Know Your Customer (KYC)

Some of the primary regulatory rules in the US, UK and Europe include:

• The EU’s Anti-Money Laundering Directives (AMLDs)
• The US Bank Secrecy Act (BSA) and the USA Patriot Act
• The UK Bribery Act and the UK Modern Slavery Act

In general, the Financial Action Task Force (FATF) regulations also provide a legal framework for KYC measures on a global scale. 

The KYC process typically takes place during the customer onboarding stage, depending on the user’s assessed risk level. However, customers may also be re-verified later, especially if their risk profile changes. For example, if the bank wants to check their identity again before allowing them to make a large (unusual) transaction. 

It’s important to note that in this context, customers can refer to both individual users and businesses.

The key elements of KYC are: verifying the customer’s identity, understanding their background and activities to ensure legitimate transactions, and assessing money laundering risks through ongoing monitoring. 

These elements can be broken down into three mandatory KYC requirements, which are:

1. Customer Identification Program (CIP). Collecting and verifying personal details. 
2. Customer due diligence (CDD). Assessing customer risks.
3. Ongoing monitoring. Continuously monitoring risk changes to keep up-to-date data.

eKYC stands for electronic Know Your Customer, which is the same KYC process but in a digital form, where customers are verified remotely, or through digital means, as opposed to traditional KYC verification methods, such as manual physical document verification and visits to physical banking branches. However, both terms — KYC and eKYC — have been used interchangeably, as most companies now use an automated digital KYC process. 

A typical automated KYC flow consists of two parts: a government-issued ID document verification (passport, driver’s license, or ID card) and a biometric check, which uses the person’s selfie picture (or recorded video) and compares it with the photo on the uploaded document. For example, customers can upload official documents via smartphone, with facial recognition ensuring their selfie matches their ID.