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The Role of Online KYC in Finance – Shaking Things Up Globally

By Stylianos Kampakis posted Fri November 25, 2022 04:54 AM

  

The days when financial institutions evaluated their clients based on manual KYC checks are long gone. Corporate entities now have a better approach to carrying out identity verification checks and maintaining the profiles of their consumers as needed. Because of how rigid the regulatory environment will get over the next few years, online KYC has no end in sight. Financial companies require actual data and frequently updated customer profiles based on preferences. Only then will companies be able to provide clients with a seamless KYC experience.

Customer identification is the most crucial component of KYC (Know Your Customer), which is a key part of the fight against financial crime like money laundering. It comes first and aids the other steps of the procedure to run more smoothly. Let's define KYC and eKYC, then learn how cutting-edge ID verification solutions may better support KYC procedures.

What is KYC Verification?

A procedure is used to identify and confirm the client's identity when opening an account and on an ongoing basis that is called KYC.


In other words, businesses must verify that the customers are who they claim to be. Companies have the right to refuse account opening requests from clients or to terminate their business relationships if they fail to meet minimal KYC standards.

Why is the KYC Procedure Crucial?

All the steps required to confirm that the customers authenticate, evaluate, and monitor risks are included in the KYC solution that companies define. These client-onboarding protocols support the identification and stoppage of illegal corruption, money laundering, and terrorism financing.

The online KYC services include identification of documents, face verification, document verification utilizing utility bills as evidence of address, and biometric verification. Companies must adhere to the online know your customer solution and anti-money laundering regulations in order to eliminate fraud. KYC compliance is the responsibility of financial businesses. 

How do KYC Documents Work?

KYC checks are carried out using independent and trustworthy sources of documentation, information, or data. Each client must submit documentation proving their identity and address.

The Financial Crimes Enforcement Network (FinCEN) of the United States imposed a new requirement in May 2018 that financial companies verify the identities of natural persons of legal entity clients who own, control, and profit from businesses when those organizations open accounts.

What is eKYC/online Know Your Customer Solution?

eKYC verification also includes information extraction from government-issued smart IDs (with a chip) with a physical presence, information collecting from IDs using OCR mode, certified digital identities, and facial recognition for online identity verification.

Then, customer onboarding can be done on a mobile device.

As the accuracy of eKYC (online KYC) increases due to the use of Artificial Intelligence, it is becoming more and more thought to be practicable (AI).

Measures for KYC and Customer Due Diligence

For banks and other financial institutions, the KYC authentication policy serves as a mandated structure for the customer identification procedure. In order to abide by international laws prohibiting money laundering and supporting terrorism, strengthened Enrolling a customer requires the implementation of online know your customer procedures at the beginning of any business engagement.

Four crucial components below are typically incorporated into banks' KYC verification policies:

Customer Identification Program also known as Customer Policy Customer Identification Procedures (data gathering, identification, verification, and checking of politically exposed persons and sanctions lists) (CIP)

  • Evaluation and control of risks 
  • Ongoing surveillance and documentation
  • This entails using sophisticated document verification software and document readers to authenticate a customer's identity using documents, such as a national ID document
  • Visual ID verification to digital confirmation
  • Some people still view this as essentially a paper check that requires them to complete KYC authentication forms. See illustrations here.

Others use a digital method that entails confirming the legitimacy of an identification document or even going further to verify the document holder through additional biometric checks like fingerprint or face recognition.

A bank's ability to automatically collect client demographic information through a digital ID verification procedure can be connected into business systems like CRM to: speed up the customer onboarding process.

Financial organizations are also required to keep track of transactions and data gleaned through customer due diligence procedures. Based on materiality and risk, these standards ought to be applied to all new consumers as well as current clients.

Conclusion

Online KYC supports customers by offering innovative solutions and  preventing fraudsters that help them comply with the new needs, remarkable those related to KYC verification duties. It has significant experience in ID verification for governments.

ID Verification enables banks to offer a simple customer onboarding process that conforms with KYC guidelines and reduces the risk of fraud. It is a key part created for its ID Verification systems. In summary, as the system continues to learn and improve, and see a quick improvement in onboarding rate. 

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