What are the 3 stages of KYC?

The process KYC (Know Your Customer) includes 3 main and successive steps. The customer identification program, also called Customer Identification Program or CIP. La due diligence or Customer Due Diligence (CDD) and the continuous monitoring, in English: Ongoing Monitoring. These 3 stages of KYC are essential in setting up a reliable process and in compliance with legal standards. In this article, we are going to study the 3 stages of KYC in detail.

Understanding the 3 stages of KYC

KYC includes a list of regulatory models that businesses put in place to secure their tools and comply with laws. This is how CIP, CDD and continuous monitoring are part of customer knowledge standards (KYC).

Customer Identification Program (CIP)

The customer identification program focuses primarily on verifying customer identity. The purpose of this model is to confirm or disprove the correspondence between digital identity and physical identity. The Customer Identification Program is mainly implemented duringOnboarding (or registration) of customers.

Due Diligence (CDD)

La due diligence, which is the second of the 3 stages of KYC, is used to assess the risk of each customer. This phase uses a set oftechnical informations for assess the risk of fraud or theft. There are 3 distinct levels within due diligence itself. Simplified Due Diligence (SDD), for which the very verification of identity documents is optional. Standard Customer Due Diligence (CDD) and Enclosed Due Diligence (EDD).

Ongoing monitoring

La continuous monitoring is the final stage of KYC. She Lasts over time in order to ensure continued compliance with regulatory standards related to customer knowledge. This phase consists of checking customers when the activities are suspicious. To do this, businesses need to set up alerts automatic duringunusual events.

The Customer Identification Program or CIP

The very first of the 3 stages of KYC is the Customer Identification Program or CIP. During this phase, it is a question of collate And of validating The customer information. In general, CIP refers to a set of procedures that a business must put in place and follow to confirm the identity of its customers.This generally means that customers should submit their documents. Among the required documents, we find:

• An identification document, issued by a government.
• A proof of address.
• Proof of income.

In addition, it is essential for businesses toassess the risk associated with each customer. This assessment takes into account factors such as profession of the customer the country of origin, and the type of transactions in which he participates. Customers deemed to be at high risk require additional review. This leads to the second stage of KYC (which we will discuss in the next part). The main objective of CIP programs is to Verify that customers are the individuals they say they are. These programs play a crucial role in the identification and prevention of money laundering (LCB), of theimpersonation, of Terrorist financing (FT), and many other types of tampering. If you want to know more about documentary scams, do not hesitate to read our detailed article 5 types of document fraud.

Customer due diligence or CDD

La due diligence of the customer (or customer due diligence in English) involves a series of ongoing procedures, designed to assess customer risk. Among the KYC steps, due diligence comes in second. After verifying a user's identity, organizations need to gather more information and conduct a thorough assessment of its profile through the CDD. This risk assessment makes it possible to detect any suspicious behavior or risky. This process is a fundamental aspect of KYC practices. It helps businesses build the trust of potential customers.CDD has 4 key requirements:

• Identify and verify all patrons.
• Identify and verify all beneficial owners : individuals who control at least 20% of the company.
• Understand the nature of customer relationships to build risk profiles customer.
• Continuously monitor activities and transactions customers to detect and report suspicious behavior.

One increased diligence (or EDD for Enhanced Due Diligence) is set up for high-risk customers. That is to say, those for which we reasonably suspect a Unauthorized access Or a Fraud attempt. To decide if EDD is necessary, attention should be paid to several things:

• La localization of the person.
• La profession of the customer.
• Son demeanour transactional: value, frequency, and monitoring of patterns of suspicion.
• Les payment methods used.

Although some requirements of increased due diligence are defined by each government, the implementation of ESD is still necessary. In the same way as for the KYC framework, each company has the responsibility to assess risk. They have an obligation to take measures to avoid wrongdoing of their customers.

Ongoing monitoring: A long-term step

La continuous monitoring, also called Ongoing Monitoring, is one of the stages of KYC, even if it lasts for the long term. Indeed, continuous monitoring is a crucial phase in the process of customer knowledge. It involves the regular check customer information to confirm the ongoing compliance to regulatory standards. The aim of continuous monitoring is to help businesses detect any potential signs ofsuspicious or illegal activities.Because customer information can change over time, the continuous monitoring helps maintain the security accounts. This step thus aims to ensure that the organization remains in compliance with KYC standards, regardless of how much time has passed since theentering into a relationship with each customer. Depending on the customer and the risk mitigation strategy, it is also necessary to monitor various factors. These can make it possible to identify suspicious activities :

• Toute unusual or cross-border activity that is out of the norm.
• Of sudden spikes in activity (in number or importance).
• Of media mentions unfavorable.
• Any person politically exposed.
• Les sanctioned individuals by governmental or financial institutions.

If unusual activity is detected, a suspicious activity report should be submitted.

Automating the 3 stages of KYC

In order to automate the KYC steps (especially the onboarding process), it is necessary to offer a reliable and secure identity verification. The tools ofartificial intelligence allow to verify the identity of customers and fight against fraud in an effective manner. These solutions help you with regulatory compliance for each stage of KYC. You guessed it, Datakeen offers a tool for online identity verification: iDify. Our solution supports you inCustomer onboarding And therisk assessment. Our AI product can also help you set up remediation campaigns, in order to ensure a ongoing compliance to KYC AML standards.