Despite rapid growth in advanced technologies, businesses still suffer from fraud, terrorism, and identity theft. Businesses suffer with heavy financial loss every day at the hands of fraudsters. KYC document verification identifies real clients and protects organizations from any kind of security risk. KYC compliance establishes customer identity and allows financial institutions to have deep insight into the sources of funds. KYC standards protect financial institutions from money laundering, terrorist financing, and corruption.
What is a KYC Document Verification Service?
While having customers on board, every business requires some piece of specific information from customers to be verified with the help of the KYC process. Various KYC documents ensure that the customers are actually who they claim to be. These documents contain the information of identity which include the client’s name and address. A verification process is carried out to ensure that the information provided is accurate. Different documents are collected to verify the customer’s identity and residence.
KYC documents are usually divided into two distinct categories:
- Proof of Identity (POI) document
- Proof of Address (POA) document
- Proof of Identity
The KYC documents that are considered acceptable vary as per the jurisdiction where the KYC process is being performed. Depending on the country and specific safety measurements, you can also use one of the following documents. Some of the more generally identified documents as proof of identity are listed below.
- Birth Certificate
- Citizenship Certificate
- Voter ID Card (in Mexico, India, Jamaica)
- Health Card (in Canada)
- Bank card with a photograph
- Passports
- National ID card
- Driving licenses
- Proof of Address
To comply with successful KYC measures, organizations must obtain authentic proof of address from customers. Particularly in the financial sector, it is mandatory to know the client’s residence before opening any account or processing a loan application.
The documents provided as proof of address should not be older than three months. Additionally, it should be visible that a document is issued by an officially recognized organization.
The examples of POA documents are:
- Bills that were posted to your client’s address (e.g. utility bills)
- Bank statements
- Letters from a municipality
- Insurance letters
- Letter of employment
- Rental/mortgage contract
- Authorized change of address form
- Proof of Income documents
- Proof of Income documents
In the banking sector, it is mandatory to know the source of funds of clients. It prevents money laundering and corruption. It is less commonly used information as compared to address and name. However, banks are required to use this information to comply with anti-money laundering strategies. The following documents can be used as proof of income.
- Tax return letter
- Bank statement
- Statement of court-ordered payments (e.g. child support and alimony)
- Proof of unemployment benefits
- Pension slips
Key Benefits of KYC
Companies and service providers benefit from higher conversion rates and optimized customer acquisition costs, especially with AI-driven and automated KYC solutions.
- Compliance with Regulation
Organizations have to employ KYC measures to know their customer’s details. It makes companies secure as well as allows them to comply with the regulations. The KYC document verification process is supplemented with various security checks that enable them to mitigate the risk of fraud.
- Reputation and Trust
KYC compliance makes firms secure and keeps them away from heavy penalties. It allows customers to trust an organization and make a business relationship with them. Thus KYC verification builds trust between the organization and its employees.
- Reduced Errors
Automated KYC processes reduce human efforts of manual verification, it has also reduced the error rate as compared to manual verification. AI and ML pre-trained models are very sharp and efficient, they verify documents to unveil a person’s identity and give error-free results. KYC automation systematically tracks errors and rapidly resolves them before they cause trouble.
5. Cost Effective
Companies do not need to hire many employees for verification purposes. Automated ML and AI models have replaced human efforts. Automated KYC verification procedures provide efficient results for the identification of clients identity.
6. Increased Security
KYC measures are employed to find individuals having unauthentic identities. It makes an organization accessible to reach criminals and fraudsters in the initial stage. It protects illegal transactions, corruption, and money laundering.
Key Takeaways
KYC documents are used to obtain information required for identity verification. Combined with AI, KYC is an advanced process to figure out unauthentic criminals. KYC measures made onboarding secure as it allows organizations to deal with only legitimate clients. It has replaced the manual verification process and works more efficiently in a very short time. Client documents are identified and verified to ensure that the information provided is accurate. It reduced the error rate and provided efficient results regarding identity verification.
