KYC in Finance

The Connection of KYC and KYB with the Financial Industry

KYC – Know Your Customer

KYB – Know Your Business

The banking, financial, and related sectors must establish highly detailed controls when verifying new customers.
Risk management and fraud prevention are essential for these institutions and companies, as they are often targets of fraudulent practices.
Public authorities have enacted regulations to ensure security within this sector and to require that customer acquisition aligns with these standards. The KYC (Know Your Customer) procedure in the financial sector is a mandatory requirement. The regulations and compliance standards in this area specify in detail the steps to follow, for example, to open a bank account online.

Through KYC, an individual can open an account, invest, manage insurance, or carry out any other financial operation from any digital device equipped with a camera and internet connection. This can be done from anywhere in the world and at any time of day.

How Does KYC Support Business Growth?

Even for physical branches, the digitalization of the process reduces the procedure time from what typically took three weeks to less than three minutes, with full security and without errors. Additionally, if the KYC service also provides user authentication for platforms, agility and productivity will be significantly enhanced for both organizations and users.

Legal Interpretation Related to Trust Services, EU Directives, and Local Laws

Trust services, including electronic identification, play a crucial role in the KYC process. At the European Union level, the eIDAS Regulation (Regulation EU No 910/2014 of the European Parliament and of the Council) governs electronic trust services and identification across the EU. This regulation establishes the legal framework for qualified trust services, such as electronic signatures, seals, and timestamps, enabling effective and secure KYC procedures in the digital world

For instance in Poland, these regulations were implemented in the Act on Trust Services and Electronic Identification (Journal of Laws 2016, item 1579), which defines the principles for the use and recognition of trust services and sets standards for digital authentication, as well as the integration of national systems with European eIDAS-based solutions.

Thanks to these regulations, financial institutions can use digital solutions for remote customer identification while maintaining regulatory compliance, simplifying the process of opening bank accounts online and other financial services. The automation and use of qualified trust services reduce error risk, accelerate procedures, and enhance transaction security, which is crucial in the fight against money laundering and terrorism financing (in line with the AMLD Directive – EU Anti-Money Laundering Directive).

Ultimately, Polish and European regulations require financial institutions to apply advanced identification measures in accordance with the “Know Your Customer” (KYC) principle, which not only aids in combating fraud but also improves service quality and accessibility for customers

Order a free KYC/KYB consultation for your company: roman.zurowski@unistyle.pl

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