What to consider when choosing a KYC vendor for your business?

The headline of the article is pretty much self-explanatory.
In the digital era when more and more businesses are moving online - a very important question arises: how can we verify our customers' identities in the world where we no longer see them face-to-face?

Leaving this question open for discussion - gave a great landscape for entrepreneurial mindsets. Today, as opposed to running a know your customer process in a traditional way, there are quite a few options to verify your customers online using KYC vendors. But, if you have never dealt with it before - choosing the right one can be very intimidating as not all of them are equal quality.

As technologies evolve, fraudulent activity becomes more sophisticated. Regulatory bodies and authorities see the solution in implementing and imposing a number of liabilities and limitations on businesses, which lead to higher security standards and stricter regulations. One that we want to discuss in this topic is KYC & AML requirements.

As we have mentioned before, starting a KYC process to satisfy regulators’ requirements can be very frustrating for a number of reasons. Just to mention a few:

1. Defocusing. Most of the time, KYC and AML activity will be outside your main business scope.
2. Time. Building a whole infrastructure from scratch.
3. Resources. Maintaining a compliance department.
4. Costs. Lawyers ain’t cheap!

It’s no surprise that companies choose partnering with KYC providers to delegate this difficult, yet very important part of their business process. As of today, the KYC landscape is very competitive. Let us jump straight to the point and share our thoughts on what you should look at in the first place:

Jurisdiction

Once you know for sure, customers from which countries you will be working with - check if your desired KYC provider has a direct access to local registries in those countries and which documents they can actually check there. The best way would be to ask for a country coverage list.

Regulation

Carefully investigate the legal field you operate in and the KYC requirements you need to follow. The result of your research will help to significantly narrow down the choice. You can end up choosing only basic ID verification, or, a comprehensive all-in-one customer due diligence procedure, covering: AML, anti-fraud, KYC & KYB.

Demo

Remember that last time you got introduced by a friend to someone you never knew? What did you say and how did you act? The key point here: it’s only natural to desire to make a good impression and look better in the eyes of others. Businesses are not an exception. They are run by people too. Make sure that your KYC vendor can set up a sandbox environment for you, so that you could have a chance to test everything yourself before you go Live.

Data storage

You may not know it yet, but some countries, for example India, Australia and Russia, have data localization laws. On a regulatory level, records about residents and citizens of specific countries may be required to be processed and stored in accordance with that law. More specifically- when dealing with customers from such countries, initial collection and storage of their data have to be within the corresponding national boundaries. Ask a sales representative where their servers are located and how they manage clients’ data from such countries to stay in line with the law.

Databases

Most of the time you will find out that KYC providers are acting as aggregators of other service providers. And that is totally fine, but what exactly their searches and checks are based on? Ask for a list of all the databases they are connected to. It is a good sign if you see premium data sources, like Thomson Reuters, Dow Jones, LexisNexis, as well as the possibility to integrate your own custom blacklists.

Integration

In most instances, you will need to integrate through API with a chosen KYC vendor. And of course, it will be beneficial for you if your partner will be able to offer you some sort of a solution. For example, it could be in the form of a ready-to-use widget. If he does offer anything like that- it will accelerate your integration time a lot. Time is money. Especially, in the scope that you are running a business and have to pay salaries to people who work with you.

Technologies & Risks

Level of automation, machine learning, biometrics. See for yourself what your partner can offer you in order to meet both of these criteria: to make the process of onboarding for your customers as smooth & easy as possible and to keep you compliant with the regulatory institution. Don’t forget to evaluate the risks and check if your KYC provider is willing to take legal responsibility.

We are slowly coming to an end with our checklist to get you started. Hopefully, you found it useful and will use it as a reference in the future. Any long-term oriented business relations should be based on honesty and transparency. These are the core values we work on. Sharing is caring!

If you feel that any of the questions were left unanswered - we encourage you to contact directly a representative from BASIS ID. We will be happy to guide you through and find a KYC solution that will be the best fit for your business.