What Is KYC Due Diligence and Why Is It Important?
Financial institutions, including those in the Singaporean financial market, need to abide by a set of regulations related to customer identity verification known as KYC (Know Your Customer). Knowing the customer and having proper security protocols in place help eliminate financial crime, which is an ongoing challenge in the financial industry. If you’re not sure what KYC due diligence is all about and have been in search of a guide, you’ve come to the right place.
Here’s everything you need to know about KYC due diligence:
What Is KYC Due Diligence?
KYC Due diligence is a standard process used by financial institutions and financial service companies to verify customers’ identities, and monitor and assess customer risks. In simplest terms, it’s about running background checks on clients that approach you to ensure that the customer is who they say they are.
The process requires approaching clients to present their credentials to prove their address and identity. These can include biometric verification, ID card verification, face verification, and/or document verification. Among the acceptable documents for proof of address include utility bills.
Why is KYC Due Diligence Important?
If you’ve been in the financial industry for a while now, you should be aware of the challenges brought about by digitization. Cybercrimes like identity theft, digital money laundering, data breaches, and phishing schemes have all wreaked havoc on firms in every sector. The biggest victims have been online gambling sites, dating sites, Fintech companies, and different financial institutions.
Even in a country as developed as Singapore, much of the money laundering activities go undetected. Apart from this, fraudulent online transactions continue to cause corporate losses.
Part of the problem is that sheer amount of identity information that’s present online that serves as a goldmine for cybercriminals. They view data related to digital identities such as email addresses, credit card numbers, medical records, passwords, and Social Security numbers as currency on the web.
After accessing and stealing these items, they’ll sell them for anywhere between 25 cents and $60 per record. Fraudsters are constantly working to acquire and utilize this data to their benefit, especially in the dark web, which remains hidden from the rest of the world.
The KYC Due diligence process is designed to minimize the chances of such financial crimes. Financial services organizations use KYC procedures like effective background checks to accurately verify their clients’ online identities. Since their brand reputations also depend on this, they have a clear monetary incentive to conduct DYC due diligence.
Conclusion
By now, you should have obtained a fair idea of what KYC due diligence is all about, who needs it, and why it is necessary. If you think your financial institution needs a robust KYC due diligence solution in place, seek professional assistance from Intellinz.
