Know Your Customer (KYC) is the process of identifying and verifying the identities of prospective and established customers. KYC is often affixed with Insurance and Financial Institutions but it is a practice that is employed by companies of any size or industry.
The aim of KYC is to know precisely who a company is dealing with. The absence of that knowledge invites fraud and criminal activities. This brings risk and can cause reputational and financial damage to a business organisation.
KYC is a law in countries for most businesses, especially the finance industry. The lack of a proper KYC can bring a hefty fine from regulatory bodies, as it designed to check fraud, money laundering, and other illegal endeavours.
KYC is needed to prevent and correct security flaws. A comprehensive KYC procedure should be able to lock out illegal activities from a system. But then, someone who has passed through a comprehensive KYC legally can decide to perform illegal activities. The knowing of that customer can help with tracing and recovery.
In today’s world, where most business operations are shifting towards the internet. Any business present online, where value is transacted, would need a comprehensive KYC structure. The integration of this, helps business control who uses their platform. For example, a Marketplace business would like criminals to be absent on its platform. The reasons are obvious – the hijack of a Marketplace by criminals means doom for the business. It will bring reputational damage.
KYC is needed for all business types to know who business is done with and to check and trace any compromise.
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