KEY ROLE OF KYC PROCESS FOR BUSINESSES | SMART Infotech

Know Your Customer (KYC) is a multiple-step process through which a business collects data that enables customer verification. This is usually done by banks and finance-related applications such as online stock brokers, digital wallets, etc. Rules related to KYC might differ from one country to another. Broadly, two basic details are ascertained about the customer:

  1. Identity

  2. Address

KYC objectives

It is done to identify customers as well as to ascertain whether the details provided by the user are correct. Since finance-related institutions and businesses usually deal with very large amounts, it becomes paramount to get details about every customer/party involved. Several other reasons why businesses should fulfill their KYC Objectives are as follows: 


  • USER PROTECTION: Every user is different. Every user comes with a different objective. There might be a huge gap between what different customers desire, but user protection is a basic need of every customer. There is a major risk involved while dealing online. While dealing online, if a scam/fraud occurs, the data procured earlier during the KYC process can be utilized to identify the culprit. There is also a need to segregate one customer from the other. 

Sometimes the amounts involved are too large. In case of any mishandling or fraud, the business might have to provide compensation to the user. Hence tarnishing brand image as well as incurring a monetary loss. 


  • FIRM'S GOODWILL: To run a business in the long run, it is paramount to have goodwill in the market. It might take years to build a reputation, but one fraud, even the smallest, can tarnish the brand image very quickly. Every firm should fulfill its KYC Objectives as they provide security for firms as well as for customers. 


  • LAW OF THE LAND: Every Business is bound to align with the law of the land. There is a certain periodicity of KYC. Usually, some guidelines bar the banks from opening an account without proper KYC documents. A business cannot function without aligning with the law of the land. Government/legal interference of any kind is not good for any organization. 


  • ANTI-MONEY LAUNDERING: Financial institutions have a higher risk of being used for money laundering. Money laundering is the process of making illegally acquired money look legal.  A proper customer identification process keeps the users in check and can help prevent money laundering to some extent. 


SMART INFOTECH has come up with an excellent software called AML TRACE, which helps in screening, monitoring, and tracking customers/transactions. It is highly useful when there is a need for KYC and customer screening. AML TRACE can accurately report when a client was cleared and can also keep details about who cleared them. AML TRACE can also aid in PEP (Politically Exposed Persons) Screening which seems like a cumbersome process otherwise. 


Every organization must keep its members in check. Similarly, the users of an application should also be kept in check to provide a safer atmosphere for everyone else on board.  

Hence, a diligent KYC Process is a must.

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