What is KYC screening and why is it important?
KYC, which stands for “Know Your Customer“, is an essential process for many businesses, particularly in the financial sector. Its purpose is to verify the identity and details of customers in order to prevent:
Anti-money laundering (AML): the use of the financial system to launder the proceeds of illegal activities such as drug trafficking, terrorism and tax evasion.
Identity theft: Identity theft occurs when someone illegally obtains another person’s personal information and uses it for their own benefit, such as opening accounts or obtaining credit.
Financial fraud: Financial fraud covers a wide range of crimes such as credit card fraud, insurance fraud and investment fraud.
Terrorist financing: Terrorist financing is the provision of money to groups or individuals involved in terrorist activities.
The KYC screening process
The KYC screening process can vary depending on the company and the legislation of the country in which it operates. However, it generally involves the following steps:
Data collection: The company will ask the customer to provide various information, such as their name, address, telephone number and a copy of their ID card or passport.
Data verification: The company verifies the accuracy of the customer’s information by comparing it with reliable sources such as government databases or credit reference agencies.
Risk assessment: The company assesses the risk associated with the customer, taking into account factors such as the customer’s country of residence, occupation and transaction history.
Monitoring: The firm will continue to monitor the customer’s activity for suspicious transactions or other evidence of fraudulent activity.
Consequences of non-compliance with KYC checks
Failure to comply with KYC requirements can have serious consequences for firms, including:
Fines: Regulators can impose fines on firms that fail to comply with KYC requirements.
Fines can be imposed on firms that fail to comply with KYC requirements: Failure to comply with KYC checks can damage a firm’s reputation and lead to loss of customers.
Legal penalties: In severe cases, failure to comply with KYC requirements can lead to criminal prosecution of company officers or employees.
Global lenders
Any global lender will act on the basis of the above process to verify the business applying for a loan. To avoid rejection, it is advisable to provide documentation that reflects the true picture of the business.
Alternative lenders may be more flexible and in some ways more accommodating when it comes to providing funds to a business outside their own country than traditional banks with their strict criteria and corporate finance mode, but in all cases they will need to have a clear picture of the borrower’s business, as well as the person running a business and seeking capital in the form of a loan. Must not have a criminal record for offences such as money laundering, drug trafficking, terrorism or tax evasion. In these cases, no alternative lender will lend to or work with such individuals.
For this reason, as a company, we carefully filter the information we receive from potential borrowers in order not to damage our credibility with the lender.
If you need funding for your business, please see the general plan in the business loans section.
