Know Your Customer (KYC)
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Know your customer (KYC) is a banking slang used to describe basic due diligence checks on new customer who a bank is dealing with for the very first time.
This is because a customer without any history with the bank needs to be screened in order to avoid being a tool of illegal activities such as money laundering.
The diligence checks conducted by a bank would also evaluate the risks involved with dealing with a new customer. Especially when it concerns unsecured credit facilities.
Some of the KYC checks might include research on:
- Companies the individual owns
- Associated companies
- Name matches with known terrorist database
- Name matches with blacklisted entities
- Court judgments
- Political associations
- Credit record
A bank would not even bat an eyelid if it finds that there is an undesirable record attached to a party or individual.
In some cases, special approval is required from higher management when a cash deposit exceeds a certain amount of money.
In this case, the source of funds would have to be verified as legitimate.
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