While the process of moving and receiving money has become more computerized, it has also introduced several negatives, the most notable of which is the potential of financial fraud and money laundering. KYC compliance is a critical component of any compliance program that aims to reduce the risk of financial fraud. When someone ruins an individual’s financial health through identity theft, this is a common kind of financial fraud. When unscrupulous actors acquire access to and abuse an organization’s financial systems, this is a more prevalent type of fraud. As a consequence, financial institutions and banks employ KYC as a defense against financial misdeeds. Customer Due Diligence and KYC are terms used to describe this process. The Checklist for KYC Compliance below contains our proposed KYC compliance online methods.

 What Is KYC Compliance?

When a consumer applies to open an account, the bank’s system or IDMerit’s identity verification system conducts a KYC verification check. They must go through an identity verification procedure in order to have a seamless transaction process. The consumer must provide specific verification documents that verify their identity and financial history as part of this procedure. This identity verification procedure identifies any possible financial crime risk and supports banks and financial institutions in determining the best course of action based on the risk profile.  

How Can Effective KYC Assist Financial Institutions In Keeping Them Safe?

Identity theft is the most common method of perpetrating financial fraud and extortion. People get away with these financial crimes by creating a phony or fictitious client profile. This is where a strong KYC compliance program may significantly reduce the risk of fraud from the start. Throughout most KYC compliance processes, clients are required to show valid documents such as passports, a unique identification number, or a duplicate of their most current power bills or insurance plan. 

These documents serve as verification of identification and residence, and they assist banks and financial institutions in calculating a customer’s financial activity and the risk they may pose. Verification of compliance programs (which includes continuing monitoring) ensures that banks and financial institutions are aware of their clients’ risk profiles, and it is a procedure that groups problematic individuals or transactions together. Because banking is an industry that is prone to monetary fraud, it is necessary to conduct client screening to limit and eliminate the risk of theft. 

The KYC Compliance, What Do You Need

 These papers help a bank build a customer’s financial profile, and effective identity validation and verification methods may help uncover counterfeit ID cards, altered utility records, or completely fabricated paperwork. 

Each bank and financial institution has its own client verification methods; some demand online identity verification while others require physical submission; as a result, the papers needed for identity verification vary.

In-Person Submission 

When a consumer presents their identity documents to the bank in person, the KYC verification procedure begins. For the in-person submission, a copy of all papers is required, which must match the image on the identity card. Customers at some banks and financial institutions are also required to submit papers for KYC through video, which needs the customer’s presence to verify their identity and address. This is usually accomplished by a procedure called liveness detection, which eliminates the possibility of imitation or fraud.

Quick Thoughts: KYC Right Now and Looking Ahead

As more banks and financial organizations move their services online, internet hackers and criminals are finding new and better ways to conduct financial fraud. As a result, financial experts were compelled to implement additional processes in order to combat these fraudulent schemes. Not only does a KYC method prevent the bank’s services from being abused, but it also protects the customer’s financial well-being. 

As the year 2021 draws to a close, it is becoming increasingly important for financial institutions and banks to have a sustainable KYC compliance program in order to maintain consistency with their clients and reduce the risk of financial extortion. While each financial institution is unique, the above-mentioned KYC compliance and KYC solutions program and checklist remain the critical vigilance procedure that will help them run a good identity verification program.