Here’s Quick Way to Solve Customer Identification using  KYC Compliance

Know Your Customer (KYC) is a vast term used for customers’ identification before getting involved or onboarding with any business. KYC is used to know about customers whether they are suitable for the business or not means anyone was/is involved in any criminal activity.

Initially, laws related to KYC compliance were imposed only on the financial sector by the evolution in technology; these laws were gradually implemented in other sectors as well. In some cases, it is known as Know Your Business (KYB), Know Your Patient (KYP), etc.

There are four points that help businesses while gathering information from customers, using a risk-based approach:

  1. Identify the end-user, who they tell they are
  2. Identify  the customers’ source of income
  3. Customers’ ongoing monitoring 

What is KYC Compliance?

KYC compliance is an affirmative duty of all financial and non-financial organizations. Organizations with KYC compliance develop identification processes for the customers and verify their customers according to the regulatory guidelines on the regular basis. KYC compliance help organizations keep away from the penalties and mitigate financial crimes.

KYC Compliance Process

KYC compliances vary from nation to nation but some requirements are common in all, below:

  • Develops identification processes for the customers 
  • Customers are identified through their identity documents
  • Customer’s risk profiles are maintained
  • If required, take measures by AML compliance 

Steps of KYC Compliance Framework

  1. Customer Identification Program (CIP)

It is very important to know your customer, but how do you know someone who they said they are? Identity theft is extensive, in 2017 over 16.7 million Americans are affected by this and lost a total of 16.8 billion USD. 

CIP ordered in America that any person who is involved in monetary transactions has to verify their identity. Customer identification provides guidance to organizations to measure risk factors.

To onboard any person, the minimum requirements are set by the Customer Identification Program (CIP):

  • Name
  • Date of Birth
  • Residential Address
  • Identification Number
  1. Customer Due Diligence (CDD)

For any organization, their first analysis is made to figure out whether the customer is trustworthy or not. CDD is too effective and protects your organization against terrorists, cybercriminals, and others who might cause any risk.

There are three levels of due diligence:

Basic Customer Due Diligence: is information acquired for all the customers associated with the organization, to verify their identity and assess the risk associated with any customer. This level does not need in-depth screening.

Standard Due Diligence (SDD): SDD is the scenarios where illicit activities are with low or medium risks such as money laundering, terrorist funding, and no need for complete Customer Due Diligence (CDD). At this level, customers are categorized as low or medium risk.

Enhanced Due Diligence (EDD): Unlike Basic Customer Due Diligence and Standard Due Diligence, customers found with high risk undergo extensive screening rounds to verify or investigate their involvement in illicit activities like money laundering or corruption.

Beyond basic CDD, it’s necessary that you simply perform the right processes to determine whether or not EDD is important. This could be an ongoing procedure, as current customers have the potential to convert into the high-risk category over time. In this way, conducting recurrent due diligence assessments on the existing customers can be supportive. Here are some points that must be useful to acquire whether the EDD is required or not.

  • The locality of the user
  • Source of income 
  • User’s payment method
  • User’s pattern of performed activities
  1. Continuous Monitoring

For KYC compliance, it is not ample to check your customer only once. You must have a system to monitor your customers’ transactions and other activities on a regular basis, in order to keep updated their profiles with the latest information.

Industries needs to know about KYC Compliance

KYC compliance laws are regulated on businesses related to distinct industries. Here is the list of some industries that are entitled to KYC compliance in the world:

  • Individual entrepreneurs, small and medium sized enterprises and lagre corporations
  • Financial Organizations (Banks, insurance companies, etc.)
  • Real Estate industry
  • Financial Technology (NFTs, Crypto, online payments, etc.)
  • Healthcare industry and many more.


As banks and other financial organizations moved to provide services online, it is becoming way easier for the identity thieves, hackers and other criminals involved in online breach, to perform their illicit activities. This is because specialists of the financial industry felt to regulate such protocols to keep their organizations safe from fraud. KYC Complaince can be used in both ways, it not only protects customers’ financial stability, but it also protects financial services from getting ill-used. 

To maintain consistency with their customers and to eliminate the risk of financial extortion, financial institutions and banks are now highly motivated to implement a KYC compliance program.

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