December 7, 2020
Know Your Customer (KYC) is one of the financial industry’s guiding principles. It requires financial institutions, such as banks and lenders, to collect detailed information on their customers to verify each transaction.
KYC laws were first introduced in 2001 by the U.S. government as part of the Patriot Act. They were designed to prevent incidents of money laundering, terrorist financing, corruption and other fraud schemes.
Overall, KYC provides three main benefits:
- It ensures businesses don’t turn a blind eye to criminal activity.
- It protects businesses from financially damaging incidents like identity fraud.
- It improves customer service, helping businesses acquire more information about their customer base.
While there’s no legal obligation to abide by KYC laws outside of financial institutions, other industries, such as real estate and insurance, have adopted the KYC ethos for screening their customers. Hospitality on the other hand, which deals exclusively with anonymous transactions, has yet to adopt KYC guidelines, leaving it more vulnerable to fraud, damaging incidents and criminal activity.
That’s why Autohost created the Know Your Guest guidelines for hospitality operators. Without a set of regulatory guidelines both operators and guests are left unaccountable for their behaviour, making the hospitality industry a hotbed for criminal activity. Know Your Guest ensures that operators are doing their due diligence to protect their business, their guests and their community.
How to implement Know Your Guest
The first step in any KYC protocol is verifying the customer’s identity. As cybercrime gets more and more sophisticated, no one is immune. In fact, as many as one in 10 people are victims of identity fraud annually. In hospitality, it's important to confirm the guest is who they claim to be in their reservation. By finding out who you’re hosting, you can properly assess the guest's suitability for your property.
Hoteliers and property managers should start by collecting a valid, government-issued ID before check-in. To verify that the ID belongs to the guest and isn’t fake or stolen, check to see if the name on the ID matches the name on the booking. If you do virtual check-ins, consider asking the guest to take a selfie holding their ID next to their face.
To ensure the ID is legitimate, compare it to photos on the corresponding Department of Motor Vehicles website. Look for discrepancies like different font sizes or photo backgrounds.
Guest due diligence
The next step is to assess risk by collecting guest information and examining the reservation’s booking conditions.
When it comes to collecting information, be thorough. You should already have name, age, birth date and address from the guest’s ID, but it’s also wise to inquire about the guest’s reason for travelling and who they’re travelling with. Be wary of guests who are vague with their answers.
When examining the booking conditions, watch for signs of risky reservations, including:
- Same-day bookings.
- One night bookings on a weekend.
- Local bookings
- Guests who book properties larger than their needs
These reservations tend to present the greatest risk of parties, fraud and criminal activity. But rather than cancelling right away, it can be worth exposing these reservations to further screening, such as a background check or credit history check. You should customize your screening process so that higher risk guests have more requirements to pass through before their reservation is confirmed.
A risky reservation doesn’t necessarily mean a bad reservation. But if you decide to accept a higher-risk reservation, have a process for ongoing monitoring in place.
This can involve monitoring interactions leading up to check-in. Is the guest responsive to messages about your house rules and check-in and checkout time? Do they have sufficient funds on their credit card for a security deposit? Have they said or asked anything out of the ordinary?
It can also involve monitoring the property during the stay. In hotels, this can be performed by on-site staff, but for short-term rental operators, home monitoring devices are key. Whether it’s a noise sensor, a cell phone tracking device or a device that monitors CO2 levels, you need a way to keep guests accountable once they’re inside your property.
To find out more tips on how to Know Your Guest, check out our ultimate guide to guest screening.