KYC for Banking and Finance - Part 6

KYC for Banking and Finance – Part 6

KYC guidelines, policies and practices are relevant to a range of industries, both for regulatory reasons and for security best practices. Here’s a look at some industries which need KYC.

1. KYC for Banking

Banks are required by law to abide by federal KYC regulations. This includes following CIP as well as CDD procedures.

In recent years, and especially since the COVID pandemic, banks have experienced a growing need for KYC procedures and technology to handle online banking customers. Among banked households, mobile and online banking have become the most prevalent ways of accessing bank accounts, according to a 2019 survey conducted by the Federal Deposit Insurance Corporation and the U.S. Census Bureau. In 2019, 34% of banking customers used mobile banking as their primary method of accessing accounts, while 22.8% used online banking. The pandemic has served to reinforce this trend toward digital banking.

2. KYC for Credit Unions

Like banks, credit unions are required to follow federal KYC regulations. A particular challenge credit unions face is following KYC requirements without disrupting the customer experience. Credit unions rely on superior customer service to differentiate themselves from other banking options, but a slow KYC process can dilute the customer experience. This makes efficient technology to speed up KYC checks particularly vital for credit unions seeking to stay competitive.

3. KYC for Wealth Management and Brokers

Wealth management firms and brokers also are required to abide by KYC regulations. Clients may interact with wealth managers indirectly through financial institutions, requiring conformity with the procedures and technologies used by these institutions. As with credit unions, wealth managers and brokers should deploy efficient technology in order to avoid bottlenecks which can hinder customer experience.

4. KYC for Lenders

Loan applications extended through traditional lenders such as banks are subject to the relevant KYC guidelines. Alternative lenders who offer loans online are not exempt from KYC requirements, although what is required may vary by loan product. The best practice to avoid fraud is to follow KYC policies regardless of what product is being offered.

5. KYC for Fintech

Fintech services which overlap with covered activities of financial institutions are equally subject to KYC regulations. Because fintech providers operate entirely online, using an effective identity platform is critical for effective fintech KYC implementation.

6. Electronic KYC (EKYC)

Electronic KYC refers to methods of KYC which employ digital verification tools. Providers and users of EKYC services must adhere to applicable KYC regulations.

To understand more about KYC, please read the following:

KYC Introduction

Chapter 1 – KYC Verification

Chapter 2 – KYC Compliance

Chapter 3 – KYC and AML Differences

Chapter 4 – KYC Checks

Chapter 5 – KYC Data Remediation

Chapter 6 – KYC for Banking and Finance

Chapter 7 – KYC Solutions