What is KYC and why does it matter?
The idea of Know Your Customers is pretty simple —verifying identities, making sure that they are genuine, ensuring they are not from undesirable list and assessing their reputation.
Know Your Customer regulation were introduced in 2001 as part of the Patriot Act, which was passed due to 9/11 event. It is a process to detect high companies and individuals from using business transactions as a cover up to fund terrorist activities. In the past, KYC services is the process by which banks and financial institutions use before forming a business relationship with them.
Now, it is mandatory process for identifying and verifying customers before you start a business relationship now in many countries.
Why introduces KYC?
The aim of KYC is not just for compliance, it allows a company to better know their customers and even stakeholders such as suppliers and potential investors. With business intelligence obtained from KYC due diligence, the company can manage the risk accordingly and avoid associating with high risk partners.
What Happens if Someone Refuse to Provide the Documents?
This one is easy. If your prospective partner refuse to provide any of the requested documents, you will consider the party as a high-risk stakeholder. The new partner should comply with your requirement or else it will be you should seek for a better partnership elsewhere.
What happens after KYC Services?
KYC Services is not a one-off process. Customers or suppliers should be continuously monitored to differentiate between normal and suspicious customer behaviour. For high risk customers, more frequency checks can be done in every 6 months.
Why the benefit of KYC due diligence outweighs the cost?
Concerns about the increase cost of anti-money laundering procedures are keeping business from establishing KYC due diligence into their process flow.
However, one should consider the cost of partnering with an undesirable vendor, you might lose your reputations and get substantial profit taken away.
Written by ProKakis Founder Elisha Yap