The Key Steps Required for Diligent ‘Know Your Customer’ Compliance

The concept of Know Your Customer (KYC) is something being embraced across a host of industries looking to streamline the onboarding process of new customers and clients. In real estate, agents are already adopting KYC and its anti-money laundering (AML) procedures to ensure the legitimacy of residential and commercial buyers.

In telecommunications, service providers are utilising KYC and AML solutions to automate the identity verification process and guard against daily fraudulent threats in specific areas like prepaid subscriptions. In iGaming, the leading US operators like FanDuel deploy KYC and AML procedures, requiring proof of identity and address before any winnings can be withdrawn for the first time. A FanDuel promo code gives US bettors access to welcome promotions, but these are only triggered when age, identity and address are verified.

Ultimately, the practice of KYC is designed to protect online businesses from being victims of fraud and incurring losses due to illegal deposits or withdrawals. When there’s money involved online, KYC and AML procedures are increasingly used to establish the risks a customer poses. A comprehensive KYC solution not only identifies a customer’s identity, but also demonstrates their financial activities, ensuring their legitimacy at all times.

For any business handling money online and looking to launch an effective and efficient KYC program, the following key elements should be incorporated:

Confirmation of customer identity

As many as 15 million American citizens had their identity stolen last year, according to Javelin Strategy. Unfortunately, a large percentage of these cases were unreported. In fact, the Federal Trade Commission (FTC) only had 1.4 million reports of ID theft in 2021. The bare minimum for businesses to verify customer identity are name, address, date of birth and social security number (SSN). Businesses may take and compare the data provided by customers and tally them against public databases and consumer reporting agencies such as credit score firms.

Customer risk categorization

Once a customer’s ID has been confirmed and validated, it’s important for businesses to quickly categorize an individual’s risk level to the business. Essentially, a competent due diligence program will not only categorize a customer’s risk, but it will also define the type of customer based on their location, occupation and even their typical transactions.

Continued customer monitoring

Aside from keeping records on the levels of due diligence carried out on each customer in case of regulatory audits, businesses also need a KYC solution that’s flexible enough to monitor a customer’s ongoing activity. Depending on a consumer’s risk profile, businesses may seek irregular spikes in transaction behavior, cross-border transactions, as well as any adverse mentions of the individual in question in the local, regional, or national media.

Today’s connected world makes KYC compliance essential for businesses to safeguard themselves from cyber-criminals and organized crime groups. Fraud prevention is not the only benefit of KYC though. It also protects minors with basic age verification checks that preserve age-restricted services.

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