KYC or Know Your Customer is a procedure that any licensed bank or financial institution is obligated to perform by law, worldwide; although requirements vary between jurisdictions. The primary goal of KYC is the identification and verification of each customer and the personal details they provide. Whether a person or a legal entity, and particularly in the case of the latter, KYC seeks to clearly establish who the true beneficiary is. In addition to this, KYC also helps banks understand a customer’s business activity, origin of funds and identify any risks associated with doing business with them. 

Critical to Preventing Crime & Fraud

A robust KYC regime, when widely practiced by financial institutions, becomes an effective weapon in the fight against money laundering, financial crime and outright fraud. Money laundering in particular is a serious problem as it seeks to legitimize the proceeds of crime, fuelling further criminal activity including human, drug and weapons trafficking along with a host of other illegal activity that is detrimental to society at large. 

Importance of KYC in Trade Finance

International trade involves transactions across borders and jurisdictions with disparate regulations and practices. This makes it very attractive to international criminals for the movement illicit goods or to give the appearance of engaging in legitimate trade in order to successfully launder money. Thus, as a trade finance provider, Euro Exim Bank takes KYC very seriously and finds itself duty-bound to ensure that international criminals do not gain access to legitimate trade finance.

Mandated by Law

In nearly every jurisdiction, KYC protocols are mandated by law and overseen by the local financial regulator. Furthermore, if any irregularity is detected in the presence of poor KYC, the financial institution, along with the criminal party are both liable to prosecution. This ensures that all financial services providers take KYC seriously and implement it stringently, helping fortify the global financial system against criminal activity and the proceeds of crime. 

Documents Required

When you approach a financial institution for the first time, you will need documents to prove your identity and your residential address. Acceptable documents vary across jurisdictions and usually include passports, national ID cards, driving licences and others. For proof of residence, usually if it matches that of your government issued ID document, that is sufficient. Otherwise, you will be required to provide a utility bill addressed to you or some other alternative. You will also be asked various questions about the nature of your business and transactions to allow your bank to understand what your regular activity looks like.