Know Your Customer (KYC) is a standard banking policy introduced globally in 2001 as a patriot act passed after 9/11. This banking process provides a variety of means to detect terrorist behaviors. The act also prevents money laundering, illegal funding, and financial fraud. On a more personal level, it lets every bank know customers like you better.
KYC allows banks to manage any risk on your behalf and provide more efficient services. Every bank is required to follow KYC policies. Its elements include monitoring transactions, identifying a customer, information of a customer, and ways of eliminating possible risks.For you to successfully create a savings account, banks need to know your identity through reliable information and documents. These documents could be the following;
- Proof of I.D
- Proof of Address/Billing
- Income Statements
- Recent Photograph
These files are for documentation for KYC. You can use this reliable information to apply for a loan or credit card, openanother account, and invest in mutual funds. Banks have the right to close the account or end banking relationships after providing due notice to a customer who failed to comply with the KYC policy.
Why is KYC good for you?
Digital currency gets used more in the modern era. On the other hand, KYC undermines one of the critical principles of the crypto world, which is anonymity. KYC always ensures transparency when it comes to transactions. Here are the main advantages of implementing KYC in a cashless society:
- Prevents scammers from using ICO or crypto currencies for illegal transactions
- Combat criminal acts through financial frauds
- Ensures safety for investing in assets
- KYC avoids legal, tax and reputational issues
- KYC also establishes a strong relationship between the customers and the bank
- It boosts the credibility of the person applying for a loan
Pitfalls of KYC
- For more obvious reasons, most investors want privacy and have no desire to make documents and information accessible to everyone. They may see KYC as an additional barrier to enter the ICO. They do not want this for such reasons of possible data leaks. However, there is always a bank that suits you and adopts the best KYC program.
- Citizens of some countries like India and China are not allowed to partake in ICOs because of KYC and AML. The United States also has its own set of features.
However, ensuring KYC is an act of anti-money laundering (AML). Not only are you complying with the international regulations, but it also minimizes the number of critical acts against the safety of your ICO tokens. It is one way to ensure the safety of ICO projects from cyber threats.
- KYC has no standardized process throughout the world and differs widely according to each bank. This non-standardized process, especially if you are traveling internationally for business, creates a difficult situation, resulting in poor customer experience. But through the continuous evolution of the banking process, some banks offer an optimum KYC efficiency for their customers.
- Sometimes KYC procedures undergo a time-killing process. Bank employees can forget to check the documents and authenticity of the information. This problem results in KYC failure and susceptibility to financial crimes. But then again, you should choose a bank with a flawless KYC.
To avoid deploying KYC with a failure is to change and adopt the right one. Go for the institutions that value high standards when it comes to its KYC processes. It might be hard for you to enter, but it is surely worth your time, money, and effort in the long run.