Know Your Customer (KYC) is the process of carrying out due diligence to verify the identity of key stakeholders of a company. This applies to clients, suppliers and partners. To what end? To ensure their integrity and verify their compliance with applicable regulations. The raison d’être of KYC guidelines is to fight against financial crime in its many forms, such as corruption, money laundering or the financing of terrorism.
KYC: inextricably linked to customer intelligence and the transparency of financial transactions
Know your clients, suppliers and partners
Customer intelligence is not a new principle (see our article 360° Customer view for an unforgettable experience). However, appearances can be deceiving, and KYC can help shed light on areas of darkness. Today, it is essential companies submit all the stakeholders with whom they are involved to a process of due diligence. Because, yes, knowing your customers, suppliers and partners is a necessity. By proving its good faith, the company reduces the risk of being held accountable in case of problems with local and international legislation.
Fighting against corruption
A robust system, built on the application of customer and partner due diligence procedures (KYC) helps businesses avoid being unknowing participants in illegal financial activity. Money laundering, fraud and corruption all constitute risk factors which can directly or indirectly harm a business. As a result, companies must incorporate measures into their Risk Management and Compliance (GRC) system to help fight money laundering and terrorist financing.
• How should you tackle KYC? Spotlight on the must-have tools to know your customer better
When implementing a KYC approach, one of the most important steps is obtaining, tracing and storing the documents needed to assess the integrity of your stakeholders. For banking institutions, the complexity of the identification process is such that they have to use the services of external providers.
Before entering such a level of complexity, it is important that all business data is centralized in one tool: CRM software, for Customer Relationship Management software. This tool, a core pillar of your information system, is specifically designed to collect useful personal data (see our article on GDPR) and give a 360° view of the customer with a history of all your interactions with him or her. This means that, by offering high-quality customer intelligence, a CRM is one of the pillars of KYC.
Legal aspects of KYC
Towards a duty of due diligence and information
Businesses have a twofold obligation with regard to KYC. The first concerns a duty of due diligence in the fight against money laundering and the financing of terrorism. The second is an obligation to caution investors as borrowers. New, independent supervisory bodies are gradually emerging to oversee financial institutions.
Following a number of abuses, and to prevent them from happening again, banking and financial groups are subject to very heavy fines, sometimes reaching up to several hundred thousand Euros. In addition to this, the risk of such an incident tarnishing the company’s image can have significant repercussions on its reputation.
In conclusion, the banking sector is most concerned by KYC. However, regardless of the company, regardless of the sector in which they operate, it can never be stressed enough: customer knowledge is the crux of the matter. By centralizing all the data on a company’s ecosystem (customers, suppliers, partners …), a CRM system, therefore, can be the best ally of the different business lines of a company. It just so happens that our website can give you more information about this!