What is Know Your Customer (KYC)?

As per the KYC regulations, KYC checks involve checking customers’ KYC documents such as identity proofs and address proofs to confirm their name, address, and other details.  

Know Your Customer (KYC) is important for companies to confirm the identity of customers to help prevent cases of money laundering, identity thefts, or any other financial crimes.  

KYC checks include the procedures to explore and verify the identity of clients, customers, or suppliers to identify any potential risks of money laundering, illicit financial activities and identity thefts.  

The KYC process under KYC regulation involves: 

• Collecting information on your customers 
• Validating information through KYC documents 
• Verifying through checks 

The ‘know your customer’ requirements include knowing and maintaining records on your customers’ identity and verifying these records through KYC documents to reduce the possibility of money laundering and other financial crime risks.  

Here are a few situations or circumstances in which KYC is applied

• Buying precious metals and stones

• Incorporating a new company in UAE

• Opening a new deposit or borrowing account

• Opening a subsequent account where documents submitted as per existing Know Your Customer standards are insufficient while opening up the initial account.

• When the financial institution or DNFBP experiences the need to obtain additional information about the existing customer based on the customer’s conduct or sudden change in behavior

• When there are any kind of changes to signatories, beneficial owners, or mandate holders

Here are the three main components of knowing your customer (KYC)

• Customer Identification Program (CIP)

• Customer Due Diligence (CDD)

• Continuous/regular monitoring

Know Your Client is a critical process for a Financial Institution, Designated Non-Financial Business and Profession, and Virtual Asset Service Provider to identify and verify its clients to assess and manage risks associated with them and comply with the Anti-Money Laundering Laws.

There are three steps involved in KYC process:

1. Customer Identification
2. Customer Due Diligence
3. Enhanced Due Diligence

KYC documents to collect in case of a Natural Person:

• Personal Data
  • Passport/Emirates ID/Any other ID Card (Issued by Government) providing information as to name, nationality, date of birth and place of birth, and national identification number of a natural person
• Principal Address
  • Bills or account statements from public utilities, including electricity, water, gas, or telephone line providers or;
  • Local and national government-issued documents, including municipal tax records or;
  • Registered property purchase, lease, or rental agreements or;
  • Documents from supervised third-party financial institutions, such as bank statements, credit or debit card statements, or insurance policies.

 KYC documents to collect in case of a Corporate:

• Personal Data
  • Passport/Emirates ID/Any other ID Card (Issued by Government) providing information as to name, nationality, date of birth and place of birth, and national identification number of partners, directors, shareholders, and authorized signatories.
  • Certificate of Incorporation, Trade License of the legal entity
•  Principal Address
  • Bills or account statements from public utilities, including electricity, water, gas, or telephone line providers or;
  • Local and national government-issued documents, including municipal tax records or;
  • Registered property purchase, lease, or rental agreements or;
  • Documents from supervised third-party financial institutions, such as bank statements, credit or debit card statements, or insurance policies.