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KYC, pKYC and Customer Due Diligence

CDD is a key part of AML compliance, and KYC should be the first step in any strong risk-based approach. SmartSearch can perform KYC checks on both domestic and international clients – our resources can confirm identities in over 200 countries using our electronic verification software. You can even access this service on the go with our app, SmartAML. Perpetual Know Your Customer (pKYC) is a more dynamic all-encompassing KYC solution and said to be the future of risk management strategies.

Customer Due Diligence and KYC

KYC (or know your customer) checks, are background checks that should be carried out as part of your risk-based approach. The KYC process involves the verification of the customer’s identity, using documents like photographic ID, proof of date of birth and proof of address. This can be done manually, with physical documentation, but it’s faster and more reliable to do it electronically, with data sourced online.

Customer due diligence, or CDD is a longer process which continues after the customer has been onboarded, and includes checks like sanctions and PEP screenings, to continuously assess the risk-level that a customer poses to a business.

Both KYC and CDD are crucial aspects of AML compliance. Regulated firms must identify and verify anyone they work with, to ensure they don’t unknowingly become involved with a business or individual with a history of financial crime, or sanctions.

Perpetual Know Your Customer

Perpetual Know Your Customer (pKYC) - also known as continual KYC - is the ongoing process by which businesses continuously update customer information as a part of their risk management strategy and is a step on from a standard Know Your Customer (KYC) process.

pKYC not only offers a much more dynamic and secure risk management solution but will automatically evolve as clients’ circumstances change, thereby reducing risk and the level of period work required by regulated firms.

KYC & CDD for UK and international clients of any size

  • KYC Checks for Every Client

    Our platform can perform efficient, electronic KYC checks for every type of client – from individuals to businesses, including SMEs and large corporate enterprises. Regardless of the scale of your customer or client, our KYC verification process is thorough, quick and extremely accurate, so you know exactly who you’re going into business with.   

  • Holistic Onboarding Process

    We’re proud to offer an end-to-end onboarding process. Our comprehensive platform is the largest collection of AML tools in one place – with everything you need, right through from initial checks to ongoing monitoring. Plus, our software can be seamlessly integrated with your existing systems for minimal disruption.   

  • International Coverage

    With SmartSearch, you’re not limited to carrying out KYC checks on customers in the UK. Our unique platform uses international databases like the Dow Jones WatchList, which is updated daily, to carry out due diligence checks on individuals and businesses all over the globe, in over 200 different countries.    

  • AML Expertise at Your Fingertips

    We’re AML compliance experts. That means our platform is built to make every aspect of your compliance as convenient as possible, with time-saving features like electronic verification and automated status change alerts. Choose one of our products and you’ll benefit from the ongoing support of a dedicated account manager.   

  • Transitioning to pKYC

    The reason many firms are looking to transition to a pKYC model is, not only is it far more reliable due to the fact it is constantly being updated to provide ongoing compliance, but because it is automated, it requires much less effort on the part of the regulated firm. Instead of doing an initial check, and then having to revisit the client each year to assess if their risk level has changed, pKYC enables the firm to sit back, rest assured that their customer database is always up to date and fully compliant.

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How do I manage the Know Your Customer (KYC) process?

Initial KYC checks will involve identifying and verifying a customer and screening them against PEP, SIP, RCA and Sanction lists. But that is not the end of the process. In order to comply with regulations, you must also continue to monitor your customers for any changes.

What are the CDD and KYC regulations?

Under money laundering regulations, you must perform Customer Due Diligence on all customers to check they are who they say they are. If the risk of money laundering is high, for example, they are a PEP, you must carry out Enhanced Due Diligence in order to assess the potential increased risk that customer may pose to your business.

What’s the difference between KYC and CDD?

CDD (Customer Due Diligence) is the process of a business verifying the identity of its clients and assessing the potential risks to the business relationship. KYC is about demonstrating that you have done your CDD. Both KYC and CDD are integral to the AML process.

What are the standard CDD and KYC requirements?

When undertaking CDD and KYC, you must identify the customer and verify their identity using reliable and independent sources. You must also run PEP and Sanction checks and, if the customer’s name matches, run Enhanced Due Diligence to assess the risk they pose.

What is the difference between pKYC and KYC?

While a traditional KYC programme is very ‘transactional’ i.e. you run the initial check and then, once the verification period is up, run another, a pKYC programme is much more dynamic. Instead of having to specifically run a new check to see if a client’s risk profile has changed, pKYC offers client lifecycle management because it is constantly monitoring for any relevant changes. The continual nature of a pKYC solution means that the business has a full picture of their client, giving them a much more robust and accurate risk-management process.

What is the difference between ongoing monitoring and pKYC?

Although similar to ongoing monitoring, to achieve a pKYC a business must have procedures in place whereby every change to their customer’s status is identified. pKYC will check a huge number of external and internal sources in order to monitor any and every change that could be relevant, for example, changes to the customers’ name, their place of work, their credit file, or their utility provider. For corporates, it would monitor changes to the corporate structure of a business, including changes in ownership and Ultimate Beneficial Owners, as well as any suspicious activity across the entire database.
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Get the help you need

We can verify the identity of your clients electronically in seconds, and the system will automatically undertake Enhanced Due Diligence if any client is matched with a Sanctions or PEP list. Our daily monitoring services will alert you of any changes ensuring you always remain fully AML compliant.

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That’s where we come in

SmartSearch offers a one-stop-shop for all your firm’s AML requirements. The user-friendly system enables staff at any level to successfully run AML checks, and we are constantly updating and improving the platform to ensure it remains the leading AML solution on the market.

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Frequently Asked Questions

  • What are the benefits of KYC?

    Including KYC in your AML compliance process is hugely beneficial. By verifying your customer’s identity, you reduce the chance of doing business with anyone who is known to be involved in financial crime. You’ll be protecting your business from fraud, and helping to combat money laundering and terrorism financing on a wider level. The KYC process can also help you to better understand your customer’s financial background, and serve them better as a result.

  • What is meant by KYC in banking?

    In banking and financial services, KYC stands for Know Your Customer, and refers to the process during which financial organisations obtain information which enables them to verify the identity of their customers. This information may consist of data like names, addresses, photographic IDs and details of nationalities, depending on whether you’re verifying the identity of an individual or a business. 

  • What are KYC requirements?

    While these could vary slightly according to the financial institution in question, most banks will require the following for KYC checks: a photographical ID, proof of date of birth and proof of address using a document like a credit card bill or similar. 

  • What are the different types of KYC?

    There are two main categories of KYC checks: electronic and paper-based. While paper KYC checks rely on customers physically bringing in their identification documents, electronic KYC checks don’t require the presence of the customer at all.  

  • How is KYC done?

    KYC can be carried out in two different ways. With paper KYC checks, you’ll need to verify your customer’s identity using physical documentation provided by them, and carry out sanctions checks and PEP screening manually, using the information gleaned from these documents. Electronic verification is both faster and more accurate than manual; checks are carried out in seconds using regularly updated international databases, like the Dow Jones WatchList. 

  • Is KYC mandatory?

    In the UK, KYC is compulsory for all registered financial institutions and banks. These checks are mandatory because they help you as a business to comply with AML regulations enforced by the FATF, as well as the recommendations of the FCA.  

  • Who needs KYC?

    Every registered bank and financial institution should have a process in place for performing KYC checks and customer due diligence, and not a single customer or client should be exempt from this screening process. 

  • How can firms transition to pKYC?

    In addition to technology and data sources needed for the identification, verification and screening required for standard KYC, businesses that want to transition to pKYC will need to aggregate and enrich their data using other free and paid-for public sources, as well as any internal data they own.

    Overlaying their own data is a key part of pKYC as it can offer a much more valuable level of information that is unique to the business and its risk level. By utilising the information they hold on their clients, regulated firms will be able to recognise connections and potential issues that would otherwise be impossible to identify. 

  • Making a business case for pKYC

    Not only is it more cost effective for businesses to manage their risk perpetually rather than transactionally, as it uses fewer resources and requires less intervention, but by gathering and managing up-to-date information, firms can also create better and more meaningful long-term relationships with their clients. A personal update on a client - new name, new address, different job - can create business opportunities for professionals as life events often lead to the need for products, services, and advice. Furthermore, a system that is able to detect out-of-date clients means businesses are able to focus their attention on existing relationships to maximise profitability.

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