Technologies | June 9, 2023

Know Your Customer (KYC) Requirements for Banks: Risk, Due Diligence, and AML Compliance for Financial Institutions

In this article, we’ll give you everything you need to know about KYC, including what it is, why it’s important, and the underpinning things you need to do to meet the standard.

KYC Requirements for Banks

At a time when more international regulations are being introduced to ensure security and orderly legislation in the area of Anti-Money Laundering and Countering the Financing of Terrorism (AML CFT), there are many questions that need to be addressed. For example, clarifying who is obligated to comply with the new rules and in what way. As the world becomes more connected and digital, we’re all at risk of financial crime. If you work in banking, your job is to keep the economy moving while protecting customers and preventing crime, and that’s where Know Your Customer (KYC) comes in. 

Now a legal requirement worldwide, KYC standards ensure you identify, verify, and manage risks relating to your customers to guard against fraud, corruption, money laundering, and terrorist financing. But that’s a pretty big job that you can’t do alone! 

That’s why in this article, we’ll give you everything you need to know about KYC, including what it is, why it’s important, and the underpinning things you need to do to meet the standard. At Inetum, we’re experts at helping our clients set up their compliance programs, so to finish, we’ll take you through our solution, kdprevent, and how it can help you master KYC compliance!

Let’s get into it.

What is Know Your Customer/Know Your Client?

Know Your Customer (KYC), sometimes referred to as Know Your Client, is a legal standard for financial institutions and financial services companies, whereby they establish a customer’s identity, assess their risk profile, and monitor their transaction activity to prevent financial crimes such as money laundering, terrorism funding, fraud, and theft. 

The purpose of KYC legislation for banks is to ensure that your customers and beneficial owners of businesses are genuinely who they say they are. While most companies focus on the identification and verification processes for a new customer, financial institutions must also ensure ongoing monitoring protections are in place for the lifetime of a customer’s relationship to ensure risk is continually managed. 

Why is a KYC Process Important For Your Business?

Fail to put adequate KYC procedures in place, and you leave yourself open to steep fines, penalties, and in the worst cases, the removal of your banking license.  

But it’s not just the legal consequences that should make you sit up and take note of KYC, as it’s also important because:

  • A solid KYC process helps you manage overall business and customer risk.
  • KYC helps improve customer experience by giving all customers the comfort that you take banking seriously.
  • Verifying the identity of new customers and storing customer information enables you to drive new product lines.
  • It helps you comply with other legislation, such as the Patriot Act in the US and GDPR in the UK & Europe.

Ultimately, KYC in banking is good practice that can underpin all of your financial activities, so it’s worth putting some genuine effort into getting it right!

kyc requirements for banks

KYC Compliance & KYC Requirements – Customer Due Diligence, Verification & More

While KYC legislation puts the onus on organizations to manage their own risks and assess compliance, some key requirements exist to meet as a baseline to present financial crime. Let’s look at each of them in turn. 

Customer Identification

KYC requires each organization to have its own customer identification program to guarantee an account owner is a genuine person. In most instances, this will mean capturing a customer’s name, date of birth, proof of address, and national identification number (e.g., passport, driving license) when they open an account. 

Customer Due Diligence

It isn’t enough to capture a customer’s KYC documents, they need to go through a verification process. This is where a Customer Due Diligence (CDD) process comes in, allowing financial institutions to use external data sources, databases, or services to verify the documents provided. 

If, in the event a new client flags as being suspicious or they are deemed to be more susceptible to financial crime, organizations are required to complete an Enhanced Due Diligence to manage the risk further. Typically, this will require capturing further information or documents, or even using a 3rd party to complete a more detailed vetting process.

Ongoing Monitoring

KYC compliance requirements don’t end after the customer onboarding, you need to prove that you have ongoing KYC checks in place to identify, assess, and flag any suspicious activity. This could include transaction monitoring, periodically re-validating customer information, and bank account audits. 

Read also: Fintech – Financial Technology Changing the Banking Sector!

KYC & Anti-Money Laundering (AML) – AML Compliance Explained

You might be thinking that some of these KYC checks and requirements seem familiar, almost like they’re not really new at all? That’s because AML and KYC are heavily linked and work together to identify suspicious activity and fight financial crime – let’s explore the difference:

AML regulations are a broader set of frameworks and legislations that financial service companies need to follow to fight against money laundering. KYC regulations form a critical part of the overall AML framework, specifically driving processes to identify and verify customers’ identities.

KYC and AML go hand-in-hand, and it’s important for financial institutions to comply with both. But it’s worth taking the time to review the regulations carefully, as AML legislation varies from country to country. Therefore, you need to make sure your KYC processes align with each jurisdiction you operate within.

Again depending on the jurisdiction, you must consider your relationships and communication strategy with key regulators and government agencies. This is because these companies (such as the Financial Crimes Enforcement Network in the US, and the Financial Conduct Authority in the UK) can review and audit your approach to KYC and AML at any point, leading to the large fines if they deem risk isn’t being managed effectively.

The Inetum Solution to KYC Verification: kdprevent

While KYC and AML compliance can seem pretty daunting, the good news is that the process can be simple, streamlined, and secure with the support of trusted partner-based KYC solutions. 

At Inetum, we’ve developed a complete digital KYC compliance solution, kdprevent, that provides proven answers to financial institutions, delivering powerful features that satisfy regulatory requirements and optimize the costs of your operation.

“kdprevent’s KYC solution allows our customers to consolidate and enrich their client’s information to visualize it in a structured way. Risk-driven approach, with controlled override possibilities, enables further optimization of ongoing review process. Currently, we are working with customers to digitalize KYC-related interaction between RMs and end clients by extending self-service capabilities of the solution.”

Michał Nowakiewicz, kdprevent Head of Product

Kdprevent has already helped over 50 clients across the financial sector meet many components of KYC compliance through: 

  • Internal and external data source integrations that help you identify and verify new customers
  • Flexible KYC forms adapting to client-specific information needs
  • Risk-driven KYC review process
  • Customer relationship analysis to identify potentially suspicious or unknown relationships between customers, borrowers, or account beneficiaries (e.g., cash flow).


Kdprevent was developed to help you fight money laundering and comply with KYC by helping you give more attention to day-to-day business, identify and manage risks, and, in the long run, reduce the chances and impact of audits, fines, and reputational damage. 

Implementing a solution to support and automate the operations and management of regulatory compliance is a good practice and part of the security procedures. Our kdprevent platform is the answer in terms of risk assessment, KYC, and other areas of Compliance.

Sound interesting? You can find out more about our financial compliance offerings here.

Do you know you need KYC help or you’d like to understand how much does KYC cost? If so, why not contact us at or reach out to us at or to discuss the capabilities of kdprevent? 

For over 7 years, she has been supporting clients in the IT sector in achieving goals and optimizing processes. Malgorzata takes care for clients in the HealthTech sector, advising on software development, cost reduction, quality improvement as well as assisting projects of compliance & AML processes with kdprevent platform.

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