Technological progress encouraged corporations with several seamless processes regarding workflow and business processes. Many companies use digital methods for enrollments and customer onboarding processes. Due to the rapidly growing cybercrime ratio, the government has designed various know-your-customer and anti-money laundering policies.
These KYC and AML techniques help organizations overcome the risk of prevailing fraud. KYC compliance provides firms with a multi-layered security to mitigate the risk of illicit activities and financial terrorism. This blog post will explore the role of the KYC process in industries to overcome financial fraud.
KYC compliance refers to regulatory obligations that are created for both financial and non-financial organizations. They offer a customer identity verification process that helps corporations to unveil fraudsters. It helps businesses get rid of money laundering, financial terrorism, identity theft, and fraud.
Companies collect various KYC documents and process them through pre-trained AI and ML mechanisms to identify the legitimacy of the provided information. KYC compliance may involve document verification, biometric authentication, and database match. It involves various identity verification and risk assessment methodologies.
How Does The Process Of KYC Compliance Work?
KYC compliance process may vary as per the business but the following are some of its common objectives everywhere;
- Customer Identification Program (CIP): it is the process of identifying various provided documents regarding client identification. It refers to a set of procedures that companies design to find the legitimacy of their clients. It enables firms to acknowledge the authenticity of provided data and information. CIP aims to ensure customers are who they claim.CIP serves as an important means to deter instances of financial terrorism, identity theft, and money laundering.
- Customer Due Diligence (CDD): It directs the process of performing background checks and other screening methods to ensure the risk assessment of an entity. It helps to acknowledge every associated risk with clients’ profiles which helps to overcome future complexities. This process further guides firms for simplified due diligence or enhanced due diligence as per the level of associated risk.
- Monitoring: KYC Compliance enables companies to monitor their clients throughout the business process. It mitigates the risk of unforeseen complexities and leads to smooth business operations.
Industries / Use Cases
KYC compliance regulations are implemented in almost every industry. The following are the most common industries that must comply with KYC regulations all over the globe;
- Banking And Financial Sectors
Banks, insurance firms, mortgage houses, brokerages, etc are the most common industries that require KYC compliance to get rid of money laundering and illegal transactions. Imposters use various techniques to access companies for illegal means and illicit activities.
- Fintech
Many fintech industries such as crypto companies, online payment solutions, mortgage providers, etc. These companies use KYC compliance to know their customers and overcome the risk of identity theft, transactional loss, and data breaches.
- Health Care
Many healthcare institutes such as online care and medicine providers, pharmacies, hospitals, and POM sellers require KYC compliance to overcome identity fraud. It enables healthcare disciplines to have a smooth workflow.
- Gaming Sectors
Many e-gaming platforms, lottery businesses, and poker require KYC compliance to overcome the risk of identity fraud and transactional breaches.
KYC compliance in the digital era is the only solution to mitigate financial crimes prevailing in the gaming sector.
Need For Online KYC Compliance
As businesses are rapidly moving toward the digital marketplace, particularly after COVID-19, companies are using online KYC compliance methods. Online KYC screening enhances the company’s scalability with remote client onboarding both nationally and internationally.
It offers an automatic solution to process individual data and verify their identities, Artificial intelligence and machine learning mechanisms provide a digital reliable solution and protect organizations from future complexities. An international organization FAFT (Financial Action Task Force) develops policies to empower organizations with KYC and AML compliance to overcome money laundering and other kinds of financial terrorism. After COVID, many businesses and banks are providing online services and require online KYC compliance to discourage prevailing cybercrimes.
Key Takeaways
KYC compliance provides a digital solution to overcome fraud, financial terrorism, and reputational damage. It helps organizations enhance their business scalability with automated robust AI and ML technology. Online KYC generates enhanced business revenue with remote clients all over the globe. Additionally, it enables organizations to evaluate clients’ profiles for risk assessment and ongoing monitoring. It protects organizations from legal complexities.
