What is the Meaning of KYC: Verification Regulations for Businesses

What is the Meaning of KYC: Verification Regulations for Businesses

Whether you’re running a cryptocurrency exchange, or in charge of a traditional financial institution providing loans and related services, you must properly understand the meaning of KYC verification. Failing to put in place the proper protocols to comply with these regulations invites the opportunity for fines and penalties – or worse in some cases.

That’s why today, we’re going to answer the question so many people come to us with…what is the meaning of KYC? And why do I need to ensure I have the proper KYC verification solution in place? Throughout our in-depth resource, you’ll learn all this and more. Towards the end, we’ll provide you with the most simple, secure way to comply with KYC regulations – protecting yourself, your business, and of course, your users. We’ve got a lot to cover, so let’s get right into the topic at hand: the role  of KYC verification?

What is the Meaning of KYC Verification?

First and foremost, the KYC acronym stands for Know Your Customer. In order to comply with KYC regulations, businesses must take steps to verify the identity of their customers. The reasoning behind this is simple – by understanding who your customer is, you can more easily assess any potential risks they may pose. From laundering money to attempting to use fraudulent identification, putting in place KYC verification protocols will help you protect not just yourself and your business, but other users of your services.

The whole point of KYC verification is to help financial institutions prevent crime from happening.  For example, if you’re a bank and you know that one of your customers is a politically exposed person (PEP), you can take extra steps to monitor their account for suspicious activity. And while you may not necessarily feel that this is something you’re responsible for investing in and creating processes for, the Financial Crimes Enforcement Network (FinCEN) makes clear that the primary onus is on businesses. And thus, you can’t afford to neglect this task. We’ll explain why later on. First, let’s get back to discussing the KYC verification meaning.

What KYC Verification Entails

In order to properly comply with KYC regulations, businesses need to collect certain information from their customers. This usually includes full name, date of birth, SSN, address, and nationality. In some cases, additional information may be required, but this is typically the bare minimum. Once this information has been collected, businesses need to take steps to verify that it is accurate and up-to-date.

There are a few different ways to go about this, but one of the most common methods is to use an external data source like FortifID. This way, you can be sure that the information you’re using is reliable and accurate. After all, there’s no point in verifying customer information if the data you’re using is incorrect! More importantly, though, our KYC solutions help prevent exposure in the event of a data breach – as you won’t actually end up storing any of the raw data you collect. More on that later.

Another important part of KYC verification is keeping up with life changes. For example, if a customer moves to a new address, their old address is no longer valid. As a result, businesses need to have a way to track these changes and update their records accordingly. This is where our KYC solutions come in handy yet again – as we can help you automatically keep track of any changes that occur. So, whether a customer moves to a new address or their name changes, you’ll be able to stay on top of it all without lifting a finger.

How does KYC Relate to AML?

When you first learn about the role of of the KYC in modern business practices, you’ll probably have a follow-up question about AML. We even see many people in the financial services industry inquiring about the difference between AML vs KYC. To put it simply, AML is the umbrella set of regulations under which KYC falls. KYC compliance amounts to one aspect of the greater overall AML compliance regime. We have an entire article discussing AML violations if you’d like to learn more about this raft of regulations.

Now that we’ve answered the question “what is the meaning of KYC verification?”, and how the KYC meaning is related to AML, let’s move on to discussing why this process is so important.

Why KYC Verification is So Important for Financial Service Providers

We briefly touched on this earlier, but we want to spend some more time discussing why complying with KYC regulations is so important for businesses that exist in the financial services industry. Regardless of your business – from a crypto exchange, or a non-fungible token (NFT) collective, to a traditional banking provider, mortgage broker, or other financial institution – an in-depth understanding of KYC and all that it entails is not something you can afford to overlook. Why? Because if you fail to put the proper measures in place, you are liable to pay hefty fees and even  face criminal charges.

In other words, if you don’t take steps to verify the identity of your customers and comply with KYC regulations, you are at risk of being held responsible for any crimes they commit. Not only would this outcome be bad for business, but it can also lead to some serious legal trouble. Here are a few real-world examples of this happening:

  • In 2018, HSBC was fined $101 million for failing to properly monitor its customers
  • In 2019, Deutsche Bank was fined $16 million for similar violations
  • More recently, in 2020, Goldman Sachs was slapped with a $110 million fine for its failure to comply with KYC regulations.

These examples make it quite clear that if you want to stay in business and avoid any legal trouble, proper compliance with KYC regulations is absolutely essential. So how can you go about doing this? We’ll discuss that next.

How to Comply with KYC Regulations: The FortifID Solution

GIven all we have discussed, how do we ensure an effective compliance program?  The answer is simple: invest in a quality KYC verification solution. These are software solutions that are specifically designed to help businesses comply with KYC regulations. And, at FortifID, we just so happen to offer the best KYC solution on the market.

Our software is designed to streamline every aspect of the KYC verification process while also providing a number of powerful features and benefits, such as:

  • The ability to verify identities in real-time
  • Flexible deployment options
  • A wide range of customization options
  • Integrations with major data providers

If you’re looking for a comprehensive solution that will make it easy for you to comply with KYC regulations, look no further than FortifID. Not only do we offer KYC verification, but you’ll also enjoy fraud verification solutions, income verification, and other AML compliance solutions you need to enjoy peace of mind. Our software even protects your users in the event of a beach. Should a hacker infiltrate your system, there won’t be any sensitive data for them to steal. That’s because our innovative solution travels to the data itself, gathers insights, and returns to you with said insights. The data itself stays put on the user side.

Our software has everything you need to get up in days or weeks – not months like you’d be forced to wait if you went with the alternatives! From data verification and authentication to tracking changes and monitoring activity, we have everything you need to protect yourself (and your business) from the financial and reputational damage that can be caused by non-compliance.

Final Thoughts on the KYC Verification Meaning

That concludes our in-depth breakdown of the KYC verification meaning. We answered the main question you came here with today: what is the meaning of KYC? You’ve also learned what this set of regulations entails. And, we’ve discussed why putting an emphasis on compliance through processes and software solutions is so important. At this point, you should feel confident and clear on your next steps: investing in FortifID as your digital onboarding and authentication solution. You’ll enjoy peace of mind through our identity verification and AML screening processes. Don’t delay any longer – you can’t afford to waste time when it comes to KYC compliance!

Still have questions about the KYC meaning or the FortifID solution? Contact us today and one of our experts will be more than happy to answer them!

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