The 4 Step KYC process are performed for different reasons and purposes as part of overall KYC performance measures. KYC process is required to be performed in an appropriate manner at different stages of the customer lifecycle. The purpose of KYC is to ensure that appropriate risk assessment is performed before onboarding any customer, so that the risk of onboarding any criminal is avoided.
The 4 Step KYC Process
To appropriately perform the KYC process, there are 4 different steps of KYC, which need to be performed in an institution. Those four steps are as follows:
Step 1: Assess
Step 2: Explore
Step 3: Organize
Step 4: Present
Step 1. Assess
Assessment of ML/TF risks involved in a prospective customer, based on the identification information provided by the customer for verification purposes
Step 2. Explore
Exploring the customer’s identification information, to identify the true identity of the customer and the beneficial owner.
Step 3. Organize
Organize the information and feedback obtained from different reliable sources, to corroborate the evidence with the customer’s information.
Step 4. Present
Presenting the case of respective customer to appropriate authority within the organization for review and approval purposes.
KYC or Know Your Customer is now an important component in the fight against financial crime and money laundering, and customer identification is the most important aspect because it is the first step in performing better in the subsequent stages of the process. The global landscape of anti-money laundering (AML) and counter-terrorism financing (CFT) raises enormous stakes for financial institutions.
International regulations influenced by standards such as The Financial Action Task Force (FATF) are now incorporated into national legislation, encompassing strict directives and preventive measures such as “KYC” for client identification.