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What is Required to Know Your Customer?

For financial institutions, an inadequate Know Your Customer (KYC) policy can lead to significant monetary loss due to fraud, fines, and negative publicity. While it has become standard practice for financial institutions to require clients to provide detailed information to ensure that they are not associated with illegal activities such as fraud, terrorist financing, corruption, or money laundering, the big question is if your KYC procedures robust enough to protect your business from bad actors?

Verify Customer Identity

The first step to establishing a strong KYC procedure is to create an effective customer identification program (CIP). The purpose of a CIP is to allow the company to say with a reasonable amount of certainty that their customer is who they say they are. The basic information to verify for a CIP is:

  • Name
  • Date of birth
  • Address
  • Government-issued ID number (such as social security number or passport)

It is essential that this information is confirmed within a reasonable timeframe to quickly identify bad actors and maintain a smooth onboarding process for your law-abiding customers. Many companies use electronic identity verification for this purpose.

If your current process is high friction and/or generates a lot of support tickets, those are signs that your business should reconsider its CIP.


Once a customer’s identity is verified, the next step of the KYC process is to screen them against lists of high-risk individuals issued by various government agencies around the globe.

It is also necessary to screen for customers who are not associated with illegal activities, but, due to their social position and access to wealth, pose increased risk for bribery or money laundering. These individuals are known as Politically Exposed Persons (PEPs). Based on the findings of the screening, the customer is given a risk rating, which helps the company decide how closely to monitor the customer’s activity or whether to do business with them in the first place. Naturally, individuals in high risk categories are subject to a higher level of scrutiny. Your business should reconsider your screening service if you have issues with false negatives (or false positives) during the screening process, leading to bad actors slipping through the cracks or false positives creating too much review overhead.

Ongoing Monitoring

The final step to a KYC procedure is to realize that KYC is an ongoing process. Just like how your company changes over time, so do your customers. Customers who were previously in the low risk category may transition to a high risk category, but the only way for you to realize that is to conduct frequent re-screening.

Given the number of customers that need to be monitored, it may be impossible to process manually. Thankfully, with modern technology, re-screening can be done in a matter of seconds.

KYC Verification with Cognito

There’s a lot of ways for financial institutions to end up in hot water over inadvertently aiding a bad actor. That’s why forward-thinking companies maintain a robust KYC program. Together, Cognito’s Identity Verification Service and Watchlist Screening make the complexities of KYC verification simple. Cognito makes identity verification frictionless for you and your customers by beginning the verification process with as little as a name and phone number. Our identity verification protects against fraud, and is designed to integrate easily into your CIP based around your compliance requirements. Our Watchlist Screening uses extensive regulated databases from around the world to catch all kinds of bad actors and PEPs. Our screening extracts more than just names, allowing you to better understand the quality and likelihood of a watchlist-match. Cognito also makes sure that your company’s KYC procedure is an ongoing process rather than a one-off check. Our system automatically re-screens hundreds of millions of users per month, with ease, to catch any changes in their status. Cognito keeps track of how watchlist hits on your customers change over time, giving you a detailed breakdown of new names, locations, passports, dates of birth, and everything required to protect you from fraud. Craving the power of optimization? Cognito’s frictionless identity verification and watchlist screening are designed to fit seamlessly into your KYC process and protect your company, automatically. Contact us today to learn more.

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