of their customers, the authenticity of the documents they provide during onboarding

What are the benefits of this protocol?

Once the definition of KYC is understood, the benefits of this procedure can be considered. Indeed, although it results from the regulations in force, it nevertheless represents certain advantages for many companies. These include:

  • Ensure the legitimacy and transparency of each monetary transaction
  • Combating criminal activity
  • Avoiding certain legal and tax issues
  • Create an environment of trust with its customers

Any company wishing to comply with the regulations in force and to ensure the reliability and security of its customers must therefore master the definition of KYC and apply the protocol in its daily activities, whether at the time of customer onboarding or throughout the relationship.

What tools for effective implementation?

Depending on the definition of KYC, there are several ways to implement this process. The use of artificial intelligence anddedicated tools is an effective way to achieve the desired data set. Indeed, the volume of data to be analysed and taken into account can be truly colossal. With an adapted tool based on artificial intelligence parameterised for one's activity, one can not only save precious time, but also choose a more reliable and less costly solution.

There are many companies that specialise in providing this type of tool for companies wishing to apply the KYC protocol (at Archipels, we operate document verification with our Archipels Verify solution). These customised tools allow a certain number of actions to be automated and to be alerted in case of doubt so that a member of the company's team can intervene. Real-time monitoring can then be envisaged with human intervention only when necessary. These tools remain the best levers for dealing with the challenges of the KYC protocol.