BBVA API Market
Knowing your customer is an essential asset in any business relationship, and it is even more crucial in the digital realm. In the financial sector, there are more and more procedures to ensure the verification and operations of customers. One of these processes is KYC.
The acronym KYC stands for “Know Your Customer”.
Know Your Customer is a policy widely adopted by financial institutions to verify the identity of customers and thus comply with the different regulations that regulate these activities. The aim is for the customer to prove their identity and apply a series of controls to prevent illegal activities such as corruption or money laundering.
The financial institution must ensure that the identity of the customer is real, understand the nature of the transactions it is going to carry out and, in addition, share this information with the authorities.
Therefore, KYC is an increasingly important process and is constantly evolving, especially in today’s digital context. Although it is applied in different sectors, in banking it is a very rigorous and reliable process, as it is strictly regulated.
Know Your Customer (KYC) processes are essential for banks as they allow customers’ personal information to be obtained, verified and then classified according to its level of risk. This practice is important for several reasons:
In addition, as it is a digitised process:
In the banking sector, where this procedure has been mandatory for years, most of its customers have carried out KYC verification in person. Therefore, the data and documents presented are compared personally by a representative of the institution. However, in recent years, the option to perform KYC identity verification online has also been enabled.
For example, identification can be carried out via a video call in which the user shows their identity documents and verifies their authenticity with a facial verification. Technological advances also make it possible to incorporate other biometric tests, such as identification through fingerprints or facial recognition tests.
Currently, with digitalisation, any industry can benefit from and support its protocols with the user verifications already carried out by the financial institution, which provides added value compared to other identification systems where the information is not cross-checked. For this purpose, there are tools or banking APIs for KYC that take care of streamlining this process.
Each time a customer opens an account or is registered, the KYC process is applied. APIs such as Auto Loans or Accounts
These are the main benefits that financial institutions obtain when using KYC:
Know Your Customer is not a static process. Although it is essential to prove identity at the beginning of the business relationship, it is also necessary to maintain a continuous process that causes the least inconvenience. On the other hand, open banking uses KYC to ensure the identification and verification of users by sharing their financial data in a secure and controlled manner
Banks have to comply with legal requirements and for this they can ask the end customer to provide documentation at any time. This usually occurs when we have not submitted a document or if unusual activity is detected in the accounts, especially a transaction for a large amount.
In addition to checking the source of documents provided by customers, banks also check information against external sources such as numerous external blacklists and public databases, as well as collecting and integrating the necessary external data with internal systems.
Another aspect is that customer due diligence (CDD) is also crucial, as it comprises regular checks and constant monitoring of the information collected.
Finally, it is important to comply with the rules and that their implementation causes as little inconvenience as possible. Although KYC requirements are strict and create many challenges for a financial institution, the consequences of failing to comply with these rules can be severe.
The KYC process is critical to establishing secure and reliable relationships between banks and customers, and it is also crucial to compliance with current regulations and laws designed to prevent fraud, money laundering and terrorist financing. These regulations vary according to the jurisdiction of each country, but they share the common goal of ensuring transparent and secure financial transactions.
In Spain, the Bank of Spain establishes that banks and financial institutions are obliged to implement KYC practices that allow them to collect the necessary information from their customers and to adopt the necessary measures to verify the veracity of this information.
KYC and AML (Anti-Money Laundering) are intrinsically linked when it comes to identifying fraud and preventing risks associated with money laundering and terrorist financing. These regulations require rigorous verification of the customer’s identity and continuous evaluation of their activities.
This integration is one of the European Union’s AML measures
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