One of the main reasons why KYC is important is that it
is to ensure that financial bodies are not being used to carry out money
laundering activities of any kind. Money laundering typically happens
unbeknownst to the financial authority whose platform is being used for such
activities. With KYC online verification and offline KYC authentication in
place, banks can catch any potential money laundering rings. Another reason why
KYC is important is that there are many non-individual customers that use
financial services like trading, mutual fund investment, and more. With KYC,
banks, and financial institutions, and brokerages, among others have the right
to verify the legal status of that entity. This can include cross-checking their
operating address and verifying the identities of their beneficial owners and
authorized signatories. In addition to learning whether these companies are
authentic, the KYC process also requires that one detail the nature of their
employment as well as the business carried out by the customer. This information
is also useful in verifying how authentic the individual and/or company is.
Before all this information is provided, the KYC verification mandates that one
cannot open a bank account, trading account, demat account, or any of the like.