3 Reasons Why Financial Organisations Need to Verify Your Identity

In 2012, HSBC was forced to pay $1.9 billion in fines.

Why? Because they weren’t verifying identities appropriately.

HSBC was not reporting accounts correctly or doing background checks, which led to a large amount of unverified accounts and a huge fine.

And this is one of the main reasons financial organisations now require you to verify your identity.

That’s why when you open an account with a company like Swaper, it’s essential for us to verify your identity as well as your address.

But how does identity verification work? And why do you need to verify your identity every time you want to open a financial account? We’ll be answering all those questions in the post below.

What is KYC (Know Your Customer)?

KYC is an identity verification step that takes place every time a customer wants to open an account with a financial services organisation. When it’s in person, you’ll need to bring your passport/ID card along with proof of address.

When it’s online, you usually need a photo or scan of those same documents – also called eKYC.

KYC is a step that is part of the larger AML (Anti Money Laundering) set of directives. All AML laws are put in place to stop people from making money from illegal activities. These help reduce risk, money laundering, financial fraud and financing of criminal organisations.

But KYC is not just useful to stop crime – it also helps manage risk and understand customer behaviour.

Although verifying your identity might seem annoying, it’s overall good business practice.

At Swaper, we’ve focused on making it as easy, simple and fast as possible.

Nowadays, most KYC is done online, and the process is straightforward: upload a photo or scan of your passport along with proof of address: a utility bill, car bill, government invoice, etc.

This is how it happens on the backend:

  1. Customer identification: you submit photos of identity, proof of address and input your personal details.
  2. Customer due diligence: we do our research and run a couple of mandatory background checks.
  3. Ongoing monitoring: we monitor your activity on an ongoing basis and check for unusual or unexpected activities.

Why is it essential?

KYC is essential because it helps keep you safe and ensures we don’t enable any illegal money activities. It’s a standard requirement in most countries around the world and helps reduce business risk – no one wants to be paying billions in fines.

KYC is a crucial part of the onboarding practice – and although it may seem inconvenient, it benefits you, the customer a lot too. Here are some of said benefits:

Advantages of using KYC

1.   Better protection

The main benefit for investors is that it ensures your protection. By completing an identity verification process, we can ensure the security of your personal data and protect you against identity theft, duplicate accounts and account theft.

Fraudsters cannot access our website, which means you don’t have to worry about fake information or scamming while on the platform.

2.   Easy restoration

Since you’re sharing your personal details with us, we can easily restore your account in case you forget your password or cannot reopen your account.

All your information is centralised and online, which means it’s a lot faster and easier to sign up.

Imagine if we had to do everything manually and with paper?

3.   No legal issues

As a financial entity, we need to meet certain regulations in order to operate in these countries.

By implementing KYC, we are adhering to worldwide laws that allow us to operate, invest your money and offer you high returns.

By completing KYC you won’t need to worry about any legal problems. A strong KYC verification system limits any criminal activity, which means you don’t have to worry about getting in trouble for taking part in our platform.

Letting us take care of all the legal jargon means there is one less thing for you to worry about.

KYC regulations in P2P lending

In Europe, the European Capital Markets Union – which is part of the European Council – sets the laws for all financial organisations, including P2P lending platforms. The most important laws and regulations when it comes to identity verification are AML laws. These ensure criminals are not able to launder money and fund illegal activities.

Although AML laws vary from country to country, financial organisations in the EU all need to comply with the European Law on Prevention of Money Laundering and Terrorism Financing.

These are called AMLD (Anti-Money Laundering Directives) and are updated every year.

In January of 2020, the 5AMLD was introduced, requiring financial organisations to conduct stricter customer due diligence and gain a better understanding of the customer. From June 2021, 6AMLD will be in effect with a goal of removing loopholes, and penalising those who help criminals, as well as criminals themselves.

These laws are all essential to protect your account, personal data and P2P investments.


Although it may seem like a nuisance, verifying your identity is essential to keeping your data safe, and reducing the amount of criminal activity in the world. A good thing, I’m sure you will agree on.

So, now you know WHY we ask you to verify your identity.

The next step is to create an account!

When you’re ready, create your free account below and get started for as little as €10 – just remember to have your ID ready at hand.

Create a free account here