An Explanation of Know Your Customer (KYC) Rules

Know Your Customer (KYC) rules govern transactions made by financial institutions with potential clients and customers. These rules are in place in order to ensure that financial institutions and businesses do not knowingly or unknowingly facilitate money laundering. This is accomplished by organizations through the use of identity verification techniques to establish the true identity of customers from the outset. This allows businesses to do their due diligence to deter fraud, and it also allows for greater confidence when it comes to risk management. Understanding KYC rules and what goes into a successful KYC program will help businesses and financial organizations remain compliant, while also meeting other goals such as customer acquisition and revenue.

KYC Rules Help Organizations Know Customers

Companies that incorporate thorough Know Your Customer techniques into their operations take an important first step toward ensuring that customers are who they say they are in a customer-not-present environment. According to PricewaterhouseCoopers (PwC), compliance with KYC requirements is expected to dominate the financial services landscape in 2014. Regulation, fraud prevention, ease of access, and customer satisfaction all play into the value that having a system in place to meet KYC rules brings to a financial services organization.

·         Compliance with Regulations – Working with clients around the world requires your organization to remain compliant with the rules & regulations of the countries in which you do business. The U.S.A. PATRIOT Act, for example, requires businesses to follow KYC rules in order to catch any potential cases of money laundering or terrorism financing.

·         Fraud Prevention – By establishing the identity of your customers and clients when they sign up for an account, such as through dynamic knowledge-based authentication, you ensure that you are doing business with legitimate accountholders. This prevents potential fraudsters from accessing unauthorized information and financial details to support their illicit activities.

·         Ease of Access/Customer Satisfaction – By speeding up the process for verifying identities by escalating the level of authentication based on risk, companies increase customer satisfaction and also make it easier to assess potential risks when processing transactions. Customers appreciate the protective measures being taken in order to safeguard personal information.

Incorporating Additional Identity Intelligence

With an effective KYC program in place, you will be able to do more than just remain in compliance with applicable regulations. Going a step further by incorporating identity verification tools will help you detect any discrepancies between information on file and what a customer provides. This way you can quickly and automatically open more accounts, lower your operating costs, and increase efficiency and revenue. Examine your current processes so you can identify room for improvement and invest in a solution that is tailored to your needs.

Company Bio

IDology, a private, business-to-business identity and age verification solutions provider. Based in Atlanta, Georgia, IDology has over 10 years of experience in providing streamlined processes to increase customer acquisition, meet global industry regulations, and improve customer experience.


1.      Lavine, Clark, Ingram (January 2014). “Anti-Money Laundering: Know Your Customer Quick Reference Guide.” PricewaterhouseCoopers ( Web. 26 Apr. 2014.