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Know Your Customer (KYC): The Cross or Lifeblood of FinTechs?

We often think the digital age is depersonalizing the client experience.

However, thanks to Know Your Customer (KYC) policies, opening any kind of account requires the service provider to know enough about their client to be able to identify them.

And while the onboarding process may appear cumbersome, KYC policies are what keep us safe from potential threats.

Below, we’ll walk you through the process so you can better understand KYC and its benefits.

What is KYC

KYC guidelines exist to keep financial institutions from being used in criminal activities, particularly money laundering. They also provide these entities to know their customer, helping them provide a better service.

Financial institutions need to have at least two primary documents on file for each of their customers: a proof of ID and a proof of address. To process these, the institution will need to see an original version and be provided with a copy for their records.

As part of KYC measures, the financial institution will also monitor your transactions in the hopes of keeping you safe from risk.

Why we need KYC

The main reason to verify customer identity is to ensure that the financial institution isn't vulnerable to fraud.

By getting to know their customer, banks (for example) can make sure that every monetary transaction originates from a legal source and is being used appropriately.

Regulations keep companies from playing a role in criminal activities.

Complying with regulations in a financial world

In layman’s terms, KYC is what keeps financial institutions and their customers safe. It’s the system of requiring a password to enter a speakeasy.

Also, KYC enables you to cancel your card in case of loss or theft. Because the bank can confirm you are the owner of the account, it can close it or keep the hacker from using it in the first place.

The greatest Achilles heel for up-and-coming FinTechs is sacrificing due process for a better user experience. New companies prioritize having a seamless customer journey to secure clients than checking all regulation boxes.

Money transfer operators and KYC

Regulation laws aren’t always homogenous, as is the case with the European Union. Each EU country has their own governing regulator and every country looking to do business with a neighbor must adhere to the compliance laws of all parties involved.

Money Transfer Operators (MTOs) must also run KYC strategies at both sending and receiving ends, all while presenting a user-friendly system that incorporates all regulation policies.

To prevent criminal activity, financial institutions keep an eye on client transactions that exceed a pre-determined amount. Inversely, MTOs control sending volumes by having a transfer maximum.

But, that’s just the tip of the iceberg when it comes to our compliance procedures.

Ria’s relationship with KYC

To even begin using our services, the sender must provide us with a valid ID as well as the receiver’s contact information.

Once the funds are ready to be collected, the receiver must also present their proper identification.

After that, we put in place different KYC strategies—like video conference, bank ID and face biometrics—depending on the laws of each country and the Ria platform the customer is using.

Eduardo González Cristos, Ria’s Digital Business Development and Innovation Lead shared that, “When it comes to our products and services, we ensure they’re adaptable to the needs of each regulator, integrating state-of-the-art solutions into all our business processes. We have a dedicated team evaluating our products on the clock to guarantee our KYC methods are the perfect combination of tech, innovation and compliance.”

Thanks to our 30+ years of experience in the sector, we’ve lived the evolution of regulations first-hand and gained all the necessary insight to remain compliant no matter how byzantine the rules of the game get.

Compliance is a challenge for all, but it is one we take on diligently, with a dedicated team of experts keeping us at the forefront of regulatory technology.

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