International terrorism, cybercrime, illegally acquired assets are among worrying issues gaining strength in the 21st century. Now the world is in the search for new methods to enhance the fight against these phenomena. That is why specialized international organizations in the coercive order introduce norms that oblige financial, banking, administrative structures intently and carefully examine
their potential business customers.
Finance companies, accounting offices, and law firms continue to remain customer-oriented, but staying under constant monitoring of controlling government agencies are forced to deviate slightly from the principle of full loyalty. Otherwise, if certain indulgences are detected, they face severe sanctions.
Indeed, one of the essential tools to protect organizations from fraudsters in many areas is customer identification. Widespread international control identification standard is the KYC rule.
KYC stands for Know your client, literally “Know Your Client! ”. Although following the practice of applying this principle, it should be introduced as the term “Customer Selection Rules.” This procedure allows financial companies to secure themselves from fraudsters and calculate all sorts of risks when working with one or another client. Its essence comes down to the need for providing a financial company with a package of documents that contain regulated information about clients personality. Banks and international financial organizations were the first who started to implement this process.
How is the KYC works?
Since the primary goal of KYC is to protect the financial structure' interests, it is evident that KYC performs several functions at once:
- verifies the identity of the client;
- the security service can determine the risk of the client' involvement in illegal, questionable activities;
- to manage their risks, limitations might be established that regulates the type and number of transactions for an individual customer.
KYC process begins with customer identification, namely reconciled data that comes from potential user financial services organizations, among which passport details, income information, credit history and much another. All submitted and received information is entered into the questionnaire of a potential client in a special database. Further data analysis takes place, the analysis method allows you to make certain conclusions, calculate the risks, minimizing them or avoiding at all.
It would not be superfluous to mention the advantages of the KYC procedure for the client himself, because in most cases KYC plays into his hands. The complete and accurate information provided to them will help an employee of a bank or other financial company to provide services that will meet his real needs. Stock exchange broker that knows the financial position of its the client and the specifics of his activities will give him the most suitable and useful invest advice, and a financial advisor will select the adequate optimal solution for asset management.
Thus, the KYC customer identification policy is a kind of protective mechanism for both customers and business structures accompanying their activity. Is is clearly
structures the admissibility of relevant financial transactions and protects both parties from possible penalties.