What Is KYC? Know Your Customer Simply Explained

Posted on January 29, 2020 in Articles, Zipmex Guide
What Is KYC? Know Your Customer Simply Explained
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If you are here you must have heard of the word KYC before. In this article, we would like to explain what KYC is and why is it important to you and the whole business system.

What is KYC?

KYC stands for Know Your Customer or Know your Clients. It’s the process of proving your identity to someone or an organization. Basically, it’s to confirm that you are really you. Think about it, if a thief stole your ID card and did plastic surgery to look like you then walk in the bank to open a bank account under your name, should the bank let the thief open a bank account? The answer is no. That’s why the KYC process is important to verify your identity.

Who needs KYC?

Most of the time, banks and financial institutions are required to perform a Know Your Customer process before they provide you with any services. Recently, other businesses such as fintech, telecom, and insurances are starting to adopt the KYC process as well.

In Thailand, financial service providers, including e-payment and digital asset exchange providers, are required to perform a KYC according to anti-money laundering (AML) regulations. This is why you need to show your ID card to open a bank account.

Why does KYC matter?

KYC process helps to avoid corruption, bribery, or money laundering. This ensures security for you, other customers, and the platform itself. If a bank allows anyone to open an account randomly and a drug dealer can open one under your name, you might go to jail for doing nothing. If there’s no KYC process in place, you would never have a peace of mind in trusting your money with the bank.

How does It work?

KYC can happen offline, just like how you need your ID to open a bank account, or online (E-KYC). The first process of KYC usually starts with collecting data, including name, ID number, birthday, and address. The level of KYC varies according to the nature and requirements of businesses, for example:

  • KYC using any ID or document without seeing a real person.
  • Video call or in-person meeting.
  • Full background checks including source of income.

After the KYC process, a CDD or Customer Due Diligence process is followed. CDD is when a bank (or whoever is performing KYC) digs deeper into your financial transaction, checks your information with a sanction list, and compares your information with high-risk profiles such as corruption, money laundering, and Politically Exposed Persons (PEPs).

The KYC and CDD information can be analyzed by both real human beings (just like when the bank staff compares your real face with your ID), or by an automated process like any face-scanning system. From there, the bank will be able to access your risk profile.

The assessment doesn’t end when you open a bank account or start using services. Organizations are always monitoring and calculating risks to make sure that there’s no suspicious illegal activities going on on their platform.

KYC with digital assets

When it comes to a digital asset or digital assets trading, KYC requirements vary by each jurisdiction. In Thailand, licensed digital asset exchanges are required to perform a KYC to ensure the security of both users and the platform itself. Zipmex believes, like any other financial services, that digital asset exchanges must strictly comply with the AML regulation. We aim to provide the most secure and trustworthy digital asset trading services for everyone.

Now that you know what KYC is, we also encourage you to be mindful of the organization asking you for information as well. Do not provide your sensitive information to any firm that is not officially regulated. At Zipmex, we perform KYC on every client to ensure the best possible security for everyone using our services. Officially regulated by the SEC, we are ready to launch our best digital asset trading platform soon! Follow us on Facebook or Twitter for our latest updates.