Identity Verification Process: Essential Documents and Steps Explained
Streamlining KYC Checks: A Comprehensive Approach to Customer Verification
In the modern business landscape, Know Your Customer (KYC) checks have become an essential part of the onboarding process for both individuals and corporate clients. These checks are designed to ensure compliance with regulations, prevent financial crimes, and maintain transparency.
The effective steps for KYC checks in businesses generally include customer identification, verification, due diligence, and ongoing monitoring.
Customer Identification
The first step involves collecting essential information such as full name, date of birth, and address. This data is verified with government-issued photo IDs like a passport or driver's license. Proof of address documents include utility bills, bank statements, rental agreements, or government-issued ID with addresses.
Customer Verification
Next, the authenticity of the identity documents is validated using reliable external sources or electronic verification methods. This may include biometric checks (facial recognition, fingerprint scans) especially for remote onboarding.
Due Diligence
Conducting Customer Due Diligence (CDD) is crucial to assess the customer's risk profile based on their financial activity and background. Depending on risk levels, businesses may apply simplified, standard, or enhanced due diligence processes. Enhanced due diligence is used for high-risk clients, including politically exposed persons or complex business structures.
Ultimate Beneficial Ownership (UBO) Verification
For corporate customers or legal entities, identifying and verifying the true owners or controllers of the business is essential to prevent fraud and money laundering.
Ongoing Monitoring
Periodic reviews and updates to the KYC information throughout the business relationship are necessary to detect suspicious activities and maintain compliance.
Required Documents Overview
| Document Type | Examples | Purpose | |----------------------------|-----------------------------------------------------------------|------------------------------------------| | Government-issued Photo ID | Passport, driver’s license, national ID card | Identity verification | | Proof of Address | Utility bills, bank statements, lease/rental agreements | Address verification | | Corporate Documents | Business registration certificates, ownership info, financial statements | Ownership and control verification | | Tax Identification Number | For individuals or corporate clients | Additional verification and tax compliance|
In some jurisdictions, such as Germany, regulated businesses are required to carry out video identification to onboard clients remotely. The automated approach to document verification significantly increases pass rates, speeds up onboarding, and reduces costs by 43%.
Businesses must keep records of all collected information for a certain amount of time, usually five years, as specified by the relevant jurisdiction. They must also verify the document's digital authenticity, checking for presence of optical security features, absence of traces of tampering, and photo on ID that belongs to the client.
Screening customers against sanction lists, watchlists, PEPs lists, and other relevant sources is also part of the KYC process. A Total Economic Impact™ (TEI) study commissioned by Sumsub concluded that companies that invest in Sumsub can experience a 240% ROI.
In conclusion, adhering to KYC regulations not only ensures compliance but also helps businesses build trust with their clients and maintain a secure and transparent environment.
In the process of KYC checks in businesses, technology is employed to expedite verification via biometric checks, video identification, and digital authentication methods for identity, proof of address, and corporate document verification. Finance plays a crucial role in ensuring that businesses comply with regulations and invest in solutions that yield significant returns, such as Sumsub, which can offer a 240% ROI.
