KYC AML Guide: the Clock shows the average reeding time of the blog10 min Read


KYC AML Guide: the Clock shows the average reeding time of the blogNovember 7, 2023

KYC Document Verification in Banks: Requirements & Best Practices

Know your customer (KYC) is a vital part of the financial industry, to prevent fraud and money laundering and ensure client validity. Banks play an important role in this process by collecting, confirming, and storing client information. This article will go over the essential requirements and best practices for KYC document verification in banks.

Belal Mahmoud

KYC Product Consultant

What is KYC in Banks?

KYC is a legal requirement in banking to ensure that people know with whom they are doing business. It is part of a larger due diligence procedure that includes identity verification and authentication. However, KYC processes are also designed to assess ongoing risks and monitor behavior to protect financial institutions against fraud, corruption, money laundering, and financing.

The three objectives of KYC in banking are as follows:

  • Validation of customers’ identities
  • Ensuring that you can receive banking services and products
  • Avoiding dealing with money laundering in banks

Furthermore, compliance with AML legislation is a legal requirement for banks and KYC processes, therefore it is a required step. Customers in the United States must also comply with the standards of Title III of the Patriot Act i.e.

What are the Requirements for KYC Document Verification in Banks?

Various laws around the world establish appropriate identification verification procedures. Banks are frequently needed to validate identity documents to prove the applicant’s identity. They can also verify their address, depending on the service provided. The KYC document list that banks employ when onboarding a new customer includes a government-issued ID card verification as well as additional proof of address such as payslips and bank statements.

Suppose that customer “X” has received a notification from his bank that he must complete his KYC document verification for payment companies to ensure compliance with the most recent regulatory requirements. Let’s go over the documents he needs to review:

Proof of Identity (PoI) Documents
  • Passport
  • Social security card
  • Driver’s license
  • Voter’s identity card
  • Birth certificate
  • Member state identity card
  • Benefit book/original notification letter  National identity card with a photograph of the applicant

Note: A photograph of the person is usually required for this sort of identity verification.

Proof of address can be carried out through identification or a supporting document verifying the customer’s address:

Proof of Address  (PoA) Documents
  • Utility bills
  • Bank account statements or Passbook entries
  • Maintenance bills
  • Local authority council tax bill
  • Driving license
  • Mortgage statement
  • Tenancy agreement for the current year
  • Tax demand letter

Note: A proof of address document should be in the name of the individual and issued within the last three months.

Financial institutions may also request proof of income/source of income before opening a bank account, issuing a credit card, or establishing an insurance policy. The following documents can be submitted to support a client’s income or financial situation:

Proof of Income documents:
  • Recent pay slip
  • Bank account statements
  • Tax forms

For banks and financial organizations, however, KYC does not end with first verification. You should also consider the risk that each client may pose after onboarding. KYC compliance is becoming increasingly critical as strict rules take effect, and banks are investing significant time and money in the KYC compliance process. One of the reasons why banks are going towards the digital identification process. Banks can use digital identification to authenticate customer identities by utilizing a library of trusted data sources, award-winning papers, biometric checks, and fraud signals. It can also help automate onboarding, KYC compliance, and identity verification.

KYC AML guide is offering KYC technology buying which can help banks and financial institutions navigate the ever-changing landscape of KYC compliance. By providing expert consultancy it enables institutions to improve identity verification, speed onboarding, and meet the expanding demands of regulatory standards

Best Practices in KYC Document Verification in Bank

1. Customer Identification

The first and most critical step in the KYC process is customer identification. Businesses must obtain a government-issued identification document, such as a passport, driver’s license, or national ID card, to authenticate the identity of their clients. KYC document verification is required to guarantee that they are not false or fraudulent.

2. Automated Verification

To correctly cross-check customer data from trusted sources, automated verification techniques should be deployed, decreasing human error and speeding up the process.

3. Risk-Based Approach (RBA)

A risk-based approach entails determining the level of risk associated with each customer and changing the KYC process as needed. High-risk individuals are given a more intense treatment plan. High-risk clients should be subjected to EDD, whilst low-risk clients can undergo simplified due diligence.

4. Ongoing Monitoring

Continuously monitors client transactions and updates customer information frequently to ensure that it is accurate and up to date.

5. Employee Training

KYC document verification in banks is only as good as the employees who use them. Regular training and awareness programs ensure that employees are informed of KYC requirements and evolving financial rules

6. Record Keeping

Record keeping is critical to the KYC process since it provides evidence of compliance and aids in investigations. Businesses must keep accurate and up-to-date records of customer identification, due diligence, and ongoing monitoring.

Why KYC Document Verification in Banks is Important?

KYC is an important process in banking since it allows banks to know who they are dealing with and effectively protects banks’ operations, customers, and the national and global economies in general from money laundering, identity theft, and financial fraud. Some of the reasons why KYC document verification in banks is significant are as follows

1.  Prevention of Financial Crime

The KYC process is critical in the fight against financial crimes like fraud, identity theft, money laundering, and terrorist financing. Banks can detect and stop illegal activity by confirming the identity and financial history of their customers, thereby reducing risk to themselves and the wider financial system.

2. Regulatory Compliance

KYC compliance has been mandated by authorities around the world to maintain the integrity of the financial system. Banks must comply with AML and counter-terrorist financing (CTF) rules, as well as standards issued by regulatory agencies such as the Financial Action Task Force (FATF). Banks who violate the guidelines face financial penalties, a negative brand reputation, and legal implications. In 2020, the majority of banks were punished for failing to comply with KYC/AML standards, and banks around the world faced record-breaking penalties.

3. Risk Management

KYC processes can assist banks in properly managing risks. Through the collection and verification of customer data, due diligence, and transaction monitoring, banks can discover and assess potential risks linked with their customers. This enables them to make educated decisions, manage risks, and avoid financial and reputational harm.

4. Customer Safety

KYC measures are intended to safeguard clients from financial and identity theft. By doing KYC document verification in banks, they can safeguard their clients’ money and personal information by certifying their identification and validating accounts and transactions.

5. International Cooperation

KYC is critical in international cooperation and combating cross-border financial crimes. Banks can adhere to international norms, communicate information with other financial institutions, and contribute to global efforts to prevent money laundering and terrorist financing by implementing KYC document verification.

Bottom Line

KYC document verification is the foundation of a secure and compliant financial system. It not only protects financial institutions from risks, but it also increases confidence among customers. Banks can maintain regulatory compliance, improve safety, and simplify consumer engagement by adhering to the regulations and best practices indicated here.

KYC Tech-Buying Consultancy helps banks and financial institutions find the best KYC partner for their specific Identity Verification requirements. It also offers useful insights and comparisons for KYC document verification components like Fake Document Testing and Original Document Verification, delivering a targeted and efficient solution.


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Belal Mahmoud
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Belal possess over 8 years experience in the KYC Identity Verification industry. He has consulted KYC solutions for over 20 new economy companies at DIFC and ADGM while ensuring a seamless technical integration and helped in jurisdictional compliance audits.