What is KYC compliance and how do you ensure it?


This guide outlines the basics of what is KYC compliance, and the key steps to ensure it for your business or workplace.

It might be tempting to ignore compliance laws and regulations, but non-compliance is not recommended. Instead of assuming that KYC (or Know Your Customer) compliance is an overly complicated subject, take some time to understand what it means for you and your business.

What is KYC compliance?

Know Your Customer (KYC) is a set of strategies used by companies to gather as much information as possible about consumers. This process aims to analyze the risk of your choices and offer more security and quality to the service you offer.

KYC is mainly aimed at organizations that are exposed to the risks of financial fraud, such as corruption, money laundering and embezzlement, among others.  It is, therefore, an especially important strategy for banks, brokers, fintechs, credit and payment companies, among others.

Regulatory compliance ensures that financial institutions adhere to legal and ethical standards, thereby safeguarding the integrity of the financial system. Implementing customer verification procedures is crucial to this, as it helps prevent illicit activities like fraud and money laundering, while also building trust and confidence among customers and stakeholders.

Know Your Customer procedures can be used to:

  • Evaluate the adherence of the consumption profile to the offer of products and services;
  • Assess a profile suspected of involvement in money laundering;
  • Confirm the identity of the customer;
  • Detect fraudulent profiles;
  • Understand the nature of the client’s activities;
  • Ensure your sources of income are legitimate.

It is also worth noting that, with the passage of time and the consolidation of these practices, various methodologies and techniques of this type were adopted by companies from other segments.

KYC involves user identification processes and procedures for writing acceptance policies. Its objective is to identify and classify the company’s customers in risk levels — low, medium and high — in addition to finding final beneficiaries and Politically Exposed Persons (PEPs). Based on this identification, the monitoring of those that pose the greatest risk is carried out.

Thus, Know Your Customer’s greatest asset is to generate a more in-depth knowledge of the company’s consumer and customer profile to ensure business security and help in the creation of products and services that adhere to the market.

The start of a New Year is the perfect time to evaluate your approach to KYC compliance, with its policies and procedures. Even though this may not seem necessary for a small financial business, the truth of that matter is that all businesses need to be compliant.

How to ensure KYC compliance

Here are five tips to help you achieve KYC compliance in your organization.

  1. Stay Up to Date

Compliant workplaces don’t just happen by magic. Business owners and managers need to understand and accept that compliance requires their businesses to review their relevant policies consistently and regularly to stay up to date with new laws and directives.

One of the easiest ways to ensure that your financial institute is, and remains, profitable is by staying updated on all legal changes that occur. Your business must find an effective way to stay current and implement any necessary policy changes in a timeous manner, thereby avoiding the imposition of penalties.

  1. Ensure Policies Are Strictly Adhered To

Your hopes of having a fully compliant workplace will be completely dashed if you do not ensure that you have your employee’s buy-in. Changes to company rules and policies are often met with confusion and apprehension because workers rarely like change.

To get your employees buy-in, be sure to communicate regularly with them about why that is necessary for the financial industry and what will happen if those directives and laws are not strictly adhered to by every employee.

Be sure to appoint a Compliance Regulation Officer, that way compliance adherence becomes their responsibility. Don’t think that gets you off the hook though, ultimately the owners and most senior employees will be held accountable.

  1. Consult the Professionals

If your business is small, new, or even both, you might be breaking laws without even knowing it. KYC compliance refers to the steps taken by a financial business to establish customer identity, satisfy that the source of the customer’s funds is a legitimate one, and monitor that customer’s activities for risks associated with money laundering.

The amount of money laundering that occurs annually is equivalent to up to 5% of global GDP – that is a staggeringly high figure and is the precise reason for updated directives that are put in place to prevent that, or at the least, drastically reduce that number.

  1. Conduct KYC Reviews

KYC non-compliance affects every level of a financial institute and can expose it to unnecessary risks, and the consequences of such can be devastating.

The processing time of identity verification ranges from a few seconds to a little over a day in most cases. KYC reviews are usually the costliest activity for an institute to proceed with. They can be done annually but need to be done at least once every 5 years. These reviews can be planned by your KYC analyst and will help to ensure your business’s customers are real and assess and monitor risks.

The most common pain points related to conducting KYC reviews include points related to data collection and transaction analysis.

  1. KYC Due Diligence Best Practices

Financial institutions have a lengthy list of compliance requirements. These companies face enormous risk expose due to the large number of financial transactions that they process each day.

KYC procedures are critical to assess and monitor customer risk. That means that to be compliant, your institution or company needs to:

  • Establish the identity of the customer
  • Assess money laundering risks associated to that customer
  • Fully understand the nature of that customer’s activities

To be effective at the above, businesses need to include elements such as:

  • Customer Identification Program: to collect, verify and record customer information
  • Customer Screening Programs: these can be built into the CIP to screen customers against lists of identified criminals
  • Basic and Enhanced Due Diligence to mitigate the risks associated to customers and onboarding third parties


Not adhering to compliance laws may end up costing you your company. It may seem like a lot of work initially, but – once your programs are in place, they will be smooth running. It will be helpful to consult a professional team to help get you up and running. That way, all you need to do is ensure that that momentum is maintained.

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