Sectors such as banking, finance and insurance are ecosystems that are fundamentally based on trust. Trust is an indispensable element of business life and is of critical importance for companies, employees, customers and other stakeholders operating in all sectors. At this point, KYC (Know Your Customer) solutions play an important role in ensuring the security of personal information. Here, in this article, we will examine in detail what KYC solutions are, how they work, and why they have become the cornerstone of trust in financial ecosystems.
What is KYC?
KYC is the abbreviation of the English phrase “Know Your Customer”. In Turkish, it means “Know Your Customer”. This is the process by which companies verify and understand the identities of their customers. Companies verify customer identities using KYC solutions when creating customer records or approving the entry of existing customers into the system.
KYC policies contain specific rules and measures used in the identity verification process of customers. In this context, personal information such as name, surname, identity number, passport number, date of birth and place of birth are requested from individuals. For legal entities, qualified information such as commercial name, tax identification number, tax office and business address form part of KYC policies.
What Does Know Your Customer Do?
KYC solutions, which ensure the identity verification of customers or users, help businesses prevent fraud and forgery through the services they offer and prove the true identity of customers. KYC solutions, which serve purposes such as proving the honesty of the customer and proving that the person making the transaction is the right person, consist of tools that are becoming more widespread day by day in ensuring transaction security and service quality.
Although developing technology improves business processes in all sectors, it has become necessary to protect systems from malicious people and software. Within the scope of security measures such as preventing fraud, forgery, money laundering, and financing of criminal organizations, KYC ensures the security of institutions, individuals, customers and all stakeholders in the financial ecosystem.
It is important to ensure high security when customers open accounts, log in to their accounts, and access financial products such as money transfers, loans, etc. KYC solutions are needed at stages such as opening accounts, remote access, passwords and user reminders. Know Your Customer solutions provide security measures to the relevant organizations that are responsible for such transactions in the processes of identification, verification of personal information on the ID, and determination of the reality and liveliness of the person trying to access the system. With modules such as KYC modules, digital methods, calls, SMS or e-mail verification, institutions ensure that malicious persons or software other than real users are prevented from accessing the system.
Legal Framework and Obligations of KYC Studies
In our country and at the global level, the importance of Know Your Customer is ensured by legal regulations. The critical importance of KYC is emphasized in the recommendations created by the Financial Task Force (FATF), which aims to prevent money laundering. In Turkey, the Law No. 5549 on the Prevention of Laundering Proceeds of Crime, prepared in accordance with the FATF directives, is used to determine the obligations within the scope of KYC.
The Regulation on Measures to Prevent Laundering Proceeds of Crime and Financing of Terrorism lists the Know Your Customer measures and objectives in detail as follows:
- Customer Identity and Address Confirmation: Identification and confirmation of customer identity, address, real beneficiary and authorized representatives within the scope of legal legislation.
- Risk Screening: Screening of customers for risks of being on international sanctions lists (including country risk assessment).
- Political Influence Determination: Determining whether the customer and the parties related to the customer are politically exposed or affiliated with politically exposed persons.
- Relations with High Risk Countries: Investigating whether the customer and customer-related parties are associated with very high-risk countries considered within the scope of international sanctions.
- Identification of Third Parties: Determining whether any person is acting on behalf and/or on behalf of a third party.
- Transaction Monitoring: Monitoring customer transactions to detect unusual transactions.
- Income Source Identification: Identification and confirmation of the customer’s source of income.
- Obtaining Relevant Information: Receiving information about the reason for working with the obligor.
These measures play an effective role in the security of the financial system and prevention of money laundering. The legal framework ensures safe financial transactions by regulating KYC practices at both national and international levels.
