KYC Compliance- Technology-Driven Fraud Detection Solution
sophiaherry97 October 29, 2021Financial institutions tend to cater to a load of transactions which makes the banking industry vulnerable, raising the risk of fraudulent activities. Due to the technological revolution and the coronavirus outbreak, banks have reshaped and become digitized. Therefore, the spike in suspicious activities is pretty much noticeable. Criminals are stealing the identities of legitimate people to exploit the system and to run fraudulent activities such as money laundering. Thus, the banking industry is on the verge of destruction, and banks are in need of automated solutions such as know your customer identity verification. A set of KYC regulations are established by the regulatory authorities to prevent the rapid spreading of identity theft and financial fraud.
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KYC- Know Your Customer
Know your customer is an identity verification process that businesses tend to place in their systems in order to identify the real identities of customers and third-party vendors. This procedure involves determining the customers that possess a potential risk for suspicious activities like money laundering which may affect other customers and the business in the future. The regulators have established KYC laws due to multiple reasons and businesses that are intended to deal with money are able to comply with KYC guidelines. By doing this, business would be secured, and will not become a pawn of the fraudster to run their criminal activities. It also enables businesses to monitor the customers’ transactions as well as providing the feature of risk management
By doing customer KYC due diligence, businesses can get to know the background of the customers through a set of KYC checks. In addition, the clients are screened against the global sanction list, watchlists, and PEPs list just to stay one step ahead of them.
Know Your Customer Verification Process
Gathering Information
Initially, the KYC documents process involves the gathering of clients’ information through an online platform. At the time of registration, the customer has to provide all the identity information such as ID number, name, date of birth, etc.
Uploading identity documents
When the customer has provided the system all the necessary identity information, then the system requests to upload the scanned or photos of identity documents. This will aid the system in authenticating the customers’ information and determine any kind of fakeness in them
Verification of Information
Once the customer has provided the personal information as well as the identity documents, the templates of the documents are identified and thoroughly examined through KYC checks in order to determine signs of tampering or photoshop to maintain kyc compliance. Moreover using OCR technology the information placed over the documents is extracted and matches with the information which the customer has provided at the time of form filling. If the information provided by the customer and the extracted information from the ID document match, identity is verified.
The Consequence of Neglecting KYC in Business
The financial regulator passed a bill in the 1970s, the bank secrecy act was established as a precautionary measure to deter fraud as well as diminishing digital identity theft, counter-terrorist financing, money launderer, and various other financial frauds. Under this act, the banks and all the financial institutions are obliged to identify the true identities of their customers and also must keep a record of the customer information while keeping in mind confidentiality measures. These checks are made only to ensure the protection of banks from fraudulent activities. Looking into the other side of the story, the regulatory authorities have well-defined criteria as well as the fines in the case of non-compliance of business involvements in suspicious activities. If any of the companies are proven guilty, they tend to pay hefty fines and in worst cases may face permanent bans.
The importance of corporate KYC
Corporate know your customer term is established to protect the B2B relationships. (KYB) know your business is a well-defined procedure that verifies the identities of the business entities as well as the companies before making any kind of relationship. Corporate verification includes the verification of owners, directors, ultimate beneficial owners, third-party vendors, and outsourced entities. KYB checks are quite impressive which tends to detect criminals’ presence in the system instantly. Due to this the business can ensure utmost protection and can establish long-lasting B2B relationships.
Final Verdict
Indeed the digitalization of businesses has come up with loads of healthy opportunities but is the source of rising financial and identity crimes. Banks and other businesses are suffering from suspicious activities and their workflow is affected badly. Banks are in need of technology-based solutions in order to fight the war against criminals.
