Is KYC Verification Mandatory? | Lightico Blog (2024)

By Howard Schulman

KYC verification is a mandatory process that financial institutions and other companies need to do before they can offer their services. It's not just about knowing your customer, it's also about making sure the customer is who they say they are and that there are no red flags on their credit history. KYC verification helps prevent fraud with customer identity verification to know if these individuals or organizations have any criminal records, terrorist ties or suspicious transactions in the past.

Defining KYC

KYC (Know Your Customer) is a process of verifying customers for its legitimacy, accuracy and authenticity.It helps to ensure that the customer is who they say they are by confirming their identity with documents such as photo id or passport; checking if there any red flags on their credit history which might indicate fraud in the past; making sure that the customer has no ties with terrorist financing or illegal activity, like money laundering, by checking for any suspicious transactions in their past.

Benefits of KYC verification:

Some of the benefits of KYC are that it helps to ensure customers are legitimate which improves service quality, reduces costs and saves time. Requirements for compliance include ensuring all new customers have completed their own process while also monitoring transactions with the customer's consent.

Requirements for KYC Compliance:

• Companies can't offer their services to a customer if they don't have the KYC verification completed.
• All new customers need to have identity verification and be verified for authenticity before any business transaction takes place.
• The process of obtaining and verifying documents with proof of identity, such as passports, photo ID and credit history will vary depending on the level of risk assessment.
• Companies should have a process in place for the ongoing monitoring of customer transactions, looking for fraudulent activity.
• Customers need to be informed about what they are providing and who it is being shared with as part of Customer Due Diligence.

When to fill the KYC form?

You should fill the KYC form when you are opening a new bank account, or if there is any change to your personal details such as name or proof of address. The process of filling out and verifying these documents can cost anywhere from $100-$1000 depending on how much information needs to be verified. KYC verification will depend on the company's customer risk assessment.The process can be time-consuming and costly, but it's worth doing KYC verification so you know your customer is legitimate!

Don't Skip KYC Verification

Yes, the KYC verification process is mandatory for the customer onboarding process of all financial institutions and other companies who want to offer their services. It helps customers by preventing fraud and businesses participating in money laundering, ensuring that they are legitimate which improves service quality, reduces costs and saves time. The cost of the procedure depends on how much information needs to be verified but it's worth doing KYC verification so you know your customer is legitimate.