KYC in Colombia: What Do You Need to Comply?

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Compliance with KYC (Know Your Customer) in Colombia is a cornerstone for the proper and ethical functioning of financial institutions. It is the link that establishes a relationship of trust between financial entities and their customers. In this post, I'll cover everything about this topic!

KYC in Colombia is a crucial mechanism for maintaining transparency and preventing illicit activities such as money laundering and terrorist financing within the financial system. 

As the name suggests, Know Your Customer focuses on the fundamental principle of understanding the users of financial services and comprehensively knowing:

  • Who they are.
  • What their financial activities are.
  • What their needs are.

This not only involves verifying their identity and financial history but also continuously monitoring their transactions to detect any suspicious activity.

KYC protects financial institutions from being used for criminal activities, safeguards the integrity of the entire financial system, and protects the customers themselves. 

For these three reasons, KYC has become a fundamental element in the digital business landscape. Today, I'll talk about the KYC process in Colombia and the necessary steps to complete it. In this article, you will see: 

  • What is KYC?
  • Why is it so important?
  • How customer identification is conducted in Colombia
  • Required documents and procedures for KYC compliance
  • Conduct your KYC process with Truora

What is KYC?

KYC, or Know Your Customer, is a set of procedures used by financial institutions to verify the identity of their customers and assess the potential risk of doing business with them.

This process involves collecting a wide range of information about customers, including their identity, financial activity, and source of funds. 

The primary objectives of KYC are to prevent:

  • Fraude.
  • Money laundering. 
  • Terrorist financing.

Why is it so important?

In Colombia, KYC is an indispensable tool for combating money laundering and terrorist financing. As a country with a growing economy and an increasingly sophisticated financial sector, Colombia faces several challenges in financial security. 

Money laundering, in particular, has been a persistent problem due to the presence of criminal groups and organizations seeking to use the financial system to legitimize illicit funds.

Preventing Fraud and Protecting the Financial System

KYC ensures that financial institutions know their customers and can identify any suspicious activity.

By collecting detailed information about customers' identity and financial activity, institutions can detect unusual patterns or suspicious transactions that may indicate criminal activities such as money laundering or terrorist financing. 

This allows them to take preventive measures to avoid the use of their services for illegal activities and protect the integrity of the entire financial system.

Regulatory Compliance and Responsibility

In addition to preventing fraud and protecting the financial system, KYC is also crucial for ensuring compliance with current regulations in Colombia.

Financial institutions are subject to a series of laws and regulations designed to prevent money laundering and terrorist financing, and KYC compliance is a fundamental requirement to meet these regulations. 

By verifying your customers' identity and collecting information about their financial activity, you stay compliant and avoid penalties from regulatory authorities.

Strengthening Trust and Transparency

In addition to its benefits in terms of financial security and regulatory compliance, KYC also plays an important role in strengthening trust and transparency in the financial system. 

By demonstrating your commitment to preventing fraud and protecting your customers, you help the sector build trust among consumers and enhance its reputation in the market.

This, in turn, can drive growth and stability for the entire financial system, creating a safer and more reliable environment for all involved.

How is Customer Identification Conducted in Colombia?

Customer identification is a critical process carried out in two main ways: 

  • In-person verification
  • Remote verification

Each method has its own characteristics and requirements, but both focus on ensuring the authenticity of the customer's identity and effectively meeting KYC standards.

In-person Verification

This traditional method requires the customer to physically appear at the financial institution to be identified and verify their identity. This process usually involves presenting original identification documents, such as a citizenship card, identity card, or passport.

Additionally, it may require interviews or signing forms to confirm the authenticity of the provided information.

A key benefit of in-person verification is its level of security and reliability. By interacting directly with the customer, the financial institution's employees can more effectively verify the authenticity of the presented documents and confirm the customer's identity.

This significantly reduces the risk of fraud and ensures that KYC standars. adequately met.

Digital Verification

On the other hand, digital verification has gained popularity in recent years thanks to technological advancements and the growing adoption of online financial services. 

This method allows your customers to complete the identification process without the need to physically visit a bank branch, offering greater convenience and speed.

It is carried out through secure digital platforms that allow customers to upload digital copies of their identification documents and complete the entire process online, including security questions and specific validation actions.

Although digital verification offers advantages in terms of convenience and accessibility, it also presents security challenges. It is crucial for financial institutions to implement robust cybersecurity and identity verification measures to protect the process's integrity

This includes using facial recognition technologies, document analysis, and real-time identity verification systems.

Required Documents and Procedures for KYC Compliance in Colombia

ECompliance with Know Your Customer (KYC) in the Colombian financial sector involves collecting various documents and performing specific procedures to verify customers' identity and assess their risk level.

Here are the details:

1. Official Identity Document

The first step for KYC compliance is verifying the customer's identity. 

This requires a valid official identity document, such as a citizenship card, identity card, or passport. These documents are essential to confirm the customer's identity and ensure that the provided information is truthful.

2. Proof of Residence

In addition to the identity document, financial institutions usually require proof of residence to confirm the customer's current address. 

This can include utility bills, bank statements, or other official documents demonstrating the customer's residence. Proof of residence is important to ensure that the information provided by the customer is accurate and up-to-date.

3. Financial Information

In some cases, financial institutions may require additional information about the customer's financial situation as part of the KYC process.

This can include bank statements, proof of income, or any other relevant documentation demonstrating the customer's financial solvency.

This information is crucial for assessing the risk level associated with the customer and determining if they meet the financial institution's requirements.

4. Completion Forms

Besides the required documentation, financial institutions may ask the customer to complete specific forms as part of the KYC process. 

These forms may include questions about:

  • The customer's financial activity.
  • Their credit history.
  • Their sources of income.

Completing these forms is essential to gather additional information and ensure compliance with the financial institution's requirements.

Conduct Your KYC Process with Truora

In conclusion, compliance with Know Your Customer (KYC) is a fundamental process in the Colombian financial sector to ensure security, transparency, and legality in financial transactions. Truora is a pioneer in offering innovative solutions for KYC compliance, standing out with its secure and efficient platform that facilitates customer identity verification.

The ability to perform all these processes directly through WhatsApp represents a significant advancement in simplifying and digitizing KYC processes in Colombia.

Do you want to learn more about this topic? Discover the use cases of KYC and AML to understand how Truora simplifies user registration while complying with KYC/AML regulations and keeping you fraud-free.

click here!