KYC Remediation- A Boon For BFSI

Globally, the Know your Customer (KYC) process is a way for banks, financial institutions, service provider companies (for e.g., telecom, power, gas, internet, DTH TV et al.), various government departments, educational institutions, and many others to verify the identity of their clients.

- Saptarshi Roy Bardhan

A business is a complex body of related and interconnected processes, which dynamically runs on some economic or commercial parameters. KYC is a due diligence process for business entities, especially banks and financial institutions, which is of paramount importance as a risk mitigation measure. over a decade or so, KYC has become common to prevent fraud, identify theft, money laundering (ML), and terror financing (TF) activities.

A bank or financial institution faces a plethora of systematic and unsystematic risks- counter-party risk and credit risk being two of the prime ones, which, if not contained, may lead to an abnormal financial loss for the company. By definition, counter party risk is the risk to each party of a contract, that the other party will not live up to its contractual obligations. A credit risk is the risk of default on a debt that may arise from a borrower failing to make required payments. Intuitively, an effort to contain Counter party risk is, in a way, a precursor to have control over credit risk.