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.
