Know Your Customer (KYC) is often seen as a compliance necessity - something companies do to avoid penalties, reputational damage or even legal trouble. For many treasurers and legal teams in enterprise corporations, the fear of action and fines from regulatory authorities is a driving force behind KYC processes. But is fear the best motivator? Or is there a stronger, more strategic reason to invest in KYC?

The reality is, while fear ensures a minimum of compliance, I feel that it’s the growth-focused companies - from large enterprises all the way to small startups - that see KYC as more than just a checkbox or task to complete. They see KYC as a tool to build trust, improve operational efficiency and unlock new business opportunities. 

But let’s explore both perspectives and why a growth mindset may be the smarter long-term approach.

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The Fear Factor: Compliance as a Cost of Doing Business

For many organizations, especially large enterprises operating across multiple jurisdictions or high-risk areas, the fear of non-compliance is a powerful motivator. Regulatory bodies impose strict KYC and anti-money laundering (AML) requirements, with hefty fees for those who fail to comply. The financial sector alone has faced billions of dollars in penalties over the years due to lapse in their due diligence with KYC.

Beyond financial penalties, the lack of compliance can also damage reputations, erode customer trust and lead to disruptions from an operational perspective - in terms of what the team needs to focus on or is troubleshooting. Treasurers and legal teams are acutely aware that failing to meet KYC standards can result in frozen accounts, delayed / rejected transactions or even restrictions on business operations.

This fear-driven approach ensures that organizations meet regulatory minimums, but it often leads to reactive decision-making. KYC becomes a burden - so, an expense, rather than an asset. Companies that only focus on compliance tend to invest in patchwork solutions, which often make their KYC processes even more inefficient and frustrating for both customers and internal teams.

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The Growth Mindset: Using KYC as a Strategic Advantage

On the flip side, companies that view KYC as a growth enabler can use it to gain a competitive edge. Rather than just avoiding penalties, they leverage strong KYC frameworks to build credibility with banking partners, streamline operations and improve customer onboarding - leading to stronger business relationships.

For treasurers in large corporates, we’ve seen that a well-executed KYC process enhances risk management and ensures smoother transactions with financial institutions. Banks are more likely to offer favorable terms to companies with clear, well-documented compliance processes.

For their legal counterparties, strong KYC procedures reduce contract and counterparty risks. Knowing exactly who your business partners mitigates legal exposure and minimizes the workload in the future.

However, even startups and small to medium-sized enterprises (SMEs) can benefit - and, I might say, even more from this approach than with enterprise organizations! While they may not have the same regulatory pressures as large corporations, they often struggle with securing banking relationships and attracting investors. A solid KYC process signals professionalism and reliability - absolutely critical factors for gaining trust in competitive markets.

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Shifting the Mindset: From Obligation to Opportunity

I don’t think KYC has to be a burden. Companies that shift their mindset from fear-based compliance to proactive growth see real benefits. Investing in the right tools and processes can make KYC more efficient, reduce friction, and create a foundation for long-term success.

Rather than asking, “How do we avoid penalties?” I’d say that the better question is, “How can KYC help us grow?” The companies that embrace this perspective will not only stay compliant but also strengthen their market position, improve operational resiliency and even unlock new opportunities.