A Closer Look at KYC Policy

KYC (Know Your Customer) is a buzzword among financial service providers these days. The know your customer or Know your Client guidelines in banking take on greater importance, particularly as identity theft becomes a greater threat. The federal laws that have been enacted to address this threat have made KYC a mandatory part of these policies. The regulations fit well within the wider scope of the overall anti-fraudulent policy of a bank. Read vast info on KYC on this webpage http://knowyourcustomers.io/.

Know Your Customer rules in banking

The Know Your Customer rules in banking are essentially implemented for the benefit of the customers. They ensure that only those who ought to be collecting information can do so. Those who are not supposed to be collecting such information or ought not to be collecting such information on behalf of the customers are enjoined by the KYC procedure from doing so. The banks are not able to allow non-customers to have access to the customer database. Hence, KYC in banking ensures that the banks maintain a high level of customer trust by ensuring that the information collected by the employees in identity authentication is accurate.

In short, KYC has become an integral part of banking because the banks and other lending institutions try to discourage the inappropriate use of the information, which may lead to money laundering or other criminal activities. Apart from monitoring and tracing old or dormant accounts, KYC also works in the area of updating the data on new or potential customers. Once an individual obtains a copy of his or her personal identification no matter whether it is through a phone or paper trail, the bank should forward the information to the central clearing house, or the issuer, for whatever purpose. In short, proper KYC provides the necessary intelligence to the bank about the current state of its customer files.

The KYC procedures for banks vary on the basis of the nature of the business. For instance, a company involved in business with the help of credit cards or debit cards would require a different set of procedures to that of a merchant bank. The issuer, on the other hand, will generally request the applicant to submit a recent photograph along with the signature of an authorized representative. The applicant must provide the details of the identity, nationality, country, date of birth and address. Most importantly, he or she must state whether the applicant is a resident of the country, has applied for a new bank account and is intending to open a new one, or is a non-resident who wants to open an account but needs to carry out KYC authentication.

KYC policies have become complex

Because of the proliferation of new and innovative products that are constantly being launched by banks, the requirements for maintaining KYC policies have become increasingly complex. Hence, banks are forced to periodically update kyc information for their customers, as well as to justify the manner in which they update the information. Hence, banks have been requiring their customers to submit updated and correct details, as well as undergo periodic review for reasons such as failure to meet the requirements, or if the information submitted is incomplete or inaccurate.

Another reason why banks regularly update their KYC policy is to minimize the costs associated with implementing and maintaining these policies. It is not uncommon for banks to incur thousands of dollars in penalties every year for delaying or not updating their KYC policies. Some banks have developed specialized software applications to perform the tedious task of KYC application, thereby greatly reducing the costs and simplifying the process. Some of the most popular examples of this include BankRate (BREF), Quicken Home Mortgage (RMP), and Intuit Quick Book (IBL). In addition, some banks offer third-party software applications that automate the entire process of KYC application and risk assessment, further reducing costs.