Tech, ExplainedNetworking, infrastructure and security
Concept

KYC (know your customer)

Checked before you're a customer.

HOW IT WORKSThe customer gives anidentity document,such as a PAN cardSoftware checksthat the documentis genuineIt matches thelive face to thedocument's photoIt screens thename againstsanctions listsThe account is opened,and the KYC record iskept and updatedEvery account can be traced to a real, checked person before any money moves.HOW IT WORKSThe customergives anidentitydocument,such as aPAN cardSoftwarechecks thatthe documentis genuineIt matchesthe live faceto thedocument'sphotoIt screensthe nameagainstsanctionslistsThe accountis opened,and theKYC recordis keptand updatedEvery account can be traced to a real, checked person before any money moves.HOW IT WORKSThe customer gives an identity document,such as a PAN card↓Software checks thatthe document is genuine↓It matches the live face to thedocument's photo↓It screens the nameagainst sanctions lists↓The account is opened, and the KYC recordis kept and updatedEvery account can be traced to a real, checked personbefore any money moves.
A customer's document is read and checked, the face is matched to its photo, the name is screened against sanctions lists, and only then is the account opened.
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KYC, or know your customer, is the set of checks that a bank, broker, wallet or other regulated company must run to confirm who a person is before taking them on as a customer. In India, the RBI sets these rules for banks and lenders, and SEBI sets them for brokers and mutual funds. The aim is to stop criminals from opening accounts in false names, and to make every account traceable to a real person.

Here is how KYC works in general. The customer gives an identity document, such as a PAN card or Aadhaar. Software reads the document and checks that it is genuine. It then checks that the face in front of the camera matches the photo on the document, and that it is a living person, not a photo or a video. This second check is called liveness detection. The software also checks the name against lists of sanctioned people. This is done by sanctions screening. Only then is the account opened. The company keeps the KYC record, and must update it every few years.

India does more of this on phones than almost any other country. With Aadhaar-based eKYC, the customer's details come straight from the Aadhaar system, with an OTP. Aadhaar is part of India's digital public infrastructure.

Take, for example, a person opening a trading account on a phone. Identity verification software reads the PAN card and matches the selfie in about two minutes, with no person looking at it.

Consider a customer whose case needs a person to see them. With video KYC, a bank employee checks the documents and the face on a live video call, so the customer does not visit a branch.

Say someone buys a new SIM card. The telecom operator must check the buyer's identity before activating it, through SIM activation apps at the shop.

How is KYC different from AML transaction monitoring? KYC checks who the customer is when the account is opened, and again at each periodic update. Transaction monitoring watches what the customer does with the account afterwards, every day. And when the customer is a company, the check is called know your business (KYB).

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