Key Takeaways:

1. KYC checks help businesses verify customer identity, stay compliant, and prevent financial crime.

2. A proper KYC process includes identity verification, risk assessment, and ongoing monitoring.

3. Automated KYC checks make compliance faster, more accurate, and easier to scale.



 

Introduction

Performing a KYC check is an important and core step for banks and regulated businesses before onboarding a customer. Just as trust is built in everyday relationships, financial institutions also must confirm who they are dealing with before enabling transactions or providing services.

 

Therefore, KYC checks help banks and businesses verify customer identity, assess risk, and prevent exposure to financial crimes such as fraud, identity theft, money laundering, and terrorist financing. 

 

In this guide, we explain what a KYC check is, the step-by-step process to conduct a KYC background check, and the KYC guides for banks and businesses to meet compliance requirements and reduce financial crime risks.


 

What is KYC check? 

A Know Your Customer (KYC) check is a mandatory process used by banks, regulated businesses, and fintechs to verify a customer’s identity. By doing this, they are able to confirm that a person is who they claim to be and assess potential risk before establishing a business relationship. 

 

The failure to or not knowing how to conduct KYC checks properly can expose organizations to regulatory penalties, financial losses, risks, and reputational damage.

 

As part of a broader compliance framework, KYC is a distinct and core element of risk management and regulatory compliance for financial institutions.

READ ALSO: What are the KYC Compliance Requirements in 2025?

 

What Are the Steps Involved in a KYC Background Check? 

A KYC background check is a structured process that helps businesses verify customer identity, assess risk, and meet regulatory obligations. While the depth of checks may vary by industry and risk level, the KYC verification process typically involves three core steps:

1. Customer Identification

KYC checks begin with customer identification. The goal at this stage is to confirm that the customer is a real individual or a legitimate business and not impersonating someone else.

During this step, businesses collect and verify basic identity information such as:

- Full name

- Date of birth (for individuals)

- Residential or business address

- Government-issued identification (e.g., passport, national ID, driver’s license)

- Business registration details (for corporate customers)

This information is validated against trusted data sources to ensure authenticity and reduce the risk of identity fraud at onboarding.

 

2. Customer Due Diligence (CDD)

Once a customer’s identity is confirmed, the next step is Customer Due Diligence (CDD). This stage focuses on assessing the customer’s risk profile and understanding the nature of their financial activities.

CDD typically involves:

- Screening customers against sanctions lists, watchlists, and politically exposed persons (PEPs) databases
- Reviewing ownership and control structures for businesses
- Evaluating the purpose of the account or transaction
 

High-risk customers identified typically undergo more stringent checks known as Enhanced Due Diligence (EDD). This step majorly helps institutions detect potential money laundering and other financial crime risks.

 

3. Ongoing Monitoring

KYC background checks do not end after onboarding.  Ongoing monitoring ensures that customer information aligns with the customer’s risk profile.

This includes:

- Periodic review and updating of customer records
- Continuous transaction monitoring for unusual or suspicious activity
- Trigger-based re-verification when customer behaviour or details change

 

Ongoing monitoring strengthens long-term compliance and ensures institutions remain aligned with evolving regulatory expectations.

 

KYC Check Guidelines For Businesses 

If your business deals with financial transactions, manages customer funds, or provides digital services, performing a KYC check is not optional. 

Here’s how to integrate the KYC verification process into your business operations:

 

1. Establish a Clear KYC Policy

Define how customer data will be collected, verified, stored, and updated in line with KYC/AML regulations, data protection laws, and regulatory requirements.

Make sure data collection is seamless and there is no friction between customer experience and the data collection process itself.  For example, you can establish a complete database so your customers do not have to input information about themselves every time they have to make a purchase.

 

2. Verify Customer Identity

Identity verification is at the core of KYC background checks. Request valid government-issued documents and use secure verification methods such as biometric verification or selfie-ID matching.
 

3. Assess Risk Levels

Classify customers based on the level of risk they pose using available data. High-risk customers may require enhanced due diligence, while low-risk customers may undergo standard checks.
Risk-based assessment is a key part of effective KYC compliance checks and AML controls.

YOU MIGHT WANT TO READ: What are the 4 Customer Due Diligence Requirements for Businesses?
 

4. Store Records Safely

All KYC documents and verification data should be securely stored and easily retrievable for regulatory reviews and audits.
 

5. Regularly Update Customer Information

KYC is not a one-time exercise. Human nature allows for customer details and risk profiles to change over time. Therefore, regular reviews and updates ensure your KYC verification process remains accurate.
 

6. Train Your Staff

Ensure employees understand KYC/AML check requirements and know how to flag suspicious activities. Having well-trained staff will boost your overall compliance structure.
 

 

Automate KYC Checks With Youverify

Performing KYC manually can be time-consuming, error-prone, and difficult to scale, especially for growing businesses.

 

With Youverify, businesses of all sizes can automate the entire KYC and AML compliance process using AI-powered verification tools. From ID checks and address verification to AML screening and continuous monitoring. Youverify helps businesses of all sizes stay compliant while improving onboarding speed and customer experience.

 

Perform automated KYC compliance checks seamlessly and save your business from fraud and sanctions by booking a free demo here. 


 

FAQS

 

Q1. What are the Steps in a KYC Process?

The KYC process typically involves customer identity verification using valid ID documents or biometrics, risk assessment, and ongoing monitoring. These steps help businesses meet KYC/AML compliance requirements.



Q2. How do I Pass a KYC Check?

To pass a KYC check, provide accurate personal or business information and submit valid, government-issued identification documents. Ensure your details match official records and complete any biometric or verification steps requested.

 

Q3. Who is a customer as per KYC guidelines?

Under KYC guidelines, a customer is any individual or business that opens an account, conducts a transaction, or establishes a financial relationship with a bank, fintech, or regulated business.