Know Your Customer compliance is crucial in today’s digital environment. With technologies connecting more clients and businesses from all corners of the world. Bad actors use evolving technologies to assume fake identities and trick banks and financial institutions. It is crucial for businesses to verify just who exactly they are doing business with.
National and intergovernmental agencies make their efforts to mitigate criminal activities. The regulations are becoming incredibly strong and financial institutions have to comply with them. Clients of all kinds of financial institutions demand robust anti-money laundering solutions. Verification and evaluation of any potential risk of illegal activity are essential for providing the customers with a good experience.
What Is KYC?
KYC or Know Your Customer is the process of verifying customer identities using a set of documents. This KYC verification process is vital to ensure that financial institutions aren’t tricked by those who steal identities, do money laundering, and funding of criminal organizations. KYC makes sure that the organizations are compliant and that customers with a lot of red flags aren’t allowed access to financial institutions’ systems. All financial institutions or banks don’t need to use identity verification as a part of KYC compliance.
How Does Proper KYC Compliance Help In Protecting Financial Institutions?
The biggest type of financial fraud is identity theft. A lot of people get away with committing financial fraud using false identities and false backgrounds. This is where strong KYC compliance comes in place and mitigates the risk of financial fraud. In most of the KYC compliances, customers are asked to submit authentic government-issued ID documents such as passports, UID, driver’s license, most recent utility bills, or insurance plan information.
These documents are needed to check if a person is actually who he/she claims she is and they also help banks and other financial institutions calculate a customer’s financial situation and if they can be a risk to an organization. KYC compliance programs make sure that banks and financial institutions are aware of their customer’s risk profiles and a process that segments suspicious or risk transactions.
KYC Checks Take Up Too Much Time
The biggest problem with traditional KYC screening is that the whole process can take up too much time. Manual KYC screening can cause a bottleneck for business operations. Regardless of the industry, businesses of all kinds that have to comply with KYC can face a bottleneck. This is not just a pain point for financial institutions, but for all professionals connected to the financial world.
Automation and third-party solutions can help organizations improve the time taken during every customer onboarding and KYC compliance. Manual KYC checks are estimated to cost an average bank more than $1 million per year.
The inefficiency of KYC checks drivers up the costs of complying with KYC procedures. As the AMLD 5 starts rolling out, the costs of KYC compliance will grow for all financial institutions.
Manual Screening and Risk of Human Error
KYC processes involve going through a number of data sources such as government sanction lists, watchlists, and PEP lists, blogs, international court cases, and more. With a wide range of data to go through and limited tools to use the chances of error are extremely high. Finding the right information about a client and assessing the information to build a risk profile is vital as your company’s reputation and liability are on the line. Even the smallest human errors can be risky as you can provide money launders access to the internal systems.
KYC Compliance Easier, Cheaper, and More Efficient With DIRO
DIRO’s solution eliminates friction during customer onboarding and creates 100% verifiable documents that suit the regulatory requirements. DIRO’s online document verification software can also assist in:
- Streamline the KYC onboarding process instantly to reduce the time taken during the approval of customers.
- Prevents the use of doctored and stolen documents with multi-factor authentication and strong impersonation checks during onboarding.
- Verifies online documents globally to improve international customer onboarding.
DIRO can provide 100% proof of authentication on documents like bank statements, bank account information, proof of address, utility bill data, incorporation documents, insurance documents, tax returns and so much more. DIRO verifies customer documents in real-time with access to thousands of original web sources.
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