Mon. May 20th, 2024
Online digital document inspection or assessment evaluation on laptop computer, contract review, analysis, inspection of agreement contract, compliance verification. Vector illustration

In this progressive world, KYC document verification is the backbone of successful industries and risk management programs. Compliance with KYC measures is essential for the substantial growth of businesses as it provides validity. Document verification services help combat financial and identity theft fraud by ensuring the accuracy of the system. According to Federal Trade Commission data, almost $5.8 billion was lost in fraudulent activity in the year 2021. It was more than 70% as compared to the previous year. 

In this blogpost, required KYC documents and how it plays a significant role in authenticating the identity document will be discussed.

Required KYC Documents to Ensure User’s Validity

Know your customer credentials consist of the documents that help in verifying the client’s identity and acquiring information related to the business industry. Usually, KYC documents are separated into three main types: 

  • Proof of identity (PoI), 
  • Proof of income (PoI)
  • Proof of address (PoA). 

These three major types are explained below:

  1. Proof of Identity (PoI) Documents

Proof of identity documents are the basis of the KYC procedure. They used to check if the details you received were legitimate or belonged to the actual person. They check the particular identification number, personal credentials of age, name, gender, signature, and photograph. The most often required documents are national ID cards, driving licenses, and passports. But it is not restricted to these three identity documents. Other documents which are usually required are the following:

  • Nationality Certificate
  • Certificate of Birth
  • Health Card (Canada)
  • Voter ID Card
  • Bank Card with a Photograph specifically used in retail.
  1. Proof of Income Documents

Proof of income documents are required to know the earning of the users over a specific period of time. It is mainly used to acquire accurate information related to the users. For example, in the finance sector, proofs are required for long term financial commitments just like property loans. It is important to evaluate all related risks before doing any type of rigorous promises. 

Payslips are the most demanding documents as proof of income, but other required documents are the following to check the income status of the customers:

  • Pension slips
  • Tax return letter
  • Evidence of income letter
  • Bank statement
  • Child support and alimony payments
  • Evidence of income letter 
  • Evidence of unemployment benefits

Proof of Address (PoA) documents

Proof of income documents are the essential documents required for KYC checks and are crucial in some extreme cases. These documents are important to acquire the user’s address and credentials at a specific place. In financial industries, it is necessary to have live address information everytime recorded for KYC onboarding documents. Address documents should not be older than three months, and credentials (name, national ID number) should be matched with the Identity proof documents. 

The acquired PoA documents are the following:

  • Rental Contract
  • Insurance letter 
  • Bank statements
  • Employment letter
  • Utility bills
  • Letters from the municipal community
  • Updated address details

Significance of KYC Documents Checklist for Authentication

KYC documents play a key role in the assistance of the KYC verification process with the help of three major components:

Customer Identification Program (CIP)

This initial step of the KYC process confirms the consumer’s identity with official documents such as an ID card and passport. The main motive of CIP is to secure the validity of the user. The requirements of CIP depend on the jurisdiction sector, and it involves the following charges:

  • Checking the watchlists and sanctions of the consumer like PEP or OFAC.
  • Examining the validity and verification of the identity document.
  • Coordinate the credentials from the identity document with the user’s application form.
  • Acquiring and verifying the user’s personal credentials, such as date of birth, name, nationality, and image from the identity document.

2. Customer Due Diligence (CDD)

It is the secondary step of the KYC procedure to gather the information of the user related to the background, main objective, and the nature of the relationship. The main purpose of CDD is to estimate the user’s risk profile and the rating is assigned according to severity. 

The main requirements acquired by CDD are the following:

  • Authenticating the consumer’s address from the identity document address such as bank statement and utility bill.
  • Inquiring the user to issue credentials related to income, source of funds, business activities, and occupation.
  • Comprehending the user’s transaction history and assigning the risk factors according to product type, sector, and location. 
  1. Enhanced Due Diligence (EDD)

Enhanced due diligence is the tertiary component for the KYC procedure to further investigate high risk customers. The main aim of EDD is to combat the money laundering and terrorism financing scams. 

The requirements acquired by EDD are the following:

  • Demanding KYC documents from high-risk consumers, such as licenses, tax returns, and bank references.
  • Authenticating the funds’ origin and the objective of the rational transactions.
  • Observing high-risk users more closely and reporting it to relative authorities. 

Concluding Remarks

KYC procedures play a significant role to verify documents by utilizing the robust techniques and tools. Advanced artificial intelligence and machine learning algorithms are used in the verification process of KYC documents. Businesses should comply with KYC measures to ensure their credibility and smooth onboarding process of the consumers.

By Admin

Leave a Reply

Your email address will not be published. Required fields are marked *