Identity Verification Solutions help Businesses to meet KYC – AML Guidelines

Identity verification is the need of all businesses but it has more importance in financial institutions such as banks, insurance companies, and crypto markets as there is more threat of online fraud as compared to other businesses. If we look at the record on the financial sector, then we come to know that the UK lost 159.7 million British pounds in 2020 in online banking frauds, according to a report by Statista. So, there is a need for secure identity verification services for the customers of financial organizations to stop online fraud. Online identity verification services are a solution to combat this problem. The process of verifying a person’s identity to ensure that whether the person is really who he claims to be. It is mostly done whenever a person opens his bank account or invests money in insurance companies.

Digital Identity Verification

It is the process of verifying the person’s identity using online means such as facial recognition and online document verification to confirm whether the person is involved in any criminal activity or not. By using online identity verification services, businesses verify their customers and avoid financial fraud by complying with financial regulatory standards. Businesses should know their customers by regularly keeping a check on their activities. Financial institutions should comply with all security measures led by financial regulatory bodies of their respective countries to keep in touch with their customer’s regular activities. The different methods of Identity verification include face recognition or document verification. Let’s discuss KYC in the financial sector in detail.

KYC in Financial Sectors

In the online landscape, data breaching, identity theft, and online fraud are common. Knowing your customer is essential for every person to meet regulatory standards. The process of authenticating the identity of the customers to ensure that whether the customer indulges in any criminal activity or not is called KYC. Know your customer’s compliance is necessary for all financial institutions to follow to prevent financial loss. The purpose of KYC is to reduce the risk of money laundering by regularly checking the current status of customers.

KYC in Banking

Nowadays, every bank provides the facility of online banking but with this facility, online frauds have also increased. Every year, people lose billions in online banking frauds. An appropriate mechanism is needed to reduce online fraud. KYC is one of the solutions to overcome this problem. KYC is necessary for customers before using the services of any bank, such as before opening a bank account, the bank runs KYC checks at the backend to check the authenticity of the customer. Several methods can be used i.e, CIP Program, CDD, and ongoing monitoring for this purpose. Let’s discuss these methods in detail.

Customer Identification Program (CIP)

This method is used to identify the customers which they claim to be. The documents needed to open a bank account are the full name, DoB, residential address, and the ID number of the person who wants to open the account. In CIP, banks verify this information to check the current reputation of the person.

Customer Due Diligence (CDD)

Due diligence in financial services is the first and foremost step before providing services to the customer in which the institution trusts the potential customer. It is performed through simplified due diligence, basic customer due diligence, and enhanced due diligence in which high-profile clients are verified through different documents.

Ongoing Monitoring

It is used to keep track of the customer’s ongoing activities, especially financial transactions as part of the customer’s risk profile. By adopting these methods of KYC compliance, banks can validate their customers easily and prevent financial loss.

Conclusion

Identity verification services help businesses to combat online crimes by providing seamless services to know their customers in real-time. On the other hand, compliance of financial organizations with KYC-AML guidelines helps them to give a safe and secure environment to their customers. Banks can make their services fraud-free to provide the best user experience by conducting KYC compliance and ongoing monitoring. By complying with KYC-AML guidelines, businesses can prevent financial loss and also help them to improve their brand image in the market.