Privacy & Security

Know Your Customer Checklist: What Are the Elements?

Learn about the elements of Know Your Customer (KYC) checklist form, the importance of a KYC analyst and how to process online digital KYC with FileInvite.

The 2001 Patriot Act created new obligations for banking institutions to verify customer identities with a multipoint system known as Know Your Customer (KYC). At that time, federal regulators declined to articulate specific standard KYC processes, holding that the burden of customer due diligence (CDD) should fall on businesses that would otherwise only comply with bare minimum requirements.

Accordingly, KYC procedures have become individualized in the banking industry. For organizations that value compliance, KYC can be a somewhat mirky landscape to navigate, which is why the adoption of tools like KYC checklists have become the standard. 

What Is a Know Your Customer Checklist?

A Know Your Customer (KYC) checklist is a list of documents and information that a business or financial institution collects from its clients or customers to verify their identity and assess potential risks of money laundering, fraud, or other financial crimes.

What Is Know Your Customer?

But before determining whether or not your organization might benefit from a Know Your Customer (KYC) checklist, it's imperative that you understand what "Knowing Your Customer" actually means.

Crimes involving financial institutions and identity verification are on the rise. In 2021, American consumers reported more than $5.8 billion in losses due to fraud, which totaled 70% over $3.4 billion in 2020. Identity theft activities such as email phishing and mobile SIM swapping have also spiked. The FBI now estimates a person’s chance of being a target of identity theft at 15 times higher than previous estimates.

In banking, KYC procedures help protect consumers and financial institutions from these crimes. Although federal regulations do not specify precisely what component information is necessary to verify an individual’s identity to the satisfaction of due diligence, the independent Financial Industry Regulatory Authority (FINRA) – a nongovernmental organization that consults with financial institutions on regulatory matters – has two KYC guidelines. 

FINRA Rule 2090 stipulates that all broker-dealers must apply reasonable effort to verify customer identities and the identities of all individuals authorized to act on their behalf when opening accounts and in ongoing maintenance. FINRA Rule 2111 states that broker-dealers must be able to prove with reasonable certainty that all financial recommendations given to clients suit their financial needs based on the understanding of the broker at the time. 

To satisfy these guidelines, many leading institutions have adopted a three-step process for KYC compliance. 

  • Customer Identification Program (CIP): Seeks to establish customer identity through the information of public records such as addresses, dates of birth, and government-issued identity numbers.
  • Customer Due Diligence (CDD): Quantifies financial risk associated with an individual through activity records such as credit reports. 
  • Ongoing Monitoring: Makes sure risk assessments are current by monitoring transaction habits, anomalous activities, and potentially adverse media attention. 

What Is the Legal Importance of KYC?

While KYC procedures may seem like just more red tape in the loan approval process, regulators included these measures in the Patriot Act to enable banks to use customer identity verification to prevent crimes involving the trafficking of illicit funds through financial services. Crimes targeted by KYC provisions include:

  • Financing for Organized Crime and Terrorism
  • Money Laundering
  • Tax Evasion

The standards of identity verification applied in diligent KYC procedures make it exceedingly more difficult for persons involved in these crimes to conceal their identities, forcing them to seek other, less protected means of moving and dispensing finances. 

Cutomer Due Diligence: Everything You Need to Know About CDD (And How to Protect Your Organization  from Criminals)

Communicating the Importance of KYC Procedures in Your Organization

Organizations can use the checklist on this page as an example and add any additional parameters they believe are appropriate to due diligence in their own operations. Within organizations, meeting KYC compliance should be a standard part of all applicable processes, and management should make KYC documents available to staff responsible for collecting KYC information.

1. Use a Know Your Customer Checklist

Create a comprehensive checklist for KYC in your organization to reduce the chance of accidental oversight. To demonstrate due diligence, institutions can employ a KYC checklist. This list should include, at a minimum:

Business Information

  • Company Trading Name
  • Address
  • Status
  • Company Number
  • VAT/GST Number
  • Details of present Directors/Partners/Proprietors

Contact Information

  • Name
  • Address
  • Mobile Number
  • Email
  • VAT/Tax File/IRD Number
  • Company Bank Details

Banking Information

  • Name of the bank
  • Branch Address
  • Account Number
  • IBAN/Swift Code
  • Primary Contact

Banking Contact Information

  • Full Name
  • Address
  • Mobile Number
  • Email
  • VAT/Tax File/IRD Number

2. Make Your Know Your Customer Checklist Available Digitally

Using a secure online file-sharing service greatly enhances the efficiency and information security of KYC processes. With KYC compliance status available in clients’ files, authorized users will always know where clients are in KYC processes and can reach out to them with specific requests. Banks can achieve additional efficiency at this stage by offering clients a secure file transfer portal to respond to requests. 

Does Your Organization Need a KYC Analyst? 

If you need more support than the KYC checklist can provide, you may want to look into a KYC analyst - which can be highly beneficial for organizations dealing with high-risk customers or industries susceptible to money laundering or fraud.

The KYC analyst's responsibilities include carrying out background checks, validating customer identification documents, and evaluating the associated risk for each customer. Moreover, if your organization operates in a highly regulated industry or faces regulatory requirements, a KYC analyst can assist in maintaining compliance with these regulations. Overall, a KYC analyst can aid in preventing financial crimes, safeguarding your organization's reputation, and ensuring adherence to pertinent laws and regulations.

Online Digital KYC Processing with FileInvite

FileInvite’s SOC 2 Type 2 compliant file sharing and document collection platform offer financial institutions a simple – yet comprehensive –solution to the hassles of managing KYC processes. Not only does FileInvite allow authorized banking staff to monitor client KYC checklist statuses in one place and set up automated reminders for missing information, but FileInvite offers a pre-made KYC & CDD template for users.

What Does This Mean for You?

Rather than create or upload a KYC checklist, you can simply request that your client complete FileInvite’s Know Your Customer & Due Diligence template, which requires the completion of standard information, such as:

  • Certificate of Beneficial Ownership
  • Know Your Customer Checklist
  • Ultimate Beneficial Ownership Form
  • Certificate of Incorporation (for Companies, LLP, Trusts)
  • Proof of ID
  • Proof of Company Address
  • Any additional information you need provided

This template can be customized for your organization's own use, which allows you to add additional information requests, or remove those that aren’t relevant to your process.

To learn more and request a demo, visit FileInvite today.

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