Businesses have been upholding KYC compliance for almost as long as they have existed, especially those in the financial sector. It is a technique that protects all organizations from fraud, including merchants, banks, financial institutions, and internet stores. The need for KYC regulations increased after the 2008 economic crisis when banks were involved in catastrophic money laundering crimes.
Following the crisis that threatened to bring the global banking system to its knees, governments, states, and international regulatory groups have worked tirelessly to enact tougher and more effective policies and legislation to combat financial crimes.
The Need for KYC Compliance Program
The Panama Papers scandal, which exposed several powerful international leaders and organizations, exacerbated the issue. In addition, numerous cases of money laundering practices have been related to terrorism funding. As a result, authorities like the FATF have been forced to levy significant penalties and punishments on governments and financial institutions. They are taking these actions in an effort to pressure corporations to modernize their compliance procedures. Companies have been forced to do AML\KYC verification in response to the FACTA Act, which was designed to safeguard customers from identity and credit card theft.
Integration of Technology in KYC Compliance
Technology has aided the financial sector in developing faster, more competent customer verification and due diligence processes for prospective anti-money laundering compliance processes. These procedures can also help organizations improve their transaction tracking and risk management systems. Advances in big data and AI have enabled organizations to entirely automate their AML and KYC onboarding procedures. In the past, banks relied mostly on manual due diligence and inspection processes.
RegTech, on the other hand, has become a growing sector because of the rising demand for regulatory requirements, which has increased the need for more effective methods. The primary purpose of advanced technologies is the creation of cutting-edge technical solutions to assist compliance teams in financial businesses.
KYC Compliance Program - Why is It So Important for Firms?
To prevent exorbitant fines and penalties from financial authorities, businesses associated with banking and finance should implement proper KYC compliance practices. Technology-based tools for improving compliance can improve its structures while significantly lowering costs. The automation of compliance processes, which also gave businesses a significant competitive edge, made digital client onboarding possible.
Firms can boost customer confidence by providing more effective fraud protection solutions. Due to reputational damage, companies that receive fines for noncompliance lose a significant amount of market share. Implementing a structured KYC compliance program online can lower this risk.
How AI Helping in Client KYC Verification
Businesses could meet their regulatory obligations by using a comprehensive digital KYC solution. Companies can identify their consumers using the AML and KYC processes. The user interface of such a system makes use of cutting-edge technologies like deep learning, facial biometrics, AI, and so on. By employing these methods, businesses can quickly verify their customers. The company oversees its offerings, which are dispersed across various verification and screening processes.
Identity Verification
A robust KYC verification solution has two basic forms:
Document Verification
When a customer scans their ID card, the verification system digitally processes and checks for modification and validity using a basic format. Then it confirms several credentials, including document number, name, birth date, issue dates, expiration, and address.
Face Verification
Firms employ facial biometrics for more strict or legitimate identification. To authenticate a user's physical attributes, facial recognition technology employs AI-based algorithms. It verifies the person's identity using liveness detection and 3D depth analysis. It protects against spoof attacks and can thus detect modified pictures rapidly.
AML Screening
Authentic AML background checks can help businesses enhance their due diligence operations. A rigorous screening system helps banks properly manage their clients' risk levels. The AML screening procedure involves cross-referencing a customer's data, including name and date of birth, against worldwide AML sanction lists and PEP lists. Companies can enable ongoing screening for their whole customer base or for their high-risk clientele.
Conclusion
The significance of KYC compliance in the corporate sector cannot be overstated. A firm can prevent fraud by validating the identification papers that customers submit. A successful ID verification procedure allows a company to check that a customer is who they say they are and not an impostor using stolen information. Additionally, by employing AI-powered user verification services, operators can analyze the risk associated with clients. Face verification, for example, employs anti-spoofing and 3-D liveness detection technology.