With the extensive use of technology and the internet, many companies are mandated to fulfil particular standards in order to fight against cyber fraud and other financial crimes, such as money laundering, corruption, and terrorist financing. Therefore, complying with KYC document verification requirements helps financial institutions to recognise and verify their customers before onboarding them.
Essentially, the objective of KYC is to prevent businesses and their relationships with clients from being connected with entities that are involved in terrorism, fincrimes, corruption, or any other illegitimate activities.
However, whenever a company onboards a new client, it needs to verify customer identity by implementing KYC regulatory steps. The KYC documentation verification process involves a few steps that help identify the firm that the client, they’re working with, is free of any risks and threats.
In this blog, you will learn about what are the documents required for KYC verification and how this process is done to hire a new user on board.
What is KYC Verification?
KYC verification refers to the procedure of verifying the identity of a customer that a company goes through in order to identify the legitimacy and reliability of a customer. This process is conducted to investigate the threats and risks associated with the user’s financial and transactional activities. KYC verification is one of the vital parts of customer due diligence.
Fundamentally, financial organisations and businesses that deal with finances such as banks and insurance industries adopt this procedure. However, it has become a mandatory practice for such sectors to remain threat-free.
Know Your Customer verification requires the user’s personal information including:
- Date of birth
- Residential address
- National ID card number
Other than these documents, several companies may also require some additional documents such as a passport, driving licence, or utility bills to verify the address. Once the company collects this information, it is compared with the data stored in a public database, sanction watchlists, and customer reporting agencies.
3 Simple Steps to KYC Verification Documents
The KYC document verification process is done just like banks and financial institutions conduct KYC traditionally to verify their customers. However, this procedure involves numerous steps:
i. User Information Collection
The first step to verifying customer identity is to gather user information. This data includes the client’s personal information with the user’s consent. This information is acquired from an online user where the customer is supposed to provide the required details while registering for an account opening application.
ii. Uploading of Supporting Evidence
Once the user has uploaded the information, he is further asked to provide adequate evidence that supports his identity. KYC proof of identity helps the company verify that the client has provided authentic information.
iii. Investigation of Information
Now that all the information and pieces of proof have been uploaded by the customer, the company begins the verification process. First of all, the document template is examined against various checks. The firm verifies that the uploaded documents are not stolen or modified. Once it is successfully verified, the institution extracts the data in two ways:
a. Via OCR
The first procedure of extracting user data is through Optical Character Recognition, in which the system automatically mines out the data for the documents that the user uploaded. Further, it also checks the authenticity of the information.
b. Without OCR
However, if the company wants to run authentication checks manually, it enters the acquired information and verifies the data by comparing it with the one present in the database.
Usually, depending upon the organisation, customer verification is done in numerous ways such as:
- KYC passport verification
- KYC biometric identity verification
- KYC photo id verification
- KYC ID verification
- KYC address verification
- Face recognition
Nonetheless, the process of KYC document verification entirely depends on the industry and the level of risk associated with the customer. Besides, these documents should also carry an individual’s picture that indicates the person’s nationality and facial features to authenticate whether the user is genuine. The company has the right to request more than one of these or some additional documents to mitigate any possible risk.
Benefits of KYC Document Verification
Executing the Identification document KYC verification process is tremendously beneficial for many financial industries and other businesses to recognise and mitigate any possible threats in order to sustain good relationships with their clients and maintain a company reputation. KYC verification serves numerous benefits:
Identifies Money Laundering
When a company implements a KYC identification process, it becomes more challenging for financial criminals to set up fake accounts and steal genuine users’ identities. Since KYC also keeps track of accounts and observes transaction activities. Yet, in case of any suspicious activity, it sends an alert.
By applying KYC document verification, companies benefit from boosting their revenue and enhancing their conversion rates by sustaining customer trust. Especially, by implementing AI-driven automated KYC solutions.
Available Anywhere, Anytime
Financial firms are able to conduct KYC document verification from anywhere and anytime through digital or eKYC solutions. Since this KYC verification process is more accessible, convenient, and user-friendly identifying user identity.
KYC verification procedures are generally sanctional and can be implemented for various security checks. However, numerous steps can be added in the process for enhanced due diligence and extensive regulatory compliance.
documents for KYC verification
Wrapping Things Up
Almost every business sector requires an effective KYC in order to comply with specific regulations to prevent fraud and financial crimes. However, to comply with the evolutionary KYC and AML regulations, these institutions need users’ documents for KYC verification and follow all the required steps.
In this KYC AML guide, you learned about an elaborated method of the KYC document verification process. Yet, this process can be done in three simple steps and delivers numerous benefits. It is not only useful for financial organisations but for customers associated with them as well. Since it helps them prevent any possible financial loss and reputational damage.
Frequently Asked Questions
The KYC verification process involves:
- Collection of user information
- Verification of documents
- Analysis of customer risks
- Continuous monitoring
Various factors may trigger KYC requirements, which include:
- Anonymous transactional activity
- Sudden modification in the user profile
- Changes in the scope of the client’s business
- Inclusion of new account holders
KYC is significant because it helps companies identify their customers, verify any possible risks associated with their clients, mitigate these threats, and comply with regulatory requirements.