One of the hardest challenges of the companies providing financial services is how to prevent themselves (i.e. a neobank) or their clients (i.e. an ecommerce) from being exposed to abusive or malicious purposes and fraud. That’s why customers of regulated fintech companies are subject to KYC/AML procedures.

If you have read our introduction to KYC and KYB, by now you may know that many of the data required in a KYC/KYB form are, all in all, text fields -even if they are grouped in a dropdown, selectors, etc.-, with different combinations depending on the introduced values. This time we are going to dive not into the text fields but into the upload fields, in particular those used to require documents from users in KYC forms.

What are KYC documents?

During the onboarding flow of a fintech company -although it also exists in other industries-, there are situations in which it’s necessary to verify the identity of users. To prove a person’s identity, a copy of certain documents such as a passport or ID card may be required. All those documents that the user must attach to an onboarding form for verification purposes are called KYC documents. 

In basic cases and transactions, the most common documents required are divided into 2 types as a way to Know Your Customer (KYC): proof of identity and proof of address. However, when the complexity of a financial operation increases, other validations are required, such as a proof of wealth and source of funds.

Let’s take a look at the most common required KYC documents. Please note that, depending on the country of activity, some documents may be mandatory according to compliance requirements, and others may not. As we don’t provide legal advice, remember to consult an expert for any legal questions you might have.

Proof of identity documents

A way to prove who the user is. This is the list of favorite documents required as a proof of identity:

• Passport.
• Identity card.
• Driver’s license.

Another common documents in KYC:

• Residence permit (with different names).
• Birth certificate.

Address proof

Although a passport, an identity card or a driving license can sometimes be used as a proof of address, here is the list of other specific documents to prove an address:

• Utility bill: phone, electricity, gas, internet, water, etc.
• Lease agreement: usually accompanied by the 3 last payments.
• Bank or credit card statement.
• Residency certificate.
• House purchase deed.

Source of Wealth, Source of Funds and Proof of Income

Determining the financial status of a client can be critical during, at least, two types of onboardings: when the company’s activity is investment-related, or when a user applies for funds (a mortgage, for instance).

‍Source of Wealth (SOW) can cover a large number of documents to be asked, because it attempts to know the origin of all the wealth of a person, which may be derived from inheritance, employment, investments, etc. On the other hand, a Source of Funds (SOF) process attempts to reveal only a portion of a person’s entire wealth: those funds or assets used in a transaction.

Basic document examples to prove a source of wealth or a source of funds are:

• Inheritance: details of the deceased, associated taxes, etc.
• Employment: Annual salary for the last years’ confirmation from the employer.

Even though we can’t cover all cases one by one, one of the most relevant wealth or funds checks is a proof of income, supported by these documents:

• Payroll records or pay stub.
• Bank statement.
• Tax returns.
• Wage and tax statements.

Collecting customer data to verify their identity is crucial to minimize compliance risk. How this is done and what documents are requested, as we’ve just seen, depends on the nature of the transaction and, of course, the regulations in each country. 

If you are thinking of building a KYC or KYB onboarding flow to meet compliance requirements, verify individuals or businesses and integrate it with your API or other 3rd party, we would like to show you the benefits of using Arengu in fintech companies. In case you aren’t a fintech company but you’re looking for a solution to build complex forms and flows, check out our tutorials and try Arengu for free.