What is KYC and how can it protect your business?

KYC (Know Your Customer)

Know Your Customer is the term commonly used by industry professionals when referring to the procedures used to determine the true identity of a customer.  These processes ensure that a business does not aid in criminal or terrorist activity or funding either intentionally or by accident.

Other terms that are related to KYC are:

- EKYC (Electronic Know Your Customer). A largely forgotten term specifically describing the act of performing KYC online.

- KYE (Know Your Employee). The process of KYC when applied to the employees of a business.

Within the United Kingdom, the Money Laundering Regulations 2017 underpin KYC processes, with the European Joint Money Laundering Steering Group providing guidance to businesses to ensure that they remain compliant with the legislation.


AML (Anti-Money Laundering)

Anti-Money Laundering regulations exist to prevent criminal and terrorist elements from concealing their financial activities behind seemingly legitimate transactions and businesses.   Money laundering and terrorist funding legislation in the UK is governed by the following Acts of Legislation:

- Terrorism Act 2000
- Anti-terrorism, Crime and Security Act 2001
- Proceeds of Crime Act 2002
- Serious Organised Crime and Police Act 2005
- Money Laundering Regulation, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017


Other abbreviations

IDV

Identity Verification is simply defined as being the process used to ensure that an individual is who they claim to be.  This can be done via several methods, both in the digital and physical world.  When an IDV check is performed, the individuals information is checked against an authoritative source such as a credit bureau or government data, ensuring that the information that they have supplied is genuine.

FAM

Fuzzy Address Matching is the technology that enables names and addresses to be identified, even if the data provided is entered incorrectly – whether by misspelling, incorrect spacing or as an abbreviation.  This will often recognise the difference between how words are spelled and how they sound phonetically, for example the difference between Bower Road and Bauer Road.

API

An Application Programming Interface enables communication between unrelated software via a set of clearly defined methods.

This simplifies the programming process for developers, enabling platforms and services like CIS to be integrated into a clients website quickly and easily.


PEP

A Politically Exposed Person is an individual who, due the nature of their work, or possibly the seniority of their position, present a higher risk for potential involvement in bribery and corruption by virtue of the influence or power that they may hold. 

SPF - Senior foreign Political Figure

The terms politically exposed person and senior foreign political figure are often used interchangeably, particularly in international forums. Foreign official is a term for individuals deemed as government persons under the Foreign Corrupt Practices Act or FCPA, and although definitions are similar to PEP, there are quite a few differences and should not be used interchangeably. The term PEP is typically used referring to customers in the financial services industry, while 'foreign official' refers to the risks of third party relationships in all industries.