Jul 14, 2021

What is KYC (Know Your Customer) and its 2022 status

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What is KYC (Know Your Customer) and its 2022 status

KYC (Know Your Customer) related practices are especially relevant in user and clients relationships with business. It is the first step in a customer relationship with a company.

Its importance in relation to customer onboarding, its relationship with identity fraud and AML controls as well as irs regulatory standards, make Know Your Customer, or KYC, one of the main challenges that companies and institutions belonging to any area face.

What does KYC (Know Your Customer) mean?

KYC or, by its acronym, Know Your Customer is the practice carried out by companies to verify the identity of their clients in compliance with legal requirements and current laws and regulations.

The extensive use of new technologies and the internet makes it necessary to define standards that help fight online fraud. KYC procedure reacts to a legal and global imperative by financial institutions and companies.

That is why the KYC procedure responds to a legal and global imperative for any type of business that wants to onboard a user as a client.

In this guide, you can get more information about video-streaming for KYC processes.

Although it affects all sectors, being necessary for delicate processes in any industry, it is especially relevant in financial and banking areas, as well as related sectors such as insurance, real state or, for example, trading.

Many companies, given the health situation in which the entire world has been involved since 2020, have been forced to establish Know Your Customer processes digitally and remotely to be able to continue operating despite the possible restrictions in force that would not make offline onboarding possible.

Although KYC processes have been a reality for years, and the leading-sector companies already had KYC partners for their customer acquisition processes that were already working to optimize their processes and reduce their acquisition costs, having a Know Your Customer partner now is making the difference between a viable business or one doomed to disappearance.

How does Know Your Customer process work?

KYC is the process of identification and verification of the identity of a client in which a series of controls are applied to avoid having commercial relations with people related to terrorism, corruption or money laundering, among others.

The KYC process consists in verifying that the client is actually who he says he is and giving him access to the services or products he needs. This verification is carried out through different methods, although not all comply with legal requirements. 

The process takes place in such a way that the user who wants to become client of a company demonstrates with legal and binding evidence his identity. For this, methods such as Video IDentification by streaming video and videoconferencing are used, in which the user shows and validates his identity documents, the authenticity of them, and their face, in addition to other biometric tests and security checks.

Know Your Customer process can be carried out both remotely online and in-person at a commercial office or store. When it is done remotely and online, or the process has been digitized, we talk about eKYC (electronic Know Your Customer) process.

Digital onboarding process that complies with KYC norms 

The relevance of KYC at the financial industry

Banking and financial industries are some of the most complex sectors in terms of customer relations. Banks and financial institutions constantly face a number of risks in relation to money laundering and terrorism financing.

Having this in mind, governments and authorities have set standards in 5AMLD and eIDAS rules to create a reliable framework where KYC processes are completely secure.

KYC in banking

The KYC banking process is no different than the same one in other industries, but high-security standards required by legislation are different from those required in other sectors.

Video-streaming is becoming the global standard for identifications within the financial sector and it is being included and standardized by regulations and law. Client onboarding has changed from a long, expensive, bureaucratic process to an optimized, more secure and quick process. 3 weeks have turned into 3 minutes with the highest security standards from any electronic camera device.

KYC regulations in the world

The process requires the financial sector to adhere to its regulations worldwide, which implies that identification with selfies or images is not valid due to its low range of technical security, the weakness of electronic evidence and the lack of its integrity.

Therefore, the level of security provided by these types of solutions is low, far from the legally required security standards for formal customer identification according to the most demanding regulations in this area.

European KYC regulation

AML5 (or 5AMLD) together with eIDAS define the regulatory framework in the financial and banking sectors in Europe and introduce, for the first time in history, fully secure digital identification methods so that customers can interact with their bank, insurance agencies, administration, etc completely remotely. 

This means that companies can acquire customers in any country in Europe, within an open and homogeneous market of 508 million people, with just one click thanks to VideoID.

Learn about these regulations by downloading this guide on the new regulatory scenario.

Mexican Know Your Customer Regulation

Regulatory KYC compliance is extensible to the whole world, and therefore to Mexico. CNBV has set standards with the Financial Technology Institutions Law. Also, the Credit Institutions Law enable remote and online Video IDentification in the country.

Likewise in Europe, selfie-based or static images solutions are also not supported in Mexican standards.

KYC (Know Your Customer) benefits and advantages

Thanks to the most advanced artificial intelligence technologies, onboarding processes have been totally improved and digitized, avoiding any type of friction and difficulty for the user to access the remote contracting of products and services in a totally secure way not only in banking but in all industries.

Not all Know Your Customer service providers equip their systems with the latest techniques and tools. For this reason, it is important to trust comprehensive KYC solutions that accompany the organization and the user throughout the onboarding process, as well as subsequent authentication needs with the highest regulatory and technical guarantees.

Otherwise, it is very likely that the solution is not fully compliant with current regulations, and it does not provide all the advantages that should be given by integrating this process. Fixing on user experience and commitment to a quality procedure is crucial.

Asynchronous Video IDentification in a matter of seconds and from any device and through any channel is now possible. Complying with the most demanding global regulation (AML5, eIDAS), acquiring a customer has never been easier.

There is a lot of buzz on the market around the various solutions available for digital identification and existing KYC solutions. For this reason, it is important to have a suitable reference partner for the Know Your Customer needs that the organization may present.

Schedule an appointment here and access 508 million users thanks to the European standardization of customer onboarding.

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