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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