Last Updated on December 9, 2022 by Hammad Hassan
KYC stands for ‘Know Your Client’. It is a process where an organization or individual verifies the identity of its clients and their source of funds. This helps in ensuring that money is flowing from legit sources and that no one can be accused of laundering money or other crimes by using fake documents.
What is KYC?
Know Your Customer (KYC) is a process that financial institutions and other regulated companies undertake to verify the identity of their customers and to understand the nature of their business. KYC is an important part of AML/CFT regulation, as it helps prevent money laundering, terrorist financing, cybercrime and other crimes from occurring in a financial system.
KYC is a critical process in the fight against financial crime, as it helps financial institutions identify their customers and determine whether they are involved in illicit activities. By conducting KYC checks on their clients, financial institutions can ensure that they do not unwittingly assist criminals to launder money or finance terrorism.
Importance of KYC
KYC is one of the most important things you can do to protect your money. It’s also a way to prevent identity theft, fraud, and terrorism financing.
KYC stands for “Know Your Customer,” which refers to the process of verifying who someone is before allowing them access to financial products or services. The goal of KYC is twofold: firstly, it helps prevent money laundering by ensuring that only legitimate customers have access; secondly, it prevents tax evasion by ensuring that people who don’t pay taxes use legitimate means when they do so (i.e., not hiding their wealth).
KYC can be carried either physically or digitally, and it entails collecting data from a range of sources such as public records, documents given through online applications, and even CCTV footage from public places like airports or railway stations. When done digitally, it saves time and money on printing costs but takes longer to accomplish manually (paperwork).
In order to enable financial institutions identify their customers and assess whether they are engaged in illegal activity, KYC is a crucial process in the battle against financial crime. Financial organisations can prevent unintentionally helping criminals fund terrorism or launder money by doing KYC checks on their clients.
Also read: CKYC for Mutual Fund Investors
Types of KYC
KYC, or Know Your Customer, is a process of identifying and verifying the identity of customers. It’s done by financial institutions and other regulated companies such as banks and insurers, who need to ensure that they are dealing with legitimate people.
KYC can be conducted manually or digitally; it involves gathering information from a variety of sources including government records, documents submitted through online applications and even CCTV footage from public areas like airports or train stations. When done manually it takes time but when done digitally it saves time as well as money on printing costs (paperwork).
Benefits of having a KYC done
As the name suggests, KYC stands for “Know Your Customer” and it is a process of verifying the identity of an individual or entity. It is done by a financial institution to ensure that they are dealing with a legitimate customer who is above board in their transactions.
When you verify your KYC details with banks like ICICI Bank or HDFC Bank, they will be able to identify you better and also help them comply with regulations such as Anti-Money Laundering (AML). This helps them prevent frauds such as terrorism funding through fake accounts opened by terrorists who are unknown to authorities but have access to large amounts of money through these fake accounts which can then be used for other purposes like funding terror attacks etc.,
It’s clear that KYC is not just important for banks, but also for individuals. In fact, as we have seen in this article, it can be helpful for many different reasons. The best way to ease your mind about doing this process is by consulting with a professional who knows what they are doing!