Know your customer & Market Intelligence

Exhausted by the time-consuming demands of Know Your Customer (KYC) processes, corporate decision-makers have made clear their continued discontent with onboarding issues.

Do you know your customer & business partners?

You better do, if you’re a financial institution (FI), corporate or you’ll face possible fines, sanctions and maybe even media ridicule if you do business with a money launderer or terrorist. More importantly, it’s a fundamental practice to protect your entity from fraud and losses due to illegal funds and transactions.

What is KYC?

Knowing your customer (KYC) is critical to your business to mitigate external risks and safeguard your company’s brand and financials. For example, KYC is critical for banks to comply with Anti-Money Laundering reporting standards. KYC is the banks way of taking ownership of all funds placed for deposit under their care while establishing rapport with the client. Objective here is to validate the identity, profile and reputation of an individual or a business entity.

How does your third party “KYC” helps you?

  • Establish individual/businesses identity
  • Understand the nature of the business activities
  • Legal records for future discrepancies arbitration or litigations.
  • Assess risks associated with individual/businesses through due diligence & monitor them.

What are KYC Documents?

KYC documents are used to verify an individual or company’s financial authenticity. If you are an Individual, you would need to submit:

  • Personal ID proof
    • PAN Card
    • Voter’s ID
    • Driving License
  • Address proof
    • Aadhaar Card or Aadhaar Letter
    • Ration Card
    • Passport
    • Utility Bills
    • Other Government Issued ID card

If you are a business (entity) the you would need this

Document Listing
Memorandum and Articles of Association (if Company)
Partnership Deed (if Partnership)
Statutory Registration Certificate
SSI Certificate (if any)
GST Number
EPFO/ESIC Challans for last 12 months
Receipt Direct/Indirect Taxes Paid in last 12 Months
Tax Payer Identification No
Excise Control Code No.
Central Sales Tax registration certificate
Local Sales tax registration certificate
Bankers Authentication Letter (If applicable)
Detailed Audited financials for last three accounting years (Profit & Loss A/C, Balance Sheet, Schedules and Notes to Accounts)
Audit report for the latest Financial year

The Regulator mandates that any individual conducting financial transactions needs to have their identity verified. As a provision in the Companies Act, it’s designed to limit money laundering, terrorism funding, corruption and other illegal activities. The desired outcome is that businesses accurately identify their customers:

A critical element to a successful risk assessment, both on the institutional level and on procedures for each account. It’s up to the individual institution to determine the exact level of risk and policy for that risk level.

Key challenges Businesses face when it comes to making KYC work

The regulations governing KYC requires the synchronisation of numerous processes as well as roles and responsibilities, which on the whole, can be a complex and extensive undertaking. Among the common challenges financial institutions encounter in their efforts to establish/maintain an effective KYC programmes include:

  • Risk in misinterpreting regulators’ guidelines – may lead to compliance gaps.
  • Lack of communication between business units/departments – may lead to inconsistent and unconsolidated data, thus resulting in weak/unreliable customer intel.
  • Manual processes in the due diligence life cycle are vulnerable to human errors – may have a far-reaching effect if left unnoticed; this include assigning the wrong risk rating to clients, as judgement is subjected to the analysts’/decision makers’ individual interpretation of the matter.

Leveraging on technology to improve the effectiveness of KYC

The accuracy of the clients’ profile and data is highly crucial towards achieving the objective of KYC. This is where technology comes in – to enhance data precision and also to improve the turnaround time needed. Among the popular digital solutions that financial institutions use are:

  • Real time screening technology – to assist in the cross-checking of clients’ details against regulators’ watch lists.
  • Data analytics – to provide an analysis and a consolidated view of the data across various business functions.
  • Workflow management systems (WMS) – to automate manual processes.

In addition to meeting regulators’ compliance demands, there’s also a growing need for financial institutions to leverage on new FinTech solutions to further optimize their KYC programmes and better differentiate themselves from the competition; especially in the areas of expediting clients’ onboarding process, minimising cost and the duplication of effort, and most importantly, bolstering security and safeguarding their reputation as well as the integrity of their systems from being involved in money laundering activities/financial crimes.