The human population is growing tremendously, and so are technological advancements. Acquisition of innovative artificial intelligence and cognitive technology is becoming a new normal with the influx of technology.
Cybercriminals are acquiring benefits from these tech innovations are fraudulent activities, resulting in a high rate of identity theft and chargebacks. Let me tell you a jaw-dropping fact. FTC received 4.8 million identity theft cases during the pandemic year 2020. The figure is estimated to evolve in the upcoming years. Due to these chargebacks, businesses face immense damages and hefty penalties. This leads to the fact that it’s high time for enterprises to acquire appropriate measures to combat these progressing criminal activities.
Robust, reliable, and real-time identity verification solutions with KYC services play a promising role to decrease these evolving cases of counterfeits. Financial sectors must prepare themselves for the upcoming years and beyond. KYC solutions are solutions that must be acquired by each and every organization, from government agencies to private sectors for the detection as well as prevention of chargebacks. AML KYC compliance is something that must not be neglected at any cost by enterprises for validating the identity of their potential customers. The KYC process starts with the development of the Customer Identification Program (CIP) which collects identity information of potential customers using officially published documents. Those documents include a government-issued identity card, passport, and driving license.
Let us lay eyes on some realities about KYC due diligence which will answer all your questions about why your organization must incorporate KYC solutions.
What is Know Your Customer (KYC)?
Let me explain this term in layman’s terms. As the name suggests, KYC checks help organizations to actually know their customer in depth. This can be done by validating and verifying customer identity through their official documents for risk assessment and fraud prevention. In this era of cutting-edge technology, AI-powered KYC systems enforce particular checks for the verification of government-issued identity documents and ensure the living presence of potential customers via biometric identification. KYC includes Know your Business (KYB), Know Your Patient (KYP) and Know Your Transactions (KYT)
Why are KYC Services Crucial?
KYC solutions permit business entities and financial institutions to access the profile of potential customers for the monitoring of suspicious behavior. With the incorporation of KYC services, terror financing and money laundering activities can be detected with a high rate of accuracy, effectiveness, and efficiency. The incorporation of KYC processes during customer onboarding decreases the chances of identity theft which assists businesses in the enhancement of their cybersecurity protocols.
Significant KYC Laws
KYC laws are the subset of AML regimes in most of the cases and it is highly influenced by the recommendations of FATF. Let’s have a look at some most important KYC laws that are incorporated in different regions all across the globe.
- The money laundering act 2017 (MLA): This act is implemented in the United Kingdom and this act elaborates customer regulations for reporting entities.
- Banking Secrecy Act (BSA): This act is enforced in the United States of America prerequisites reporting entities of financial infrastructures to acquire appropriate measures for customer ID verification and for the reporting of suspicious activities to FinCEN.
- Anti-money laundering Act (AMLA): This act is implemented in France and explains customer authentication and verification laws for financial infrastructures.
- Proceeds of Crime and Terrorist Financing Act (PCMLTFA): This act sets KYC processes and requirements for reporting systems.
- AML/CTF Act of Australia: This act is implemented by AUSTRAC and clearly defines KYC AML compliance guidelines for real-time verification of potential customers and individuals.
AML KYC compliance enables financial infrastructures to realize the below-mentioned advantages:
- Business users are empowered by interactive and intuitive configuration tools for the creation and maintenance of questionnaire forms and associated business rules. This is crucial as business and regulatory requirements change when new and innovative products and services are launched across the enterprise.
- KYC due diligence questions are depicted in an intuitive user interface for the extraction and acquisition of the right information at the right time according to requirements.
- The central platform of consolidated policy management and KYC processes plays a promising role and can be replaced without even thinking twice with inefficient and disparate data capturing methods.
- KYC AML policies are incorporated in a central platform for the assurance that EDD/CDD information is collected to meet due diligence requirements. Complete audit history is employed for the reporting purposes of businesses.
Common Entities That Must Comply with KYC Regulations
KYC solutions must be incorporated in different industries for the detection and prevention of illicit activities. Here’s the list of common entities that are entitled to KYC solutions in most of the regimes all across the globe.
- Financial infrastructures including banks, brokerage houses, insurance companies, mortgage houses, and more.
- Fintech industry such as online payment solutions, cryptocurrency companies, digital asset exchange platforms, digital loan providers, mortgage providers, etc.
- Gaming industry such as e-gaming platforms, poker business, gambling, etc.
- Healthcare industries such as hospitals, online drug providers, in-home care providers, POM sellers, online care providers, etc.
- Legal sector
- Real estate sectors
Technology is evolving, so are the hackers. Fraudulent activities are evolving with the speed of a leopard and it’s becoming difficult for financial institutions to combat these evolving criminal activities with the passage of time. It’s high time for businesses of all sizes to acquire appropriate KYC solutions for the enhancement of their cybersecurity protocols and to fight a really strong battle against counterfeits. KYC solutions are crucial for risk assessment and customer monitoring.
Acquisition of KYC AML compliance is something that must not be neglected by financial institutions for the prevention of money laundering activities and unauthorized access. There exist a wide range of such products that offer reliable, robust, and real-time KYC and AML solutions to combat the probability of chargebacks. Shufti Pro is one of the most prominent and reliable products in that matter. Hence considering the fact the businesses come across different sorts of people every day, they must mandatorily acquire KYC checks for the elimination of risk and fraud.