May 25, 2018
Introduced in 2001 as part of the Patriot Act, KYC laws are obligating FIs to deliver on two requirements: Customer Identification Program (CIP) and Customer Due Diligence (CDD). CIP is a particularly important element of performing KYC for any FI in relation to onboarding and CX/UX/UI. To help the government fight the funding of terrorism and money laundering activities, federal law requires FIs to obtain, verify and record information that identifies each person who opens an account.
According to The Federal Deposit Insurance Corporation (FDIC), the CIP must include account opening procedures that specify the identifying information that will be obtained from each customer. It must also include reasonable and practical risk-based procedures for verifying the identity of each customer. Customer verification can be performed through documentary, non-documentary methods, with reliance on other institutions, or through third-party service providers. Regardless of the method, though, the institution is always bearing the risks associated with errors in ID verification and fraud detection.