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In recent years, many colleges have changed their college admissions testing policies, making standardized tests like the SAT optional, and placing more emphasis on other factors, such as GPA and essays. One reason for the shift is a growing concern that these tests tend to unfairly reward students with more wealth and access to test prep courses and tutors.

The SAT might be dropping as a requirement for admissions to some colleges, but the number has an impact beyond just getting into a school. Read on to learn how SAT requirements are changing, but why taking the SAT and submitting your score can still be helpful.

How SAT Requirements Are Changing

The number of colleges dropping SAT scores as a requirement for admission is growing. However, policies vary from school to school and from admission year to admission year, so students might want to double- and triple-check before assuming that their dream school doesn’t want to see their standardized test score.

A “test-optional” policy allows applicants to decide whether or not they want to submit their SAT or ACT scores to a college. This means that you can take the SAT (or ACT) and, based on how you do and how those scores compare to the average SAT score of admitted students, can decide whether or not you want to submit the score with your application.

Less commonly, colleges will have a “test-blind” or “test-free” policy. This means that even if a student submits SAT or ACT scores, the school will not consider them during the application process.

While some schools no longer require or consider their applicants’ SAT scores, others are making it easier to put your best foot forward with scores. Many colleges and universities, including the common application, now allow applicants to submit their SAT superscore.

An SAT superscore allows you to mix and match individual section scores from different test dates to come up with a “superscore” that is higher than the SAT score from a single sitting.

For some, this takes off some of the pressure of standardized testing. It means if a student feels off on one section, they can use a higher score from a previous test to get their best score possible.

Two other major recent changes to the SAT come from the College Board (which creates the test) itself: The SAT no longer contains the essay or subject tests. This means you no longer have the option to take — or submit — these tests.


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How SAT Scores Still Matter

Colleges and universities might be changing their guidelines about requiring SAT scores, but standardized tests still matter not only in the admissions process but beyond.

Here are some reasons why the SAT and a student’s score still matter:

•  Avoiding the SAT could limit options. A student’s target school might not require an SAT score, but what about their safety or reach options? Bypassing the SAT test altogether could end up limiting a student in where they can apply to schools. With no test score at all, they may be limited to schools that don’t require an SAT score, potentially missing out on another great option for them. Forgoing the SAT test completely could mean dramatically cutting off a student’s options before the application process even begins.

•  Considered, but not required. Some schools no longer require SAT scores for applicants, but will still consider them if submitted. Sharing SAT scores can help give admissions officers a more comprehensive picture of the applicant. In addition, if the school is particularly competitive, a strong standardized test score could help a student stand out.

•  Scholarship eligibility. Some universities and nonprofits require an SAT score when applying for merit scholarships. Without an SAT score, applicants might be ineligible, losing out on an opportunity to get funding for education.

•  They’re just a piece of the puzzle. SAT scores aren’t the only thing college admission boards consider. They’ll also look at a student’s GPA, extracurriculars, essays, recommendations, and more. No applicant is just a number, and the SAT score is only one small part of a student’s profile. Oftentimes, the score serves only as a screening tool in the beginning and is considered less and less the further a student progresses in the admissions process.

•  Testing out of college courses. Applicants might not need SAT scores to apply to a school, but providing them might make them eligible to test out of core classes. In some schools, SAT scores might determine placement into, or out of 101 classes all students are required to take. Testing out of these courses could lead to graduating faster or spending less on higher education.

While students might not need an SAT score to get into their dream school, preparing for and taking a standardized test could help them secure admission, scholarships, and entry into higher-level courses.


💡 Quick Tip: It’s a good idea to understand the pros and cons of private student loans and federal student loans before committing to them.

Another Number that Matters: Financing Your Tuition

A student’s SAT score isn’t the only number they’ll have to consider during the admissions process. Another important figure is the cost of tuition, and students will have to start thinking of how they can pay for their education.

On top of federal student loans and scholarships, students might consider private student loans. These are educational loans available through banks, credit unions, and online lenders. Unlike federal student loans, private loans typically don’t come with benefits like income-driven repayment plans and loan forgiveness options — which is why it’s best to apply for federal student loans first.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 04/24/2024 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org).

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SOIS0823004

College is a place for learning new things, preparing for a career, expanding one’s point of view, making new friends, and, of course, having fun. But putting more emphasis on a good time than on academics can lead to bad grades and worse.

One way to help ensure you thrive in school is a no-brainer: to study. You may find, however, that your high school study habits aren’t highly effective in college, where the work load tends to be higher, teachers are less personally involved, classes are larger, and exams are tougher. On top of that, college life is full of distractions.

That doesn’t mean you won’t succeed in your college classes. You may, however, need to kick it up a notch. What follows are some of the best study strategies for college classes.

Get Enough Sleep

Sleep is critical to a well-functioning brain and body. If you get enough sleep, you will generally find it easier to focus and feel healthier overall. Young people ages 18 to 25 need seven to nine hours of sleep a night, according to the National Sleep Foundation.

If you’re having trouble sleeping, try to go to bed and wake up around the same time every day, make sure your bed is comfortable, and a void drinking caffeine or alcohol, especially in the evening. Also helpful: Doing some yoga or meditating before bed, using ear plugs if your dorm is noisy, and using room-darkening shades on your windows.


💡 Quick Tip: Some lenders help you pay down your student loans sooner with reward points you earn along the way.

Feed Your Brain

Some foods, like candy and greasy dining hall pizza and french fries can make you feel good in the moment but may cause you to crash later or give you a stomachache. Instead, you’ll want to aim to eat nutritious foods that will power your brain.

Some of the best brain foods include: fatty fish that contain omega 3s , dark chocolate, blueberries, pumpkin seeds, nuts, eggs, oranges, and green tea.

Drinking water and tea instead of soda and sugary fruit juices is also a good idea.

Recommended: 11 Strategies for Paying for College and Other Expenses

Get a Study Partner

A good study partner can hold you accountable as well as keep you focused.

If you have a tough time sitting down and focusing on your studies on your own, you may find that learning with a study partner will force you to stick to a study schedule and may also help ensure that the information actually sticks.

Recommended: A Guide to Making Friends in College

Find a Quiet Space

Many people are unable to concentrate when they’re in a noisy environment. Unfortunately, a college dorm room can be loud because it’s where social gatherings often take place. Plus, there are so many students crammed into one area, nobody has any personal space. That’s why it can be a good idea to hunt for a quiet study space.

Quiet spaces on campus could include a library, where students might be able to reserve a private room; a secluded place outside; the campus cafe when it’s not busy; or an empty classroom.

If you have a car, you can drive off campus to a park, uncrowded eatery, or public library.

Recommended: Using Student Loans for Living Expenses and Housing

Put on Some Focus Music

Listening to music can be one of the best study tips for some college students. As long as the music isn’t distracting, you might find it helpful to pop in your earbuds when you study. Generally, the best types of music for focusing on work include nature sounds, songs without lyrics, songs played at medium volume, and songs with a specific tempo.

You might also like listening to your favorite upbeat bands that make you excited, as it may help you study and get your work done faster.

Don’t Wait Until the Last Minute

Practitioners of the fine art of procrastination often pay a price.

Procrastination can lead to bad grades, higher levels of stress, and negative feelings. Procrastinators are likely to not have a great study session because they are rushed.

To stop postponing the inevitable, you might want to put reminders on your phone that tell you when to study and when your assignments are due. A study partner can also help put feet to the fire.

If you procrastinate over and over again, perhaps it’s a sign that you are not interested in your studies and may want to pursue a different major.

Get Organized

If your papers are scattered everywhere, you won’t know where your important books or files are, or you may forget when your tests are scheduled.

If you could benefit from better organization, you might want to set up a Google Calendar and put every test, class, and appointment in there. You can also set reminders that will show up on your computer or phone when you need to study.

You could also clean your room at least once a week, filing papers in folders, putting books in a neat pile, and storing backpacks, clothes, and other items in closets. You might also want to purchase storage systems from places like IKEA and the Container Store so you have a place for everything.

In addition, it can help to create ongoing to-do lists and check off each task as you complete it. The night before you go to class or have to take a test, you can organize your backpack and put everything you need into it instead of rushing the morning of the test.

Recommended: 11 Strategies for Paying for College and Other Expenses

Shut Out Distractions

The noise in a dorm room or on a college campus can be distracting. Social media, text messages, and emails also take focus away from studying.

To buckle down, you may want to log out of social media and email and put your phone on do not disturb, only allowing emergency contacts to reach you.

If you are addicted to your phone or social media, you might want to install an app that turns off distractions and tracks how much time you’re spending on their phone.

Put Together a Study Schedule

Studying isn’t just going to happen. That’s why one of the most important study tips is to put together a study schedule that is realistic.

For instance, if you like to go to bed at 2 a.m., you can’t plan to study at 6 a.m. the day you have a test because you’ll be exhausted. Instead, you can plan to study the evening before the test.

You may also want to schedule a time when you can find a quiet place to study or when your dorm room is going to be less noisy. You will likely not be able to concentrate on a Friday or Saturday night in your dorm because of surrounding shenanigans. You could block out time on a calendar when the dorm is quieter and make sure you stick to it.

Recommended: How to Get Involved on Campus in College

Take Breaks

Studying for hours without a break could lead to burnout. Instead, pause to walk around, get some fresh air, or grab a glass of water or a healthy snack.

Some research suggests that the most productive people focus on intense work for 52 minutes and then take a 17-minute break.

You don’t have to follow the rule of 52 and 17 to a T; instead, you might get up every 20 minutes or so, or at least once an hour, whenever you start to feel you’re losing focus or your body is cramping.

If you are studying by looking at a computer screen, you can shut off the screen and phone and look at something else during that break. Looking at a screen for too long can hurt your eyes and have a negative effect on focus.


💡 Quick Tip: It’s a good idea to understand the pros and cons of private student loans and federal student loans before committing to them.

Here’s to Hitting the Books

You might have to try different techniques, and most of them will require practice, but once you hit a groove, you should be well on your way to getting good grades — a stepping stone to a fulfilling career.

You may also find it easier to focus on your studies if you’re not worried about paying all of the costs associated with college. There are a variety of ways to cover your college tuition and expenses, including financial aid, federal student loans, and private student loans.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 04/24/2024 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org).

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOIS0823003

When you fill out your college applications, you may have the option of declaring your intended major. Selecting a major at this stage of the game often isn’t required, and many students don’t. However, you may be wondering –- will declaring a major improve (or potentially hurt) your chances of getting into a college?

Whether it’s better to begin college as an undecided major or select a major before you arrive on campus will depend on your situation, as well as the school and program you are applying to. Here’s what you need to know about applying to college with or without declaring a major.

What It Means to Declare a Major

Declaring a major can have varying levels of importance, depending on which school you’re applying to. At some schools, choosing a major merely indicates an interest in a field of study.

It could be okay to swap majors later as well, and the major you declare on your application could have little to no bearing on your chances of getting admitted to the school.

However, at some schools, and even within particular programs, declaring a major is a much bigger decision. It indicates that the student only wants to attend for that specific program and could come with more weight on whether the applicant is accepted or not.

It can be a good idea to inquire further from the admissions department at each school you are applying to, or even reach out to the department heads of their prospective majors to learn more.


💡 Quick Tip: Some lenders help you pay down your student loans sooner with reward points you earn along the way.

What It Means to Be Undeclared

Going into the application process as an undeclared student can be okay, so long as you understand how it could affect your chances of admission. Applying undeclared indicates to a school that you aren’t quite ready to commit to a program yet.

However, by applying at all, you are still showing your commitment and desire to attend that college or university, which may matter most.

Recommended: Ultimate College Application Checklist

When It Makes Sense to Declare a Major

If you’ve known what you’ve wanted to do since childhood — and there is absolutely nothing standing in the way of your goals — then you may want to go ahead and make that declaration. Manifest it into the universe by saying, “yes, I will study this and only this,” and mark it on every application.

Of course, there are also other reasons to declare. Some programs require choosing a major for admittance. This is typical of particularly competitive programs. This way, admissions officers know who is serious and who isn’t.

Some programs within specific universities may have additional requirements or supplemental essays with student applications. For example, Yale and Cornell both have supplemental essays for students applying to engineering programs. UPenn even requires a separate application for its international business program, the Huntsman.

It’s a good idea to check in with the college or university you are applying to and make certain your application is in order, particularly if you intend on applying to a rigorous or competitive program.

One more reason you may want to consider declaring a major is if you are going to apply for any study-specific scholarships. By declaring a major, you may become eligible for additional financial support including department-specific aid, housing, or professional development that are open only to specific majors.

When It’s OK to Remain Undeclared

Look, no one is going to fault a teenager for not having their entire life mapped out by the time they turn 18. You may know you want to gain a higher education, but are unsure exactly what you want to study, and that is totally okay too.

The good news is, many schools don’t require students to declare a major when they apply. In fact, some colleges and universities require students to take a number of general education courses in their first and second year in school. This provides students with not only a well-rounded education, but also with the opportunity to explore new things and discover potential passions they didn’t know they had before.

Some colleges and universities even offer “undeclared courses” to help students find the right path for them.

Essentially, if you are truly unsure of what you want to study, you will likely want to check “undeclared.” However, you may not want to use this as a way into a college or university believing you can transfer into your preferred program later as there is no guarantee that will happen. At which point, you might have to make a tough decision — pick a new major or transfer schools.

Recommended: Understanding Lower Division Vs. Upper Division Courses

How Being Undeclared Could Affect a College Experience

Being undeclared has both its pros and cons as a college student. As mentioned above, it could afford you more opportunity to explore several different fields of study at once, meet people from across your college, and even potentially decide you want to study more than one field and go for either a dual major or a major and a minor.

However, there are pitfalls you’ll also want to be aware of.

By going into college as an undeclared major, you may end up taking classes that do not count toward their college degree, adding up to both a waste of time and money.

Undeclared students may also find themselves left in the lurch when it comes time to apply to their preferred program. If they do not get in, then they may be forced to quickly pivot and find a new path.

Students admitted to college as an undeclared major may also miss out on important social aspects of college as well. If you declare a major in your third year, you could be entering a program where the rest of the students have all worked and studied together for the previous two years.

College is a surprisingly important place to learn to network and form life-long relationships, and declaring a major early could help.


💡 Quick Tip: Would-be borrowers will want to understand the different types of student loans that are available: private student loans, federal Direct Subsidized and Unsubsidized loans, Direct PLUS loans, and more.

Get at Least One Decision Off Your Plate

Whether you decide to go into the application as a declared or undeclared major, it can be a good idea to at least ensure all your financial ducks are in a row to pay for that college education.

Being financially prepared from the get-go can help you feel more at ease with exploring different academic pursuits, or going all-in on your dream program, without worrying about paying for tuition along the way.

A great first step is to fill out the Free Application for Federal Student Aid (FAFSA). This will let you know if you qualify for any federal or state financial aid programs, including grants, scholarships, work-study programs, and subsidized and unsubsidized federal student loans.

Once you get your financial aid package, however, you may find there are still gaps in funding. At this point, you might consider applying for a private student loan. These are available through banks, credit unions, and online lenders. Rates and terms will vary depending on the lender, but students who have excellent credit (or who can recruit a cosigner who does) generally qualify for the lowest rates.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 04/24/2024 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org).

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOIS0823002

There are banking regulations in place that are known as KYC. The definition of KYC is “know your customer,” and these rules provide guidelines for financial institutions to know more about their customers.

This isn’t just a matter of curiosity but of national security and crime prevention. Banks need to protect themselves from unwittingly participating in illicit activities.

If a criminal uses a bank for illicit purposes, such as money laundering money, the financial institution could be held accountable. It’s the bank’s responsibility to always know who their customers are. That way, they can help avoid being involved in criminal activity.

KYC plays an important role in financial institutions maintaining accurate information about their clients. KYC procedures and anti-money laundering (AML) laws can work together to minimize risk. Read on to learn more about know your customer regulations.

3 Components of KYC

There are three main parts of a KYC compliance framework: customer identification, customer due diligence, and enhanced due diligence. Each phase of the process of this kind of financial regulation gets more intensive according to the estimated risk that the potential client might pose.

Customer Identification Program (CIP)

The first of the three main KYC requirements is to identify a customer. (Incidentally, some people refer to KYC as know your client vs. know your customer.)

Organizations must verify that a potential customer’s ID is valid, real, and doesn’t contain any inconsistencies. The person must also not be on any Office of Foreign Assets Control (OFAC) sanctions lists.

An organization also needs to know if their prospective customer is “politically exposed.” A politically exposed person (PEP), such as a public figure, is thought to be more susceptible to corruption than the average individual, and is therefore considered high-risk, requiring special attention.

As part of their AML/KYC compliance program, all financial institutions are required to keep records of their Customer Identification Program (CIP) as mandated by the Financial Crimes Enforcement Network (FinCEN).

FinCEN works under the guidance of the department of Treasury and is charged with guarding the financial system against illicit activity and money laundering.

The following information will satisfy the minimum KYC requirements for a Customer Identification Program:

•   Customer name (or name of business)

•   Address

•   Date of birth (not required for businesses)

•   Identification number

For individuals, the customer’s residential address must be validated. US Postal Office boxes are not accepted. Individuals with no physical residential address can use an Army Post Office box (APO), Fleet Post Office Box (FPO), or the residential or business street address of their next of kin.

For business banking customers, the address provided for know your customer laws can be the principal place of business, a local office, or another physical location utilized by the business.

The ID number for most individuals will be their social security number or Taxpayer Identification Number (TIN).

For business entities, the number will usually be their Employer Identification number (EIN). Foreign businesses without ID numbers can be verified by alternative government-issued documents.

Recommended: Opening a Bank Account While Living in a Foreign Country

Customer Due Diligence (CDD)

Due diligence includes:

•   Collecting all relevant information on a customer from trusted sources

•   Determining what the customer will be using financial services for

•   Maintaining ongoing surveillance of the situation to further verify that customer activity remains in line with recorded customer information.

The goal of this phase of the know your customer process is to assess the risks a potential customer might pose and assign them to one of three categories — low-, medium-, or high-risk.

Several variables — including the customer’s expected cash transactions, the type of business, source of income, and location — will help determine the customer’s risk level.

Other categories for assessing risk include the customer’s business industry, whether they use a foreign or domestic account, and their past financial history. The customer is also screened against politically exposed persons (PEP) and Office of Foreign Assets Control’s (OFAC) sanctions lists.

Enhanced Due Diligence (EDD)

Enhanced due diligence (EDD) involves increased monitoring of customers deemed to be high-risk. This may include customers from high-risk third countries, those with political exposure, or those that have existing relationships with financial competitors.

Conducting enhanced due diligence on high-risk business entities requires identifying all beneficiaries of those entities when they open an account. Customers that are legal entities are those that have had legal documentation filed with a Secretary of State or other state office, and include:

•   Limited liability companies (LLC)

•   Corporations

•   Business trusts

•   General partnerships

•   Limited partnerships

•   Any other entity created via filing with a state office or formed under the laws of a jurisdiction outside of the US

On May 11, 2018, a new AML/KYC requirement came into effect. This change to KYC laws states that all banking and non-banking firms subject to the Bank Secrecy Act (BSA) must verify the identity of beneficiaries of legal entity customers when they open an account.

Firms must also develop risk profiles and continually monitor these customers. This must be done regardless of what risk category the customer falls into.

Due diligence is an ongoing process and requires financial institutions to constantly update customer profiles and monitor account activity.

5 Key Steps Involved in Know Your Customer?

There are five main steps of complying with the know your customer rule, which is part of how banks are regulated. These include:

1. Customer Identification Program (CIP)

As mentioned above, the first step is to ensure that a prospective client’s ID is valid, real, and consistent. The address and other details must be checked. The applicant must be screened to be sure they are not on any OFAC sanctions list and their PEP status must be investigated.

2. Customer Due Diligence (CDD)

The next step of due diligence involves researching and vetting the customer’s intentions regarding the financial services they are seeking.

3. Enhanced Due Diligence (EDD)

Further scrutiny may determine that some applicants are considered risky. If the customer is deemed high-risk, additional ongoing screening is required to make sure activity doesn’t cross any lines.

4. Account Opening

If verification is successful and a client is eligible, the customer can open a bank account, with some clients requiring closer monitoring than others.

5. Annual Review

Once an account is opened, the institution will conduct an annual review of their activity. The higher the risk category a customer falls into, the more often their activities will be reviewed.

4 Key Elements of a KYC Policy?

KYC compliance involves four key elements. When gathering KYC information, organizations must:

1. Identify Their Customers

In this step, the financial institution will gather information about the customer’s identity.

2. Verify That the Customer’s ID Is True and Valid

The identification documents will be checked against independent sources to make sure identity theft isn’t occurring

3. Understand Their Customer’s Source of Funding and Activities

In this step, a review of the customer’s activities and background can shed light on how likely it is that the client would do reputational damage or could commit crimes that involve money laundering or the financing of terrorism.

4. Monitor the Activities of Their Customers

Monitoring of customer activities is an ongoing process, particularly for high-risk clients. Most firms review clients based on their level of risk.

Low-risk clients might only be reviewed once every two or three years, moderate-risk clients every one to two years, while high-risk clients tend to be reviewed once a year or even once every six months.

Recommended: Guide to Keeping Your Bank Account Safe Online

Why Does KYC Matter?

KYC procedures matter because they are an important screening step. Their implementation can help verify customers and assess and minimize risk.

The KYC process provides guardrails and can help protect against such crimes as money laundering, terrorism funding, and other illegal activities.

Is KYC Successful?

KYC programs are seen as improving a financial institution’s reputation and integrity, though it can add a layer to a prospective client’s application process and banking life.

As the banking landscape evolves quickly with technological advances, banks are finding new ways to track customers and comply with protective KYC and other guidelines. For instance, artificial intelligence (AI) may be able to perform some of these functions.

AML vs KYC

KYC and AML are both ways that financial institutions comply with regulations designed to inhibit terrorism financing and money laundering.

•   AML is the more general practice of an institution seeking to identify and stop such activity.

•   KYC is one aspect of AML, focusing on customer identification and verification.

The Takeaway

KYC, or know your customer, is a regulation that helps financial institutions prevent fraud by their customers. KYC involves constant check-ups and ongoing measures to ensure customer information and account profiles are kept up-to-date.

Wherever you decide to bank, know that teams are likely to be at work, ensuring compliance with KYC regulations.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

What is a KYC procedure in banking?

KYC procedures in banking are regulations that involve a financial institution verifying potential clients’ identities and backgrounds and monitoring their activity if they become customers. This can be a part of the bank ensuring that it’s not being used in criminal activity such as money laundering.

Do all banks require KYC?

Yes. FinCen, or the US Financial Crimes Enforcement Network, requires financial institutions and their customers to adhere to KYC regulations.

Why is KYC mandatory in banks?

KYC is an important measure as banks work to know their customers and make sure accounts are not being used for illegal purposes. KYC regulations are one way that the government seeks to prevent money laundering and terrorism financing.

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SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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