What Is Know Your Customer (KYC)?

Know Your Customer (KYC) is a commonly used term in credit card processing circles. It refers to the process of verifying the identity of a customer before approving their application for a merchant account. This involves collecting and reviewing documents related to the customer’s business, such as identification documents and financial statements.

KYC – Know Your Customer is the verification process that all companies goes through with banks whether it is personal or if it business wise, and in-depth in contains you to prove that everything regarding you and your company is legal and some banks might go to an extreme to do their due dilligence.

The term KYC is also used in referral to anti-money laundering regulations known as AML and banking regulations which oversee activities in these categories. Know your customer processes are used through bank risk teams to deem if a business is worth the risk or if more information is needed but can also end in a decline if lack of informations is submitted.

With PayFasto we help you understand what it means and what is needed for you in order to work with banks and settlement bank accounts, it can be a long process but when explained right it will be a fast process.

Standard KYC policies

Purpose of the Know Your Customer guidelines are to avoid banks from being exploited, intentionally or unintentionally, by criminal figures with money laundering activities. These procedures helps banks to better understand their customers and their financial dealings. It helps them to gain a better overview and foresee their risks better.

 We are now writing 2018 and now it is not only the banks but also other online businesses can effectively adapt KYC into to their risk check. These four key elements are used to incorporate and build KYC policies upon: 

  • Customer Acceptance Policy
  • Customer Identification Procedures
  • Transaction monitoring
  • Risk management

KYC has become a mandatory and crucial part of banking procedures. It helps reduce the risk of fraudulent transactions. 

Know Your Customer is to identify and define a client/person as: 

  • A person or entity that upholds an account and/or has a business relationship with the bank
  • One on whom behalf the account is maintained (i.e., the beneficial owner); 
  • Beneficiaries of transactions conducted by professional intermediaries such as stockbrokers, Chartered Accountants, or solicitors, as permitted under the law
  • Any person or entity connected with a financial transaction that can pose significant reputational or other risks to the bank, for example, a wire transfer or issue of a high-value demand draft as a single transaction