A Know Your Customer check, or KYC, is the process that companies undertake to verify the identity of their customers and understand what risks may be present if they participate in a business relationship with the customer. True KYC, or Know Your Business (KYB) guidelines and procedures, fit within government regulations for bank anti-money laundering policy.
In a typical business relationship, a KYC check reduces risk and can help prevent financial loss. Simply put, a proper KYC check could protect you from fraud, financial loss and illegal activity.
“The credit application is the primary document which allows the credit professional to ‘Know Your Customer,’” according to the National Association of Credit Managers.
A completed and signed digital credit application is the first step in a KYC check. A digital credit application will help protect you through the following processes:
- Identify customer and ownership. Completing a credit application on a digital platform like Nectarine Credit will give you the customer’s full legal name, legal type/structure of the company and their tax or Federal Identification Number. It’s also important to get the other names, or DBAs, your customer may go by. In addition, the seller will get a full picture of ownership, which could prove helpful in any future legal dispute.
- Verify authenticity through due diligence. Simply put, acquiring some basic facts about your customer through a credit application will help in your KYC check. Getting a full address, date of incorporation, phone number as well as key management and directors will go a long way in verifying your customer’s authenticity.
- Vendor, bank and credit checks. Having your customers’ other vendors update their payment history on Nectarine Credit can help avoid loss by alerting you to any unusual or late payment activity. We also check bank data through our secure third-party partner. Their financial partners perform their own due diligence on your customers and are subject to strict checks of illicit activities.
- Continuous monitoring. In the case of credit applications, it's important to do periodic checks on your customer. A new application should be signed and completed by your customers at least once a year.