Light KYC refers to a simplified version of the standard Know Your Customer (KYC) process. It involves collecting and verifying less customer information compared to the full KYC process. Light KYC is often used in situations where the risk of illicit financial activities is considered low.
Key Aspects of Light KYC
Here's a breakdown of important features and applications:
- Reduced Data Collection: Light KYC requires fewer data points from customers compared to full KYC. This speeds up onboarding and reduces friction.
- Lower Verification Requirements: The depth of verification is less rigorous. For example, instead of requiring multiple forms of identification, only one might be necessary.
- Applicable Scenarios:
- Low-Risk Scenarios: According to the provided reference, light KYC is suitable when the customer presents a lower risk of engaging in illicit financial activities.
- Limited Transaction Amounts: It's frequently used for accounts with transaction limits.
- Specific Industries: Certain industries or services deemed lower risk may utilize light KYC.
Light KYC vs. Full KYC: A Comparison
| Feature | Light KYC | Full KYC |
|---|---|---|
| Data Collection | Minimal | Extensive |
| Verification | Simplified | Comprehensive |
| Risk Level | Low | High |
| Onboarding Speed | Faster | Slower |
| Transaction Limits | Often Imposed | Typically Higher or Nonexistent |
| Regulatory Compliance | Compliant with specific regulations | Compliant with more stringent regulations |
Examples of Light KYC
- Opening a basic savings account with limited transaction capabilities.
- Registering for a loyalty program with a retailer.
- Using a prepaid card with a limited spending allowance.
In essence, light KYC balances regulatory requirements with the need for a streamlined customer experience in lower-risk contexts.
