KYC (Know Your Customer) is much more than a customer relations buzzword in today’s world. What used to be a confined to the financial services sector is being increasingly adopted by other industries as a tool to manage risk. More than ever, companies are vulnerable to reputational risks from the people they work with, they employ and do business with so they need to conduct KYC checks.
KYC and reputation checks are an easy, but essential, way of managing that risk. It puts knowledge at the heart of your business decisions and can help lessen the risk of fraud and offer a layer of protection against a company’s reputation.
Risk is an inherent element of business. But with new digital transformations sweeping across industries, it exposes companies to new risks like cybersecurity and data privacy problems. According to the 2020 Identity Fraud Report by Javelin Strategy & Research, losses due to online fraud grew 15% in 2019 to almost $17 billion.
So, what is a KYC check, and how do they protect companies from harm?
What is a KYC Check?
KYC is the process that companies use to verify a customer’s identity and assess their suitability. You may be familiar with the KYC norms used by banks and credit companies. The aim is to confirm that the customer is who they claim to be when entering a business relationship.
A strong KYC programme usually consists of three parts:-
- Customer Identification Programme (CIP)
- Customer Due Diligence (CDD)
- Continuous Monitoring
CIP involves customer verification through review of ID documents. There are also non-documentary methods that compare the customer’s information with public databases, websites, online search results, and social media accounts.
Next, CDD is performed by screening the customer’s information and evaluating it for any potential risks, like illegal activities or links to terrorist groups. Suspicious cases have to undergo enhanced due diligence or more stringent checks.
The KYC process doesn’t end here. A customer’s profile can change with time and should be monitored continuously. CIP and CDD steps may have to be repeated to update the customer’s risk rating. This helps the company prevent potential crises and minimise any chance of reputational damage.
Intelligence services like Yoono offer more than the traditional checks, to be able to perform an online reputation check with simplicity and ease. Yoono also comply with data privacy guidelines. No wonder that
Why are KYC Checks Important?
Global data breaches have soared in number during recent years. Risk Based Security’s Data Breach QuickView 2020 Q3 Report revealed that the number of breaches in 2020 touched a whopping 36 billion. This has triggered a surge in cases of online fraud and damage to the reputation of associated businesses. Amidst this kind of uncertainty, companies cannot afford to let their guard down.
Just as consumers use search tools to find information on brands and jobseekers browse employer reviews, so too must firms and businesses. Reputation checks of associates and employees can help avoid liability and protect both parties in a transaction.
Online reputation checks are also becoming popular in recruitment with 70% of employers using social media to screen candidates. These checks can help identify areas of concern not apparent in a CV or an interview, lessening the chances of a wrong hire. KYC checks at an early stage can save time and effort in the long run.