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KYC South Africa
Know Your Customer Verification
The complete guide to KYC verification in South Africa. Understand FICA requirements, implement compliant processes, and protect your business from fraud and regulatory penalties.
What is KYC?
KYC (Know Your Customer) is a regulatory requirement that obligates businesses to verify the identity of their customers, assess their risk level, and monitor their transactions. In South Africa, KYC is mandated under the Financial Intelligence Centre Act (FICA) to prevent fraud, money laundering, and terrorist financing.
KYC verification involves collecting customer identification documents, verifying them against official sources like the Department of Home Affairs, assessing customer risk, and maintaining ongoing due diligence throughout the business relationship.
Why is KYC Important in South Africa?
South Africa is a member of the Financial Action Task Force (FATF), the global body that sets standards for combating money laundering and terrorist financing. Compliance with KYC requirements is essential for:
- Fraud Prevention: Verifying identity prevents identity theft and impersonation fraud
- AML Compliance: KYC is the foundation of anti-money laundering programs
- Regulatory Compliance: Avoid penalties of up to R50 million for non-compliance
- Risk Management: Identify and manage high-risk customers and transactions
- Customer Trust: Build trust by demonstrating robust security measures
Important
Under FICA Section 21, you cannot establish a business relationship with a customer until you have verified their identity. This is not optional - it is a legal requirement with significant penalties for non-compliance.
KYC Data Points
Information typically collected and verified during KYC:
- Full legal name
- Date of birth
- South African ID number
- Residential address
- Contact details (phone, email)
- Nationality
- Occupation and employer
- Source of income/funds
- Purpose of business relationship
- Expected transaction patterns
- PEP status
- Sanctions screening
KYC vs KYB vs AML: Understanding the Differences
While often used interchangeably, KYC, KYB, and AML are distinct concepts that work together to prevent financial crime.
| Aspect | KYC (Know Your Customer) | KYB (Know Your Business) | AML (Anti-Money Laundering) |
|---|---|---|---|
| Focus | Customer identity verification | Business entity verification | Money laundering prevention |
| Scope | Individual customers | Corporate clients | All transactions & customers |
| Primary Activity | Identity & address verification | Company & director verification | Transaction monitoring |
| FICA Section | Section 21 | Section 21 | Sections 21-29 |
| When Applied | Customer onboarding | Business onboarding | Ongoing |
KYC
Focuses on verifying individual customer identity. Includes ID verification, proof of address, and individual risk assessment. Required before establishing any business relationship.
KYB
Focuses on verifying business entities. Includes CIPC verification, director identification, beneficial owner identification, and business risk assessment.
AML
The broader framework that includes KYC and KYB. Encompasses transaction monitoring, suspicious activity reporting, sanctions screening, and ongoing customer due diligence.
FICA KYC Requirements in South Africa
Section 21: Customer Identification
Before establishing a business relationship or executing a single transaction above the threshold, accountable institutions must:
- Obtain full name and date of birth
- Obtain ID number or passport number
- Verify identity using reliable independent source
- Obtain proof of residential address
- Determine the purpose of the business relationship
- Keep records of all verification performed
Section 21A: Enhanced Due Diligence
Enhanced Due Diligence (EDD) is required for higher-risk customers:
- Politically Exposed Persons (PEPs)
- Foreign prominent public officials
- Customers from high-risk countries
- Complex ownership structures
- High-value or unusual transactions
- Customers with adverse media
EDD requires more detailed verification, senior management approval, and enhanced ongoing monitoring.
Section 22: Record Keeping
All KYC records must be kept for at least 5 years after the business relationship ends. Records must include:
- - Copy of identity documents
- - Proof of verification performed
- - Account and transaction records
- - Business correspondence
- - Risk assessments conducted
Section 29: Suspicious Transactions
Accountable institutions must report suspicious transactions to the Financial Intelligence Centre (FIC). This includes:
- - Unusual transaction patterns
- - Transactions inconsistent with customer profile
- - Attempted transactions that raise concerns
- - Suspected terrorist financing
- - Property linked to crime
How to Implement KYC in Your Business
Follow these steps to implement a compliant KYC process in your South African business.
1. Customer Identification
Collect and verify customer identity documents. For individuals, this includes SA ID, passport, or permit. For businesses, company registration documents.
2. Identity Verification
Verify identity against reliable sources. Home Affairs database verification is the gold standard for South African IDs.
3. Address Verification
Verify proof of residence using utility bills, bank statements, or municipal accounts not older than 3 months.
4. Risk Assessment
Assess customer risk level based on business type, transaction patterns, geographic location, and PEP/sanctions screening.
5. Ongoing Monitoring
Continuously monitor customer activity for suspicious transactions and update customer information periodically.
Who Must Comply with KYC in South Africa?
FICA Schedule 1 lists accountable institutions that must implement KYC procedures. These include:
Banks & Credit Providers
Insurance Companies
Estate Agents
Attorneys & Accountants
Crypto Exchanges
Money Transfer Services
Casinos & Gambling
High-Value Dealers
Other entities that may need KYC compliance:
- - Motor vehicle dealers (transactions over R100,000)
- - Krugerrand dealers
- - Trust companies and administrators
- - Company service providers
- - Auctioneers (transactions over R100,000)
- - Authorized financial services providers
- - Collective investment scheme managers
- - Any business in terms of an exemption
KYC Compliance Checklist
Use this checklist to ensure your KYC process meets FICA requirements.
Identity Verification
- Valid SA ID / Passport / Permit
- Photo comparison (biometric)
- Home Affairs database check
- Document authenticity check
Address Verification
- Utility bill (< 3 months)
- Bank statement (< 3 months)
- Municipal account (< 3 months)
- SARS correspondence
Risk Assessment
- Customer risk rating
- PEP screening
- Sanctions screening
- Adverse media check
Documentation
- Consent obtained
- Purpose of relationship
- Expected transaction patterns
- Source of funds (if applicable)
Manual vs Automated KYC
Manual KYC
- -Takes 24-72 hours per customer
- -Requires physical document collection
- -Prone to human error in verification
- -Cannot easily detect fraudulent documents
- -Difficult to maintain audit trail
- -Poor customer experience
- -Higher cost per verification
Automated KYC with VerifyNow
- +Results in 2-5 seconds
- +Digital-first, remote onboarding
- +100% accurate Home Affairs data
- +Biometric matching for fraud detection
- +Complete digital audit trail
- +Seamless customer experience
- +Pay-as-you-go pricing
Penalties for KYC Non-Compliance
The Financial Intelligence Centre (FIC) has significant enforcement powers under FICA. Non-compliance with KYC requirements can result in:
Administrative Sanctions
- - Up to R10 million for individuals
- - Up to R50 million for companies
- - Public censure and reputational damage
- - Restrictions on business activities
Criminal Prosecution
- - Up to 15 years imprisonment
- - Unlimited fines
- - Director liability
- - Asset forfeiture
VerifyNow KYC Solutions
Complete KYC verification tools for FICA compliance. From ID verification to address proof and risk screening.
ID Verification
Real-time verification against Home Affairs. Confirm identity, check status, and get biometric photo in 2-5 seconds.
Learn more →Address Verification
Verify proof of address documents. Bank statement matching, utility bill verification, and address geocoding.
Learn more →PEP & Sanctions Screening
Screen customers against PEP lists, sanctions databases, and adverse media. Identify high-risk individuals.
Learn more →Frequently Asked Questions about KYC
What is KYC in South Africa?
KYC (Know Your Customer) in South Africa is a regulatory requirement under the Financial Intelligence Centre Act (FICA) that requires businesses to verify customer identity, assess their risk level, and monitor their transactions. KYC helps prevent fraud, money laundering, and terrorist financing.
What are the KYC requirements under FICA?
Under FICA Section 21, accountable institutions must: verify customer identity using reliable sources like Home Affairs, obtain proof of address, assess customer risk, keep records for 5 years, report suspicious transactions, and conduct ongoing due diligence.
What is the difference between KYC and AML?
KYC (Know Your Customer) is a component of AML (Anti-Money Laundering). KYC focuses on verifying customer identity and assessing risk, while AML is the broader framework of policies, procedures, and controls to detect and prevent money laundering. KYC is a critical first step in AML compliance.
Who needs to comply with KYC in South Africa?
Accountable institutions under FICA must comply with KYC requirements, including banks, insurance companies, estate agents, attorneys, accountants, casinos, crypto exchanges, money transfer services, and any business dealing with high-value transactions.
What documents are required for KYC in South Africa?
For individual KYC in South Africa, you need: valid ID document (South African ID, passport, or permit), proof of residence not older than 3 months (utility bill, bank statement, or municipal account), and in some cases, proof of income source.
What is Customer Due Diligence (CDD)?
Customer Due Diligence (CDD) is the process of collecting and verifying customer information to assess risk. Standard CDD includes identity verification and address verification. Enhanced Due Diligence (EDD) is required for high-risk customers and involves additional verification steps.
What is Enhanced Due Diligence (EDD)?
Enhanced Due Diligence (EDD) is additional verification required for high-risk customers under FICA. This includes PEPs (Politically Exposed Persons), foreign nationals, high-value transactions, and customers from high-risk countries. EDD requires more detailed verification and ongoing monitoring.
What is KYB (Know Your Business)?
KYB (Know Your Business) is the process of verifying business entities similar to how KYC verifies individuals. It includes verifying company registration with CIPC, identifying directors and beneficial owners, and assessing business risk. KYB is required when onboarding corporate clients.
What are the penalties for KYC non-compliance in South Africa?
Penalties for KYC non-compliance under FICA include administrative sanctions up to R10 million for individuals and R50 million for companies. Criminal prosecution can result in imprisonment. The Financial Intelligence Centre can also impose directives and public censures.
How long must KYC records be kept in South Africa?
Under FICA Section 22, accountable institutions must keep KYC records for at least 5 years after the business relationship ends or after the date of a single transaction. Records must be readily retrievable and in a form that can be provided to authorities.
How does automated KYC work?
Automated KYC uses technology to verify customer identity in real-time. This includes querying government databases like Home Affairs, optical character recognition (OCR) for document verification, biometric matching, and automated risk scoring. Automated KYC is faster, more accurate, and provides complete audit trails.
Can I do KYC verification online in South Africa?
Yes, online KYC verification is fully compliant in South Africa when using approved methods. VerifyNow provides real-time ID verification against Home Affairs, proof of address verification, and biometric matching - all online and fully FICA compliant.
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