TransUnion’s four steps to understanding and automating KYC

Introduction

In this post, we’ll define Know Your Customer (KYC), provide an overview of how and when it applies, explain why it’s important, and show you some ways we can help you perform it.

Outline

KYC is the process of checking and verifying a customer’s identity before or in the starting stages of doing business with them. This process, attributes a risk-level and to accesses whether they are likely to be involved in or linked to money laundering, sanctions and/or terrorism. KYC is a regulatory obligation for companies.

KYC in its simplest form includes:

  1. Verify the customer’s identity (sometimes referred to as ID check, ID proofing, ID verification, KYC checks) – to establish that the customer is who they say they are, is of eligible age to purchase and to prevent fraud. The check includes verifying their; name, address, Date of Birth
  2. Screening and assessing the risk-level of the customer against high-risk or prohibited lists (such as PEPs and sanctions) 

What’s the purpose of KYC?

KYC is designed to help establish trust in the presented customer’s identity, reveal financial fraud, identity theft and money laundering before any financial transaction between the potential customer and the company occurs. PEPs and sanctions screening helps businesses understand the level of risk a customer poses and whether further checks such as Enhanced Diligence is required.

Who is KYC applicable to?

KYC regulations apply to organisations facilitating financial transactions such as banks, credit lenders, fintechs, retail financers, gaming operators , estate agents, high-value dealers, , payment companies, and financial institutions.

Who oversees KYC?

The regulator for financial services companies in the UK is the Financial Conduct Authority (FCA). They apply different KYC expectations according to the varied economic activities and services of various firms across industries and sectors.

How is KYC enforced?

Instead of dictating the details for all, the FCA expects each organisation to apply adequate internal policies and procedures to ensure compliance. This risk-based approach puts the onus on the company to prove they made every effort to mitigate the risk of financial fraud if the need arises. Although those found to not be sufficiently conducting KYC checks can be named and fined by the FCA.

What if a customer is deemed a higher risk?

In this case, enhanced due diligence (EDD) may be required which are more in-depth checks. If the risk is acceptable and a business relationship begins, it’s prudent to monitor that account for suspicious activity — see our blog on customer due diligence (CDD).

Why comply with KYC?

It’s a regulatory requirement which, if ignored, could result in reputational damage and the financial impact of FCA fines. But there’s more to it than simply regulation.  Being proactive with KYC can help you monitor, manage, and mitigate the risk of bad actors transacting with you, which can reduces your vulnerability to fraud losses.

Are there benefits to automating KYC?

In short yes and here is how:

  • Better conversion rates with faster onboarding: Reducing processing time from hours to near real-time for low-risk customers to help you meet their expectations and engage them before your competitors.
  • Improved operational efficiency: Automating KYC checks reduces the manual review queue volume, false positives and back-office expenses whilst quickly highlighting more risky transactions.
  • Provides consistency in processing: Manual reviews rely on the reviewer(s) to assess each person which can lead to human errors or inconsistencies.

How we can help

We can help you establish trust, develop a robust, risk-based approach to KYC and support your KYC compliance through TruValidate in two steps.

  • Step 1: Verify. Quickly and confidently confirm or question the authenticity of identity information provided against local and global credit data and alternative data assets to minimise fraud and money laundering risk and strengthen KYC compliance. Simplify and automate this process using:
    • Identity Verification to quickly confirm the authenticity of customer-provided information
    • Email Verification to verify email addresses are genuine and not associated with risky behaviour or other identities
    • Phone Verification to effortlessly and effectively verify phone number is associated to the customer
    • Device Risk to identify devices with evasive behaviours and risky attributes
  • Step 2: Validate. Validate photo identity documents like a passport or driving licence and capture utility bills, bank statements and other official documents using optical character recognition to identify potential tampering:

In summary

By leveraging actionable insights to quickly adjust KYC approaches, you better protect your business from the negative impacts of fraud — including money laundering — while optimising operational performance and enhancing the onboarding experience of genuine new customers.

Contact your TransUnion representative directly, and complete the form below to learn more about the TruValidate suite of solutions. Book a consultation to support your regulatory requirements, enhance customer experience, improve operational efficiencies and reduce fraud losses.

KYC Resources

Follow the links for further reading and insights.

How to prove and verify someone's identity. Good Practice Guide (GPG) 45 helps you decide how to check someone's identity. GOV.UK, Jan. 2014

'Know your customer' guidance, accessible version. For all applications – know your customer (KYC) requirements – anti-money laundering (AML) specific. GOV.UK, Oct. 2016

The Financial Conduct Authority’s Review into Challenger Banks’ Financial Crime Controls: The Key Takeaways. TransUnion, July 2022

Quick guide to the Money Laundering Regulations 2017. The Law Society, Jan.2020

Brexit and KYC Compliance: What it Means for UK Financial Services Firms Operating in Europe FinTech Times, March 2021

If you’re a consumer with questions or issues related to your personal credit report, drivers history report, disputes, fraud, identity theft, credit report freeze or credit monitoring services, please visit our Customer Enquiries page for assistance.

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