Know Your CustomerKYC

The parts of a KYC program

KYC is usually described in layers, each building on the last:

• Customer Identification Program (CIP): collect and verify name, date of birth, address and identification number before opening the account, and check government lists.
• Customer due diligence (CDD): understand what the account is for and what activity to expect, so the bank can build a risk profile. For legal entities, FinCEN’s CDD Rule, in effect since May 11, 2018, also requires identifying and verifying the beneficial owners.
• Enhanced due diligence (EDD): more scrutiny for higher-risk customers, such as cash-intensive businesses or politically exposed persons.
• Ongoing monitoring: watching activity against the expected profile, updating customer information when risk changes, and filing suspicious activity reports when warranted.

KYC vs. CIP

CIP is the identity piece of KYC: the specific, rule-defined steps to confirm a person is who they claim to be. KYC is broader. A bank can pass CIP on an applicant whose identity is real and still miss what KYC is meant to catch: that the account will be used for something other than what was described, or that the applicant’s stated income and employment do not hold up.

Where KYC meets account opening

For a digital applicant, every KYC question has to be answered inside the application. Each manual step, such as a document upload, a branch visit to show ID, or a callback to confirm employment, is a point where real customers abandon the form. The banks that open accounts quickly answer the same questions from authoritative sources instead: identity data verified against issuers and services like eCBSV, and the funding account and income confirmed directly with the customer’s bank or payroll provider.

Speed is not the only reason. Fraud that walks through CIP, such as synthetic identities and first-party fraud, is caught by checking the facts on the application against data the applicant cannot edit.