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KYC Process Steps Explained (2025) – From Onboarding to Ongoing Monitoring

The KYC process is more than just collecting documents from customers. It is a structured set of steps that help banks, fintechs, and other institutions understand who they are dealing with and how risky the relationship might be.

In this guide, we break down the KYC process into clear, simple steps that reflect how real compliance teams work in 2025.

Step 1: Customer Onboarding & Data Collection

The KYC journey usually starts when a customer applies for a product or service, such as:

• Opening a bank account
• Signing up with a fintech app
• Applying for a card, wallet or loan
• Onboarding as a business customer (corporate KYC)

At this stage, the institution collects basic information:

• Full name, date of birth and nationality
• Residential or business address
• Contact details (email, phone)
• Purpose of the relationship (salary account, trading, business operations, etc.)
• For businesses: legal name, registration details, ownership structure

Step 2: Document & Identity Verification

Once basic data is captured, the next step is to verify identity using reliable documents or data sources.

Common examples:

• Government-issued ID (passport, national ID, etc.)
• Address proof (utility bill, bank statement, etc.)
• Company registration certificates (for business customers)

In digital onboarding, this may include:

• e-KYC or digital ID verification
• Selfie + ID match checks
• Database checks and third-party identity tools

Step 3: Sanctions, PEP & Adverse Media Screening

Before opening the account, institutions typically screen the customer against:

• Sanctions lists – to check if the customer is restricted or banned
• PEP (Politically Exposed Person) lists – to identify higher-risk profiles
• Adverse media – negative news that indicates reputational or financial crime risk

Any alerts from these checks must be reviewed and documented carefully, especially if alerts are true matches.

Step 4: Customer Risk Assessment (CDD or EDD)

After identity and screening checks, the institution decides how risky the customer is. This is where CDD and EDD come into play:

• CDD (Customer Due Diligence) – Standard level of due diligence applied to most customers.
• EDD (Enhanced Due Diligence) – Deeper checks for higher-risk profiles (e.g., PEPs, high-risk industries, complex structures).

A typical risk assessment considers:

• Customer type: individual vs corporate vs institution
• Country of residence / operation
• Nature of business or occupation
• Expected transaction behaviour (volume, frequency, products)
• Any red flags or unusual factors detected during onboarding

Step 5: Decision – Approve, Reject, or Onboard with Conditions

Based on the information collected and risk assessment, the institution decides whether to:

• Approve and onboard the customer
• Reject the relationship due to policy/ risk reasons
• Onboard with conditions – for example, specific limits, extra monitoring or documentation

This decision should be documented clearly, especially when risk is not straightforward.

Step 6: Ongoing Monitoring & Periodic Reviews

KYC does not end once the account is opened. Institutions are expected to:

• Monitor transactions and behaviour for unusual patterns
• Update customer details when changes occur
• Repeat KYC or perform periodic reviews based on risk level

Higher-risk customers typically have more frequent reviews and tighter thresholds for alerts.

Why Documentation Is Critical at Every Step

From a compliance and audit perspective, good documentation is as important as good decisions.

• Every KYC decision should be traceable.
• Screening alerts should show who reviewed them and why they were cleared or escalated.
• Risk ratings and changes should be justified and recorded.

Common Mistakes in the KYC Process

• Treating KYC as just “document collection” instead of a risk process
• Copy–pasting customer details without proper verification
• Ignoring weak matches on PEP/sanctions and adverse media screening
• Not updating KYC when customer circumstances change
• Poor documentation of decisions, especially for higher-risk profiles

How the KYC Process Works Inside Real Teams

In practice, the KYC process is usually split across different roles:

• Front office / sales – collect initial data and explain requirements to the customer
• KYC Operations – perform data entry, document checks and screenings
• KYC / CDD Analysts – handle complex cases, EDD and risk assessments
• Compliance / AML teams – define policies, review high-risk cases and support escalations

Frequently Asked Questions About the KYC Process

How long should a KYC process take?

It depends on the institution, product and customer type. Simple low-risk cases may be completed quickly, while complex or high-risk profiles can take longer due to additional checks and approvals.

Is digital KYC (e-KYC) different from traditional KYC?

The core steps are similar, but digital KYC uses electronic identity verification, biometrics and online checks instead of purely paper-based processes. Controls and audit trails are still required.

Who is responsible if something goes wrong in the KYC process?

Ultimately, the institution is responsible. However, regulators and internal policies may hold specific teams or roles accountable for weak processes or poor decisions.