Define KYC (Know Your Customer) with its objective

Posted by Muhammad Jakirul Haque Talukder on Tuesday, March 24, 2015 | 0 comments

KYC or ‘know your customer’ policy refers to documentation which sets out a business’s approach to ensuring that it can effectively identify, verify and monitor its customers and the financial transactions in which they engage, relative to the risks of money laundering and terrorism financing.
Financial institutions and other reporting entities should have a proper understanding of their customers to satisfy their respective KYC obligations. It is equally important that employees of these organizations are properly trained regarding the importance of KYC and the specific KYC policies or procedures of their organization.
KYC is important for a number of other reasons. For example, if a business knows its customers well, it may be able to prevent damage to its reputation and avoid fraud or excessive risk in financial transactions involving customers.
The principal objectives of a KYC policy include:
1. Ensuring that only legitimate and bona fide customers are accepted
2. Ensuring that customers are properly identified and that they understand the risks they may pose
3. Verifying the identity of customers using reliable and independent documentation
4. Monitoring customer accounts and transactions to prevent or detect illegal activities
5. Implementing processes to effectively manage the risks posed by customers trying to misuse facilities.

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