What is a KYC document?

A Know Your Customer (KYC) document refers to formal documentation such as a passport or utility bill, which can verify the identity and address of a customer. Requesting and verifying KYC documents is a mandatory part of customer due diligence for regulated entities. For B2B businesses, KYC is also an acronym for Know Your Client.

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In the financial industry, KYC documents are a regulatory requirement, enforced globally.

Global money laundering and terrorist financing watchdog, Financial Action Task Force (FATF), says that verifying a customer’s identity must be carried out using reliable, independent source documents as a preventative measure for combating money laundering and terrorist financing.

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Obtaining the appropriate KYC documents from customers at onboarding is an important KYC procedure.  

In order to comply with money laundering regulations, a customer must prove their identity by providing KYC documents that provide proof of name and proof of address. Similar rules also apply for companies and other legal structures. Proof of income may additionally be required for individuals when applying for certain products/services. The below KYC document examples indicate acceptable forms of proof and identification:

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Proof of identity is a mandatory KYC document for individuals

Individual proof of identity must comprise a KYC document for proof of name and another KYC document for proof of address. It is not possible to accept a single KYC document as proof of both name and address.

Proof of Identity (POI) documents:

• Passport
• Driving licence
• Birth certificate
• Member state identity card  

• Benefit book/original notification letter  
• National identity card with a photograph of the applicant

It is a common requirement for this type of proof of identity document to include a photo of the individual.  

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Proof of Address (POA) documents:

• Utility bill  
• Local authority council tax bill
• UK driving licence
• Bank statement  
• Mortgage statement
• Tenancy agreement for the current year
• Tax demand letter

A proof of address document should be in the name of the individual, and have been issued within the three months.

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Proof of Income documents:

• Bank statement
• Pay slips
• Income tax returns

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Proof of KYC documents for companies and other legal structures

The type of KYC document required for companies and other legal structures can depend on the specific legal structure of the company, such as whether it is listed on a regulated market, the number of partners it has, and whether it is a trust. In addition to individual ID, the following examples illustrate the types of corporate KYC documents that may be required:

• Copy of certificate of incorporation
• Copy of a dated page from the website of the relevant stock exchange
• Recent audited accounts
• Entry of details held by a relevant professional body
• List of trustees
• Any document which establishes, manages, or regulates the structure

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In its guidance on digital identity, FATF states that reliable and appropriate digital ID can make it easier, cheaper, and more secure to identify individuals in the financial sector. Digital ID can also help companies to comply with transaction monitoring requirements and minimise weaknesses in human control measures.

FATF identifies the following common examples of digital identity verification, which can be used as part of the KYC procedure:

• Biometrics to help identify and/or authenticate individuals
• Digital application program interfaces (APIs), platforms and protocols that facilitate online identification/verification and authentication of identity
• Electronic databases, including distributed ledgers, to obtain, confirm, store and/or manage identity evidence
• Digital credentials to authenticate identity for accessing mobile, online and offline applications

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Napier uses its Intelligent Compliance Platform is to bring disparate, third-party KYC and AML systems together. The platform aggregates data from KYC documents and all third-party streams with data from transaction monitoring systems to create a more cohesive view of customers and their risk.

Unlike a traditional approach to KYC, where risk is identified at onboarding and then periodically reviewed at a frequency based on that risk initial scoring, Napier promotes and enables perpetual KYC. Napier’s Client Activity Review proactively and continuously monitors a customer’s transactional activity, comparing it against their profile to measure risk and detect suspicious behaviour.

By moving away from a traditional, periodic approach to KYC, Napier’s platform uses KYC reviews that can be triggered by changes in the customer’s transactional behaviour and risk-score. 

Napier’s Intelligent Compliance Platform comprises the following products, which are all also available as a standalone solution:

1. Client Activity Review
2. Risk-based Scorecard
3. Transaction monitoring
4. Client screening
5. Transaction screening
6. STR builder

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