What is KYC and why is it important

What is KYC and why is it important

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Crime has always tried to illegally exploit the identity of individuals to implement illegal practices.

To combat this phenomenon, governments have implemented ad hoc regulations and technologies and practices have been devised to protect consumers and companies from fraud, corruption and money laundering practices.

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What is Know Your Customer?

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The Know Your Customer (KYC), literally 'know your customer', indicates the set of mandatory recognition procedures that specific categories of institutions and professionals must implement to verify the identity of their customers.

These procedures were introduced in 2002 and are part of the European Anti-Money Laundering Regulations.

How is KYC implemented?

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The main objective of KYC is to verify and confirm the identity of the customer, whose data and information are acquired.

In particular, withRisk-Based Approach”, the verification activity is modulated according to the money laundering risk associated with the type of customer and transaction.

Let's see together what it means.

The customer provides his personal documents and fills out a document, the “Questionnaire for the adequate verification of customers”. In addition, it is possible to draw on public records, lists, acts and documents containing customer information.

We proceed, in this way, by implementing a risk assessment linked to both the “subjective” and “objective” profiles of the customer.

-From a subjective point of view, the legal nature of the customer, the activity mainly carried out, the geographical area of residence and the behavior carried out at the time of the transaction (professional performance) are examined.

-From an objective point of view, on the other hand, a check is carried out on the transaction in question, of which the type and method of carrying out are analyzed in relation to the activity carried out by the customer, the frequency and the reasonableness of the transaction.

Who are the subjects required to carry out the KYC procedures?

Initially, only individuals belonging to the financial and insurance world were subject to verification. Over time, then, other categories of companies and professionals have been introduced.

Let's discover them together:

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-Banking and financial intermediaries, such as banks, Poste Italiane, securities brokerage firms (SIM), asset management companies (SGR), variable capital investment firms (SICAV), fixed capital, securities and real estate investment firms (SICAF);

-Insurances in the case of life insurance policies

-Other financial operators, such as trust companies and credit brokers;

-Professionals (on an individual, associate or corporate basis) such as chartered accountants, accounting experts, labor consultants and any other person who carries out activities in the field of accounting or taxes (including CAF and patronage);

-Notaries and lawyers, when, in the name or on behalf of their clients, they carry out financial or real estate transactions (transfer of real rights to real estate or economic activities, management of money and financial instruments, opening bank accounts and deposit books and organizing the necessary contributions for the management and administration of companies);

-Legal auditors and statutory auditing firms

-Other non-financial operators, such as real estate agents, art dealers, auction house managers, professional gold traders, civil brokers and extrajudicial debt recovery operators;

-Virtual currency service providers;

-Gaming service providers

Is it possible to implement a digital KYC process?

The procedures we have talked about are complex to implement and heavy on budgets, especially if they are still conducted in a manner textbook and Not automatic.

It is possible to digitize KYC controls, thanks to solutions based on artificial intelligence algorithms that guarantee “completely digital” recognition procedures or to support evaluation techniques already in place.

So, relying on Right digital partner, Know Your Customer procedures can be carried out both in person and remotely, providing better feedback in less time, compared to traditional procedures.

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