Know your customer (KYC) checks encompass the customer due diligence and enhanced due diligence a regulated company must carry out to ensure their customers are who they say they are and do not pose a risk to the business.
Before onboarding customers, it’s important to verify that an individual is who they say they are and that you can trust them. Beyond onboarding, it’s necessary to monitor for changes in circumstances and behavior. KYC is best practice for any business looking to transact securely, prevent fraud and build trust and confidence in its brand.
There’s a whole compliance industry and a long list of regulators and regulations out there, but your KYC checklist breaks down into four key questions:
1. Is this a real person?
This may sound like a strange question, but before transacting with customers online, verifying that you are being presented with a real identity is an important part of establishing trust. Cybercriminals routinely disguise themselves by creating a synthetic identity – a combination of stolen and fake personal information used to create a new digital persona for illicit purposes.
Data identity verification
Data-oriented identity verification involves the checking and matching of PII data – name, address, date of birth, ID number and other identifiers – against trusted global data sources to confirm the identity that’s been presented has been seen and accepted before. These sources tend to include credit agencies, voter registrations and property records. Dark web data searches screen the identity matching stolen information or compromised data.
2. Is this person who they claim to be?
Another important check when getting to know your customer is ensuring that the person introducing themselves is the legitimate holder of the identity they are claiming. Identity theft is an ever-present threat online, so your business needs to be satisfied that no one is fraudulently using another person’s personal identity data without their knowledge.
Identity document proofing
The best online onboarding experiences smoothly combine automated document-proofing and biometric identity authentication in a couple of simple steps.
For example, computer vision and artificial intelligence can quickly and accurately pick out a prospective customer’s face from a photo or video. Algorithms then analyze, measure and map the position of the features to create a unique faceprint. Recognition systems make a one-to-one match of this faceprint to an image extracted from a government-issued ID, like a passport or driving license.
The best identity proofing solutions will run forensic tamper-proof tests on documents and liveness or presence attack detection on the individual uploading it to ensure the genuine presence of your prospect.
3. Can I do business with this person?
For regulatory compliance, this is an essential question in your KYC checklist. It’s necessary to screen prospects against global sanctions and PEPs (Politically Exposed Persons) lists to identify high-risk individuals and businesses engaging in illegal activities. There are many global lists, but the most common are published by OFAC (United States), OSFI (Canada), EU, HM Treasury (UK) and the United Nations.
PEPs and sanctions screening
To meet regulatory standards for scrutiny and minimize the chance of missing a sanctioned or PEP individual, fuzzy matching techniques are deployed to the screening process. Unfortunately, this can return good prospects as well as bad actors, so the best automated onboarding solutions remove these false positives, saving your Compliance team’s time and swiftly welcoming that person into the fold of your valued and trusted customers. It’s not a one-and-done process, because these lists are constantly evolving, so your solution should continue to screen your customer base beyond onboarding.
4. Should I do business with this person?
This is your call, based on your business’s approach to risk, but regulated businesses must conduct extended due diligence (EDD) for high-risk customer checks. These tend to be individuals and businesses from high-risk industries (notably financial services) and countries, and individuals and entities conducting large or unusual transactions. It’s up to your business to detail and document a risk-based definition and approach to investigation.
Customer trust scoring
GBG GO’s machine learning risk models and eDNA identity graph technology search for and interpret fraud signals, evaluating customer data, behavior, adverse media and connections with untrusted entities. This process delivers an actionable trust score tailored to your business; automatically fast-tracking low-risk customers and rejecting high-risk customers or taking them on a more secure onboarding journey. Even better, GBG GO delivers the documentation you need to explain your scoring and onboarding decisions to risk managers and regulatory auditors.
GO with complete customer lifecycle compliance
GBG GO offers your business a no-code customer onboarding solution that helps you know your customer, so you can check the boxes on your KYC compliance checklist.
GO’s unique orchestration brings together the power of our award-winning identity-proofing technologies at the right moment in your customer journey to reduce risk, maximize customer conversion and deliver complete customer lifecycle compliance beyond onboarding.
So, whatever industry you're in, you can go to market with confidence, knowing your customer and growing your business at speed.
Ensure good customers are onboarded seamlessly, while fraud is prevented and compliance regulators are satisfied.