It is one of the most important responsibilities of the banks to make sure that the identity of their customers is genuine, namely, they are who they claim to be. So, KYC (Know Your Customer) is a compulsory process for the banks when opening a new account or on a regular basis used for identification and verification of the client’s identity. If a customer fails in meeting the minimum KYC requirements, banks will have to right to refuse to open the account or terminate the business relationship with that customer.
KYC holds its critical place in today’s financial world because it serves as a crucial weapon in the war against financial crimes and money laundering as the identification of customers is the initial step for each process.
You can read more here about KYC compliance.
With the tremendously increasing pace of digitalization, it is becoming harder and harder to control the financial payment systems. Occasionally, the regulations are evolving and becoming more challenging to be able to ensure a more secure financial environment. KYC is taken as one of the key elements to prevent financial crimes and is actively affecting the scope of the regulations.
Regulation Requirements in terms of Compliance
The KYC (Know Your Customer) procedures are aimed to help prevent and detect illegal activities like money laundering or financing of terrorism via assessment and monitoring of the risks.
Banks and other Financial Institutions have to apply the KYC procedures by following and complying with KYC regulations. It is solely in their responsibility to abide by the KYC compliance and there are heavy penalties applied in case of a failure in the compliance.
The regulatory precautions are underlining the importance of knowing the customer and mostly focusing on the AML (Anti-Money Laundering), transparency, and personal data protection.