In a study conducted by KPMG In 2020, more than 200 executives of Mexican companies were interviewed and it was revealed that the 67% considers that the mechanisms to mitigate the risks of financial crimes are insufficient. Do you know what KYC means? It is a methodology that solves and combats this problem.
But what is KYC or Know Your Customer? To know what KYC stands for, you must understand that these acronyms represent the English phrase “Know Your Costumer”.
It basically consists of a procedure carried out by various organizations, especially banks and financial institutions, to prevent fraud and criminal activities.
What does KYC mean?
It is a methodology that is applied when an organization wishes to register a new client. Your goal is verify identity of the clients in a safe way and respecting the rules that regulate this practice.
Fulfilling this purpose requires requesting from clients certain documents and identifying evidence (controls and verifications) that will be contrasted with information stored in trusted organizations, and thus avoid the consolidation of commercial relationships with people linked to criminal acts.
This process can be carried out in person or online (video ID) and, in general, documents such as identity cards or passport are usually requested, in addition to biometric tests based on machine learning.
The importance of KYC
In addition to knowing what KYC stands for, you must also recognize its importance. The value of "Know Your Customer", apart from allowing a better relationship with customers, lies in the possibility of avoiding the natural risks associated with financial companies, such as money laundering and financing of terrorist actions.
In an era of accelerated digital transformation and, mainly, in the framework of the pandemic, not only the routine habits of people have changed (with the positioning of trends such as teleworking or distance education, for example), but also crimes have adjusted to this new reality.
In this way, a large increase in financial criminal acts has been noted in Mexico and the rest of the world, which has even led to the European Union Agency for Police Cooperation (Europol) calling this phenomenon "coronacrimes" .
For this reason, during 2020, companies had to increase their costs to avoid fraud and economic crime.
According to an investigation by LexisNexis® Risk Solutions, "The total estimated cost of complying with financial crimes in Mexican financial companies is US$900 million per year."
Advantages of KYC or Know Your Customer
Among the benefits offered by the KYC are:
- It allows institutions to carry out a better risk assessment of their loans.
- Prevents money laundering.
- Limits fraud mainly associated with identity concealment.
- It provides stability and investment to the country, since it generates a safer and less risky financial market.
- The lower uncertainty encourages the institutions to lend to their clients, generating higher profits.
The success of an organization requires that its business relationships are carried out in a secure manner and protect the identity of its users. Prevent fraud and mitigate financial crime in the technology mission Know Your Customer.
Now that you know what a KYC is, we want to offer you a solution for the identity verification of your clients, which adjusts to your needs. For this reason, we want to invite you to integrate our identity verification and validation platform for your users in your applications.