In today’s technologically advanced world, it has become easier for criminals to execute their destructive plans. The advancement in technology has made them enormously resourceful that they can carry out their suspicious activities without the headache of regulatory bodies. The technology has enabled them to use the identities of genuine clients and move forward with their plans with stress and reap the benefits endlessly.
Nevertheless, financial companies are in need of systems that help them gather information about their clients in a safe way and then protect the information without the stress of being hacked by a criminal. The step is also known as know your customer- (KYC).
Likewise, there is another big issue that digital businesses are intentionally or unintentionally used for financial crimes that become a hindrance later on for both parties. This is a problem because it is strictly in non-compliance with the global and local level rules and regulations.
This kind of black and dirty money is used to support terrorists in their plans, and help drug dealers carry out their criminal activities. It should be kept in mind that organisations and businesses that do not comply with the regulations are prone to huge and hefty fines that can be financially detrimental for the business in the long term and even the short term. Therefore, AML compliance should be followed to preserve the integrity of the system.
How Significant Is the Digital KYC Solution?
The KYC is extremely important in establishing the basis of a reliable financial process and system. Criminals and fraudsters can attack the system at their weak points which can enhance the exploitability of the system at deep levels. In this way, criminals will benefit from the system without losing their anonymity. There is an extreme need for enhanced security measures that will help with effective risk management.
KYC Verification in the Corporate Sector
There is a procedure known as the KYB (Know Your Business) that makes sure that authentication procedures are carried out for organisations and businesses. This is a significant initiative to be in compliance with the KYC solution. The system includes the verification of UBOs, advanced businesses, and other corporate entities. The KYB system is put in place to safeguard the organisation from fraudulent activities. These steps are not only in accordance with the said requirements but also make sure a strong relationship between the customer and the businesses.
KYC compliance is much more than it and it does not end here. The authentication procedure that happens is not the alternative for the credibility of the customer’s identity. This is why continuous monitoring of the client’s profile is required to prevent and detect any fraud from the client. The continuous financial exchanges are extremely critical in order to detect any suspicious activity and unusual behaviour during the process of the financial systems and processes. The evaluation method should include certain parameters that should be fulfilled while looking for the following:
- Any exchanges and transactions that are beyond the threshold
- A higher number of transaction patterns
- Fraudulent activity
CIP- Customer Identification Program
In the KYC method, the CIP is the very first step. The confirmation of the big risk clients should be performed so that any risks associated with the clients should be tackled immediately. The objective behind CIP is to make sure that any financial exchange is done through proper verification. Such steps are necessary to take so that any instances of money laundering and financial terrorism can be reduced as soon as possible and the integrity of the financial system can be maintained. The CIP requires that the client opens their bank account using valid and verified information. The information can be the following:
- Full name
- Correct address
- Date of birth
- The correct number for identification
When the information is collected, it is completely verified by different pieces of evidence (document verification and biometric markers of identification). Therefore, the procedures are pre-defined in the sense that they are helpful in preventing all kinds of fraud. Finally, this is the point where organisations decide about CDD and EDD.
An efficient KYC process is needed in every organisational sector. In order to comply with the KYC and AML rules and regulations, the corporations will need effective KYC solutions so that companies can align themselves according to the terms and conditions. The latest procedures are so effective that they allow efficient customer onboarding in a smooth and easy way.