KYC,Know Your Customer

Reviewed by Vishnava | Updated on Sep 24, 2021

Catalogue

Introduction to KYC

  • KYC means Know Your Customer and sometimes even Know Your Client.
  • When starting a bank account, the KYC or KYC check is used to verify the client's identity.
  • Banks may decline to open an account or terminate a business relationship if the client fails to meet minimum KYC requirements.

Understanding Know Your Client (KYC)

  • Those in the securities industry who are dealing with the customers throughout the opening and maintaining of accounts require the KYC.
  • There are two rules implemented in July in the year 2012 that cover this topic collectively: Financial Industry Regulatory Authority Rule 2090 (Know Your Customer) as well as FINRA Rule 2111 (Suitability).
  • These rules are set in place to protect the broker-dealer and the customer and so that brokers and firms deal fairly with clients.

Importance Of KYC (Know Your Customer)

  • KYC procedures determined by banks involve all the required actions to assure their customers are real, assess, and monitor risks.
  • These client-onboarding processes help avoid and identify money laundering, terrorism financing, and different illegal corruption schemes.
  • KYC process involves ID card verification, face verification, document verification like utility bills as proof of address, and biometric verification.
  • Banks must comply with the KYC regulations and anti-money laundering regulations to restrain fraud. KYC compliance responsibility lies with the banks.
  • In case of negligence to comply, heavy penalties can be implemented.

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