In this ever-advancing digital world, organisations are at increasing risk of fraud and criminal activity, which could cause irreparable financial and reputational damage. Legislations are in place to protect organisations from financial threats – one of which is Know Your Client or Customer (KYC).
This blog outlines what KYC is, why it’s essential, and how Xref can help organisations comply with KYC to remain safe.
KYC stands for Know Your Customer (aka Know Your Client). It is a due diligence process whereby customers’ or clients’ verification is checked.
ID verification is a major component of KYC that ensures a customer is who they say they are (i.e. not a fraudster), which is important when, for example, they are opening a bank account or starting a new job.
KYC falls into Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) legislation, which are crucial for identifying and preventing criminal activity. Knowing who your customers are reduces the risk of financial corruption or exploitation.
Money laundering and terrorist financing are significant reputational risks for organisations, and KYC policies are a powerful tool to prevent these activities.
To comply with KYC and AML requirements, organisations must conduct screenings of politically exposed persons (PEPs) and sanctioned individuals as part of the customer onboarding process.
Mandatory KYC processes are in place to safeguard a business and its customers against fraud, money laundering and risk, as well as to protect customer data.
The organisations that are required to comply with KYC standards are mostly in the financial sector during customer/client onboarding, but can also be in the professional services sector.
Businesses that may be required to comply with KYC include:
Although KYC is not required within HR, organisations may conduct verification checks for compliance purposes, for example, checking identification and work entitlements during the hiring process.
Organisations must also be aware of Tranche 2 reforms that modernise Australia’s approach to AML and CTF by extending responsibilities to other high-risk professions.
Under the AML/CTF Tranche 2, industries like real estate, accountants and lawyers are required to have a more active role in deterring terrorist financing and money laundering.
Tranche 2 has already been introduced in New Zealand, the UK and Canada to fight the evolving threat of organised financial crimes.
Xref offers KYC checks to support AML requirements through the Trust Marketplace.
As a growing community of global checking vendors, Trust Marketplace is an aggregator for enhanced due diligence in the online trust environment.
With access to top-tier vendors from around the world, the Trust Marketplace offers a large number of check providers on a single platform, making it API Agnostic and exclusively available from Xref.
More specifically, Xref customers can access the Trust Marketplace via the Enterprise platform and can conduct KYC checks using RapidID.
RapidID is an ID verification product that offers various checks to help organisations comply with KYC/AML requirements and remain safe from criminal financial activity.
RapidID checks include:
RapidID connects organisations with a check provider and then delivers an unbiased report. Using the information provided in the report, the organisation can verify the person’s identity or deny it.
RapidID provides a seamless experience for organisations and helps them comply with KYC to reduce financial risk.
ID verification checks were historically conducted in person. For example, a person wanting to open a bank account would visit their local branch with printed copies of their identity documents.
In-person, manual ID verification is time-consuming for the organisation and the individual and not as effective as online ID verification.
Below are three benefits of using RapidID for ID verification:
Online ID verification is a safer, more efficient and more effective approach to complying with KYC/AML regulations than manual processes are.
Online ID verification uses intelligent software to access large databases and match identity documentation using advanced biometrics. Therefore, it can detect fraudulence better than humans can and provide organisations with the assurance they are safer from criminal activity.
Organisations cannot afford to ignore identity verification — the financial and reputational risk is too high.
To ensure you are complying with KYC and Tranche 2, conduct ID checks through the best identity verification providers, which RapidID can connect you with.
RapidID is highly automated, easy to use and effective in providing peace of mind to organisations that their customer or client is legitimate.
To find out more about how RapidID and the Trust Marketplace can benefit your organisation, book a demo today.
