Knowing the Definition of KYC and the Benefits of Its Implementation
What is the true definition of KYC? Are you curious about the definition? In today’s digital era, the number of buying and selling transactions for a product carried out through online means is increasing. As a result of the COVID-19 pandemic, all payment processes must inevitably also be done online. Although it makes it easier to save time and energy, in fact online transactions also have weaknesses that can harm many people.
The weakness comes in scams that are often carried out by irresponsible people in order to get a quick profit. As a solution to this problem, the KYC principle was developed. For those of you who work in the business world, knowing this principle is very important. Without further ado, let’s take a look at the explanation about KYC below.
Definition of KYC
KYC, or Know Your Customer, is a process specifically carried out to verify the correct identity of customer. The verification process is important to overcome the problem of fraud or money laundering. Generally, this principle is now widely used in the world of banking, services, and other financial institutions.
This verification process has also been carried out online as e-KYC. Customer identity verification is carried out by requiring customers to fill in complete and clear personal data and upload a photo of their ID card or driver’s license.
Regulation That Govern The Implementation of KYC
The implementation of KYC in Indonesia refers to the recommendations provided by the G7 Conference in France, namely The Financial Action Task Force (FATF) on Money Laundering. From these recommendations, the KYC principle has been incorporated into several laws and regulations as below.
- Law Number 7 of 1992 as amended by Law Number 10 of 1998 concerning Banking (Banking Law)
- Bank Indonesia Regulation Number 3-10-PBI-2001 concerning the Application of Know Your Customer Principles
- Law of the Republic of Indonesia No. 8 of 2010 concerning Prevention and Eradication of the Crime of Money Laundering
- Regulation of the Minister of Finance Number 30/PMK.010/2010 concerning Application of Know Your Customer Principles for Non-Bank Financial Institutions
- Decree of the Capital Supervisory and Financial Supervisory Agency (BAPEPAM) No. Per01/BL2011/ concerning the Implementation of Guidelines for the Implementation of KYC Principles for Insurance Companies
- POJK Number 12-POJK.01-2017 concerning the Implementation of the AML-CFT Program in the Financial Services Sector
Read Also: EKYC FOR CREDIT SCORING PROCESS
Benefits of the Implementation of KYC
After understanding the meaning of KYC, you also need to know the benefit that you can get by implementing KYC.
The implementation of KYC can be carried out in various fields and is not limited to only addressing or reducing unlawful practices related to fraud and money laundering. Furthermore, with the data you get through KYC, you can do the following things.
- You can get to know customers better.
- Every transaction activity is properly recorded and stored in the system for use in analysis or when conducting monitoring.
- Help companies understand the nature of customer activity.
- Provide protection to customers from fraudulent practices and financial losses.
- The process of verifying customer identity and information is easier and faster.
- Analyzing market trends.
- Maintain financial stability for companies, services and institutions, and even governments. This is because all financial transactions made by customers have a direct and indirect impact on the government.
- Customers’ trust in companies, services and institutions is getting higher thanks to a system that makes them feel safe.
All the purposes and benefits above explain the definition of KYC which is very important in the transaction process. This is because the KYC principle plays a significant role in providing security, comfort and convenience for all those who use it. All the information and data obtained is useful for developing your business in a better direction.
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