Perpetual KYC: Why It's Critical and How It Works. Understand p-KYC in 2 minutes.
Know Your Customer (KYC) is a fundamental process for financial institutions and other organisations to verify the identity of their customers and comply with regulatory requirements. KYC involves obtaining and verifying customer information, such as name, address, and identification documents, at the time of account opening or initiating a business relationship.
However, this process is more than just a one-and-done deal. Customers' circumstances and identities change over time, and ensuring that the information on file is current and accurate is essential. This is where perpetual KYC comes into play.
What is Perpetual KYC Due Diligence?
Perpetual KYC is a continuous or ongoing process of verifying the identity of customers to ensure that the information on file is up-to-date and accurate. This means that organisations need to continuously monitor and update customer information instead of conducting KYC only when account opening or initiating a business relationship.
Perpetual KYC involves regularly updating customer information and conducting ongoing monitoring to identify any changes or updates that need to be made. This helps organisations to detect any suspicious activity or changes in customer behaviour that may indicate fraudulent or criminal activity.
Why Does Perpetual KYC Matter?
Perpetual KYC is crucial for several reasons:
- Regulatory compliance: Financial institutions and other organisations must comply with regulatory requirements related to customer identification and verification. Perpetual KYC ensures ongoing compliance with these requirements.
- Risk management: By continuously verifying customer identity, organisations can detect any suspicious activity or changes in customer behaviour that may indicate fraudulent or criminal activity. This helps manage financial crime risks, such as money laundering or terrorist financing.
- Customer satisfaction: Perpetual KYC can help organisations to provide a better customer experience by ensuring that customer information is up-to-date and accurate. This helps to prevent issues such as account freezes or delays in processing transactions due to outdated or incorrect information.
Perpetual KYC can be conducted through various methods, including:
- Customer self-verification: Customers may be asked to provide updated information or confirm their identity through self-verification methods such as biometric authentication or digital signatures.
- Third-party verification services: Organisations may use third-party verification services to verify customer information or monitor suspicious activity.
- Internal monitoring and review: Organisations may conduct internal monitoring and assessment of customer information to identify any changes or updates needed.
Perpetual KYC is critical for financial institutions and other organisations to comply with regulatory requirements, manage risk, and provide a better customer experience. By continuously verifying and monitoring customer information, organisations can ensure that customer data is current and accurate, helping to prevent financial crime and maintain regulatory compliance.
Perpetual KYC is an essential aspect of financial services that are becoming increasingly important as the world moves towards an increasingly digitised and interconnected future. By ensuring ongoing customer verification and monitoring, organisations can protect themselves and their customers from fraud and other financial crimes while also providing better services to their customers.