Know Your Customer (KYC) regulations are critical to assessing customer risk and a legal requirement to comply with Anti-Money Laundering (AML) laws. Effective KYC involves knowing a customer's identity, financial activities, and risk.

Know Your Customer (KYC) is a process that financial institutions use to verify the real identities of their customers and determine what fraud risks they may pose. It postulates that knowing your customers like:

  • performing identity verification,
  • evaluating their financial activities, and
  • examining their risk factors

— can put money laundering, terrorism funding, and other types of illicit economic activities in check.

How much do you know your customer?

Knowing your customer is significant; you ought to. Especially people who belong to financial institutions (FI) will face possible fines, sanctions, and reputational damage if the business is continued with a money launderer or terrorist. Significantly, KYC is an actual implementation to protect the financial organization from fraudulent activities and losses of illegal funds or transactions.

What is KYC?

KYC, or 'Know Your Customer,' is a methodology through which banks obtain information about their customers to ensure that bank services and government regulations are not exploited. It is used when bank customers open accounts. Banks are also required to update their customers' KYC details periodically.

KYC aims to reduce the risk of identity theft, money laundering, financial fraud, and the financing of criminal organizations.

To create and function an effective KYC process in banks, these are the following elements that are required:

  1. Customer Identification Program (CIP) - The CIP claims that financial institutions like banks take the most appropriate measures to trust that all customers who enter a formal banking relationship with them speak about their actual identity.
  2. Customer Due Diligence - Customer Due Diligence information includes facts about a customer that enables an organization to examine the seriousness of the situation. The customer exposes the institution to a lot of risks. These risks involve terrorist financing and money laundering. The importance of KYC is a complex undertaking involving collecting documents that show proof of identity (government-issued IDs), establishing and verifying customer identity, and screening the identity information against political exposure, sanction lists, criminal and unreliable customers lists.
  3. Ongoing monitoring - Ongoing monitoring includes understanding a customer's profile and how they will be using their accounts. Risks of the customer's profile are assessed, and the customer's transactions are monitored to ensure they align with expected behavior.

    The modus operandi of 'KYC' taken by financial institutions or businesses are as follows:

    • Establishing customer identification
    • Understanding the nature of the customer's activities (primary goal is to satisfy that the source of the customer's funds is legitimate)
    • Assessing the money laundering risks associated with that customer for purposes of monitoring the customer's activities
New technological developments drive KYC solutions forward

From biometric data to AI, technological advancements have offered to excel ways to distinguish customers from running due diligence checks to perform monitoring.

The amalgamation of mobile data and conventional data sources rocketed KYC to the next level. This will subjoin an extra layer of authentication to help deliver a convenient, immediate, and effortless customer experience alongside the necessary compliance and fraud-mitigation measures.

Coupling with real customers and foiling fraudsters in the era of mobile phones strike a challenge. While the customer has an array of verification methods and data available to himself, accessing mobile data and leveraging it to ensure that legitimate customers meet specific criteria adds an extra layer of protection. Breaking it down simply, it's another tool to help reduce fraud risk, improve KYC standards, and, just as important, secure an effortless experience for your mobile-minded customers.

Difference between CDD & EDD

Customer due diligence (CDD) is the preliminary process of identifying the customer and collecting basic details and documents to verify their identity.

Enhanced Due diligence (EDD) helps scrutinize those risks that cannot be detected by the Customer Due Diligence (CDD) process. EDD is conducted for those customers classified under the high-risk category by the system. In this process, additional, comprehensive verification checks are performed to reduce the risks, prevent the violation of regulatory compliance standards, and achieve the ultimate purpose of preventing money laundering. With EDD, banks get a more in-depth understanding of the customers they are dealing with.

EDD needs to be conducted in situations such as: when KYC risk assessment shows a high level of risk when transactions are enormous in volume when the customer is a Politically Exposed Person (PEP), or is associated with someone in the sanctions list when there is a change in regulatory and AML policies when the source from which the funds have come is not clear or is suspicious when the customer belongs to a sanctioned country, etc.

Thus, to conclude, all banks should focus on accurate screening and scrutinizing the sanctions lists. This way, banks will be able to capture data more organized, and the number of risk alerts or false positives can be reduced.

Our application focuses on intensive identity verification by ensuring complete customer verification, including Prove of Identification, Prove of Address, and Source of Funds, depending on the regulatory requirements.

An AML compliance program aims to detect, respond to, and eliminate inherent and residual money laundering, terrorist financing, and fraud-related risks. At Remitall Software, we understand and address the challenges to develop a robust AML compliance program that helps expose bad actors and stay safe from non-compliance fees. Our experienced and knowledgeable compliance officers implement a powerful anti-money laundering program on solid foundations of regulatory experience.

Time-proven services like real-time volume and velocity checks for Anti Money Laundering (AML) and linked transaction detection have been rendered by Remitall Software. The cross-border money transfer is safe and secure with our sanctions and PEP screening, payment filtering, Know Your Customer (KYC), and Customer Due Diligence (CDD). For more details, visit us at:

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Srijita Mukherjee

Experienced Content Writer with a demonstrated history of working in the outsourcing/offshoring industry. Skilled in WordPress, Headline Writing, Feature Writing, SEO, Copywriting, press release, etc. Strong media and communication professional with a Master's degree focused in journalism and mass communication from University of Calcutta.