Know your customer (KYC) is the process of a business verifying the identity of its clients. The term is also used to refer to the bank regulation which governs these activities. Know your customer processes are also employed by companies of all sizes for the purpose of ensuring their proposed agents, consultants, or distributors are anti-bribery compliant. Banks, insurers and export creditors are increasingly demanding that customers provide detailed anti-corruption due diligenceinformation, to verify their probity and integrity.
Know your customer policies are becoming much more important globally to prevent identity theft, financial fraud, money laundering and terrorist financing.
KYC controls typically include the following;
- Collection and analysis of basic identity information (referred to in US regulations and practice as a "Customer Identification Program" or CIP)
- Name matching against lists of known parties (such as "politically exposed person" or PEP)
- Determination of the customer's risk in terms of propensity to commit money laundering, terrorist finance, or identity theft
- Creation of an expectation of a customer's transactional behavior
- Monitoring of a customer's transactions against their expected behaviour and recorded profile as well as that of the customer's peers
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