In this modern era, the technological revolution has facilitated the growth of various industries but has also enabled fraudsters to fool the security protocols. Criminals use identity theft to exploit legitimate entities such as credit unions and e-commerce, to benefit from free services, commit fraud and hide black money. Nonetheless, financial institutions must opt for digital innovative solutions that can verify the credentials of onboarding customers. This will also help businesses to fight money laundering and terrorism financing and ensure compliance with AML regulations. Fraudsters can support drug-related activities with their black money. Businesses that fail to comply with international regulations given by regulatory authorities have to face harsh penalties. Thereupon, implementation of KYC verification is compulsory for companies to prevent fraud.
KYC Verification Solutions: A Quick Overview
KYC authentication plays an important role in streamlining the onboarding process of modern-day financial systems. Fraudsters keep track of the shortcomings in security protocols of modern-day organisations to exploit them for their advantage. This is essential to minimise the risk of money laundering and identity theft.
Taking proactive security measures facilitates active fraud prevention. For example, the KYC verification procedures can discourage data breaches, ID theft, ATO fraud, and money laundering & terrorist financing.
The major problem is that unauthorised entities contribute to rising crime rates worldwide. To fight the issue, banking service providers and other firms must implement digital KYC verification for new customers during the onboarding process. This not only facilitates fraud prevention but also supports compliance with international regulatory obligations.
Complete KYC Verification Procedure
Historically, banking firms used to perform ID authentication on-site but technological innovation has introduced eKYC which has facilitated corporations. The complete KYC verification procedure includes the following three steps:
Performing Data Collection
The initial stage in the KYC verification procedure requires data collection from the new customer. The user must provide their Personally Identifiable Information (PII) at the time of account registration.
Demanding Secondary Proof
After completion of the first step, the solution asks the customer to provide supporting evidence as identity proof. This ensures the validation of identity credentials and discourages external attacks.
Authenticating User Data
In the third stage, the software identifies a document template and examines it against multiple checkpoints. This helps confirm that the given documentation does not have forgeries. After validation, the OCR software extracts data from the records. The following are two major components of KYC procedure:
Customer Identification Program
In the KYC verification process, the Customer Identification Program (CIP) is the first stage. Companies must identify high-risk customers during the onboarding process to mitigate the risk of identity fraud. This is important to ensure that only genuine customers perform financial transactions. This plays an essential role in fighting money laundering and terrorist financing cases that can disrupt the mainstream financial infrastructure.
In CIP, financial firms must gather financial data to open an online bank account which demands the following information:
- Full Name
- Address Data
- Date of Birth (DoB)
- ID Number
After gathering the above information, the software verifies supporting evidence against various parameters and also utilises data from biometric verification. Additionally, CIP facilitates risk assessment of users and business accounts while helping financial institutions build parameters for risk scoring. Hence, KYC verification procedures are well-defined that contribute to fraud prevention. Depending upon the risk score, business entities can decide on implementing CDD or EDD systems.
Customer Due Diligence
In this procedure, the new customer’s data gets screened against KYC protocols. In KYC compliance, this is the second stage where basic user data is collected in real-time. In CDD, the system demands the following information:
- Full Name
- Correct Age
- Date of Birth (DoB)
The abovementioned user credentials help validate new customers’ identities during the onboarding process. After this, the new user receives a rating according to credentials to ensure financial credibility. In case the system detects any high-risk clients, businesses must implement an Enhanced Due Diligence (EDD) system.
CDD generates a risk score which helps determine the risk from a new client for a concerned institution. In both private and offshore banking, experts must perform CDD comprehensively to detect suspicious entities in real time. CDD is a practical approach that highlights money laundering & terrorist funding cases in the financial system by identifying suspicious entities.
The application of KYC verification service and solutions can protect businesses from identity theft and money laundering incidents. To comply with the latest KYC compliance requirements, organisations must opt for the latest digital solutions.
Working with a verified vendor can provide solutions for firms to fulfil the needs of corporations. The innovative KYC services can ensure global coverage and processing of multilingual documentation that can ensure a positive experience for remote clients. Complying with data protection standards, KYC verification solutions are reliable and secure for instant customer onboarding.