KYC is one of those abbreviations which is often used in the financial services industry, but what is it all about? KYC stands for Know Your Customer, and describes the steps which banks, building societies and other financial institutions must take to comply with money laundering legislation. In practical terms, KYC describes the checks and proof which a bank might ask you for when you open a new bank account, take out a loan or credit card, or apply for a mortgage.
Reliable Documents
Every bank will have its own rules and processes for implementing KYC, but all will follow a broadly similar process. When you go into a bank to talk about opening an account or applying for a mortgage, you will be asked to take with you some key identity documents to prove who you are, and your residential address. If you are applying for a joint account, both people named on the account must provide their identity documents to be verified. If the account is for an organisation such as a company or charity, other documents must be shown to prove that the organisation is properly registered and who the owners are.
The key requirements for documents used to prove identity is that they should have the owner’s photograph, and signature. The commonly used documents to prove identity are passports and driving licences. It is a common misconception that a British passport is required to prove identity to a British bank, but this is not the case. The legislation allows for the use of any passport officially issued by a foreign government, as long as it is machine readable and currently valid. A photo driving licence issued overseas which has not expired and has both signature and photograph can be used to prove identity too.
Proving Your Address
As well as proving your identity, the KYC regulations require banks to check that the addresses stated are genuine too. If you have used your passport to prove your identity, then you can use a driving licence as proof of address. Alternatively, customers can produce other documents such as a credit card or bank statement, a Council Tax statement, utility bills or mortgage statements. Banks will want to see recent and original copies of your address documents. “Recent” is generally defined as within the last three months, or in the case of something sent annually such as a Council Tax bill or mortgage statement, the most recent available. Banks will generally not accept any documents which have been printed off the internet. As most of us are managing our finances online these days, that could mean requesting a hard copy of a statement.
Credit Checking
Banks might also take steps to check that the documents you have presented are genuine and may want to take copies. They might also run basic credit checks, looking at whether you are registered to vote at the address you have given. If you are not on the electoral roll, this can make getting any sort of credit difficult.