KYC in business stands for ‘Know your Customer’.
A business should not only be concerned with making profits; it should also attempt to know who it has business dealings with. This means identifying and verifying the identity of customers; according to Wikipedia. KYC was first derived from the United States under the Patriot Act. It is a business philosophy that is used by most companies today, from banks to sole proprietorships. For instance, a bank usually has a questionnaire type of form to gather personal information about customers who wish to open an investment account.
KYC is not just about due diligence, it is also a catalyst for business growth.
Knowing your customer, no matter what industry and field you are in, is the absolutely essential first step to sustainable business growth.
(https://primepay.com/blog/9-steps-sustainable-business-growth-step-1-know-your-customer)
KYC is important to business growth because:
1. It helps us to understand our customers’ profile & needs.
Knowing our customers’ better helps us to serve them better. The fact-finding process in KYC best practices helps businesses gather useful data about customer’s profiles such as their ages, employment status or purchasing power. These data can then be employed by management to offer customized solutions to clients’ to better serve their needs. As a result, good customer relationships are forged which in term aids in future forthcoming business.
2. It helps us to do business legitimately.
Doing legitimate business is important because it prevents us from being accountable to Anti-money laundering or Anti-corruption laws that are in place in the financial world today. In other words, if you know that your customer is doing business with you with unethical methods, it would be expedient & makes for better business sense to decline the engagement than to be held accountable for breaking the law. Legitimacy means that we are doing business trustworthily. This translates to a good business reputation and potentially more clientele.
3. It deters crime.
Based on an article on Quora.com, KYC collects & verifies basic details of customers such as their name, authorized signatures, legal status of legal entity or person & identity of the beneficial controllers & owners of the account. These controls in KYC are aimed at identifying theft, preventing terrorist financing, money laundering & financial fraud. The effect of this is that only legalized business is done & in time growth in business follows because more business is carried out within a positive legal climate.
4. It builds trust.
Adopting stringent regulatory requirements under KYC means that your business is only concerned with doing lawful business. This results in the building of trust in your company; not only by existing customers, but also by prospective ones. In time, business growth is expected because customers trust you & not another non-KYC-compliant firm.
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