KYC and KYB – Essential Considerations for Remittance Companies in 2022

Online remittance companies have been spreading across the globe at a rapid speed. These financial institutions are made up of significant policies that make them reliable, efficient and workable. If you are a financial institution (FI), you should be aware of many things, especially your customer. For instance, if your customers send money to India, Bangladesh, Pakistan, the Philippines, or any other developing country, there must be separate regulations according to the money transfer mechanisms and the rules implemented by regional authorities to regulate safe and secure transactions.

Do you recognise who your consumer is? Whatever the case is, you should. If you conduct business with a money launderer or a terrorist, you might risk penalties, sanctions, and reputational harm. More significantly, Know Your Customer (KYC) and Know Your Business (KYB) are critical processes for protecting your firm from fraud and losses caused by unauthorised funds and transactions.

In this blog post, you will learn about the nooks and crannies of KYC and KYB principles.

What is KYC?

In the financial world, the Know Your Customer (KYC) or Know Your Client principles encourage professionals to verify the identity, appropriateness, and risks associated with establishing a business connection. Know Your Customer (KYC) processes are essential for assessing customer risk and a legal necessity for complying with Anti-Money Laundering (AML) legislation. Effective KYC entails understanding a customer’s identification, financial actions, and the threat they pose.

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KYC processes are also used by financial businesses of all sizes to ensure that their prospective customers, agents, consultants, or distributors are anti-bribery compliant and who they claim to be. Customers are increasingly being asked to supply thorough due diligence information by banks, insurance, export creditors, and other financial organisations. Initially, only financial institutions were subject to these requirements; however, the non-financial industry, Fintech, virtual asset dealers, and even non-profit organisations are now required to comply.

  • eKYC

Once the KYC procedure is digital, we refer to it as eKYC (electronic Know Your Customer). The digitalisation of processes in all industries has increased production, reduced costs, eliminated bureaucracy, and reduced wait times from weeks to minutes. Together with eIDAS, Anti-Money Laundering (AML5) or (5AMLD) establishes the digitisation of KYC procedures. It provides legal assurances and comprehensive security to carry out client digital onboarding operations securely and trustworthy.

What’s Needed for KYC?

The term “KYC” refers to the processes that a financial institution (or business) takes to:

  • Create a customer identity
  • Understand the nature of the customer’s operations (the primary purpose is to ensure that the customer’s money is authentic).
  • Evaluate the money laundering risks connected with the consumer to monitor the customer’s activity.

The following things are required to build and manage a successful KYC program:

  • Customer Identification Program (CIP)
  • Customer Due Diligence (CDD)
  • Ongoing Monitoring

What is KYB?

The Know Your Business (KYB) procedure is similar to the well-known and standardised Know Your Customer (KYC) process. KYB (Know Your Business) process has all of the characteristics you have seen in defining the KYC procedure. The distinction is determined by the user’s ability to identify: While the conventional procedure identifies possible clients or users for registration in a corporation, the Know Your Firm process identifies the person accountable or legal representative of a business.

Usually, B2B (Business-to-Business) enterprises must conduct due diligence to identify the businesses with whom they interact and combat money laundering and other tax offences, in addition to working with organisations that provide security and guarantees. Nonetheless, in most cases, such as in the banking industry, it is a legal obligation. For instance, firms that provide professional services to companies or engage with SMEs and freelancers regularly must create KYB processes to identify the legal representatives of these enterprises and verify their link with the client company.

As with the KYC process, digital solutions in KYB aid in cost reduction, eliminating bureaucracy and developing control techniques that are safer and more trustworthy than old identifying methods.

Countless diasporas from India and other developing states reside in developed countries like Australia, Canada, Switzerland, and other Europian countries. These expatriates always try to find out the best way to send money to India or any other native country to help support their family’s financial needs. Considering that the money transfer industry is replete with fraudsters and culprits, it is critical to deploy effective and unbreakable strategies to ensure robust security of international transactions which is easily possible with KYC and KYB.

KYB Environment for Businesses

KYB (Know Your Business) or BKYC (Business Know Your Customer) is a comparatively new phrase. The release of different rules in several jurisdictions worldwide that mandate its application has resulted in a surge in demand for these sorts of solutions. As a result of the digitisation and delocalisation of operations, businesses that sell products and services to or after businesses (B2B) must build Know Your Business procedures. They must lower costs and times, administrative procedures, and simplify previously time-consuming and complex processes, all while ensuring that their B2B clients’ relationships are protected and have adequate legal support and develop broader internal compliance policies regarding relationships with customers and suppliers.

Why are KYC and KYB Essential for Remittance Companies

Before the official onboarding process, KYC and KYB assist organisations in determining the eligibility of an individual or business. KYC and KYB checks will also identify any politically exposed individuals, persons with considerable control, or ultimate beneficial owners, all of whom are classified as high-risk consumers. If a company decides to conduct business with a client or customer who offers a higher risk, they must modify their strategy accordingly. This might imply increased due diligence or more detailed continuing monitoring to keep track of any status changes.

Do Remittance Service Providers Work on KYC and KYB Principles?

Yes! Remittance service providers such as ACE Money Transfer have been subjected to work on KYC and KYB principles. This way, these services would be safe from any kind of potential threat from the customer. Their reputation would not be on the lines because it is a severe matter of reputation for these services.

What is ACE Money Transfer?

ACE Money Transfer offers remittance services to over 100 plus receiving countries. ACE strives for perfection when it comes to providing specialised, online solutions for all of your remittance needs. Through a single interface, overseas migrants can benefit from rapid and simple remittances to hundreds of recipient countries. ACE is dedicated to offering its customers a safe, secure, and quick platform for sending money to family and loved ones. If you need to send money to India online, ACE is by far the best option based on its service features.

So what are you waiting for? Get hold of ACE Money Transfer’s exceptional services now!