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KYC, KYB, KYT: Know your K-Y terminology

K…Y…What?! Learn the acronyms that will help you safeguard your fintech business

Know your kyc terminology blog

Want to be sure you’re protecting your fintech company from identity fraud and other illegal activity? Wondering if your business is in compliance with the latest AML/KYC regulations? And what’s with all the acronyms anyway?

Here are some key terms you should know:

  • AML (anti-money laundering) — laws or practices to prevent money laundering and/or to identify individuals who conduct illegal money-laundering activities.

  • KYC (know your customer) — verifying the identity of a customer. If someone applies for a personal checking account, for instance, it’s essential to confirm that the person is who they say they are, and not an identity thief.

  • KYB (know your business) — confirming the authenticity of a business to make sure it’s not a shell company. Suppose a person who plans to start a new e-commerce business has applied for a digital loan. Before the application can be approved, the identities of everyone associated with the startup—the applicant and any partners—should be verified.

  • KYT (know your transactions) — monitoring every customer transaction to make sure it’s legitimate. Imagine that a bank customer’s business checking account receives a weekly wire transfer deposit in the amount of $9,000. The very next day, $8,500 is transferred to another account. It’s important to check that these recurring transactions aren’t part of some illicit activity.

  • CAP (customer acceptance policy) — confirming the identity of a potential customer before agreeing to conduct business with them.

  • CIP (customer identification program) — more generally referred to as KYC, the set of federal requirements for financial institutions to verify the identity of all potential customers.

Each focuses on a different aspect of fraud prevention, but all play a role in safeguarding your customers and your business.

Okay, but does having a KYC/KYB process really matter?

If you don’t want to be fined for noncompliance with federal and state regulations, then yes, it
does. In 2019, for instance, banks were collectively hit with $10 billion in fines, of which just over 60 percent was for failing to comply with AML regulations.

Beyond the compliance issue, however, is the wisdom of being proactive. Potential fraud risks for a fintech business—including yours—are very real. You don’t want to leave your company vulnerable to illegal activity. Can you imagine providing unwitting financial support to a money-laundering ring?

Use KYC automation to protect your fintech business

Implementing an effective risk management process isn’t as daunting as it might seem. With an Identity Risk Platform, KYC automation uses advanced artificial intelligence and machine learning to verify the identity of your customers. A KYC API connects multiple data source products, giving you a holistic view of each customer and making verification seamless. With an automated digital KYC process, you can fulfill regulatory requirements without having to rely on internal resources.

At the end of the day, your KYC/KYB process can go beyond compliance. It can become part of an overall strategy for managing your risk and planning ahead. The ability to tweak and modularize your IDP technology will help you pivot and adapt as the challenges around digital-based security continue to evolve.

The goal is to reassure your customers and business partners that you take security seriously and will always prioritize the safety of sensitive information.

How Alloy can help

Are you ready to implement processes for KYC/KYB and KYT? From KYC onboarding to transaction monitoring, Alloy offers a full set of solutions to help your business achieve regulatory compliance–and much more.

Learn more

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