The KYC stands for Know Your Customer. The authentication procedure is important in financial companies for deterring fraud. In actuality, the KYC system defines the certification procedure which includes different verifications (e.g. age verification, address verification). This is to better understand the needs of the customers and create their risk-based profiles.
The Simple yet Practical Procedure of KYC Document Authentication
Step 1: The Provision of Data From Customers
Step one is to incorporate the PII (Personally Identifiable Information) for effective registration of the account. The PII can include different features e.g. name, DoB, emails, SSN, Passport number, and credit card details.
Step 2: The Submission of ID Documents
Step 2 for the clients is to submit a clear scanned copy of the identity documents e.g. ID card, and passport. The OCR software will automatically extract the desired data from the submitted ID records for an in-depth analysis.
Step 3: Verification of Customer’s Identity
The data captures through the OCR gets cross-check with the manually enter information. The purpose is to verify the authenticity of the information provided by the clients. The submitted document images inspect against a standard document for proper validation.
Step 4: The Outcome
When the whole procedure gets complete, the results gets deliver to the client with comprehensive proof of verification. If there no problem find in the verification process, the client onboards with success.
How Significant is the KYC Compliance?
It is the procedure by which the banking industry validates the information provided by the clients so that its originality and authenticity can be determined. This is important when a client is opening an account and also looking to preserve their account. The point here is that effort should be made to clearly define the accuracy of identity and the benefits of the ownership of accounts, and the source of its funding according to the nature of business. All of it is important to facilitate the corporate sector in dealing with their shortcomings.
The first KYC law introduces in 2001 as the Patriot Act in order to deal with financing terrorism. It was established that the addition to secret acts of the 1970s was important for legislative regulations for the banking industry. The attack on 9/11 highlighted the need for rules and regulations. This is where the KYC procedure was made compulsory for the banking sector. Hence, the provision of documents becomes a requirement.
How KYC can be Practiced in the Banks?
It is frequently the case that any customer will not be interested in exposing the amount of money that they are making on a monthly and yearly basis. This is especially relevant when their income subjects to high taxes. Due to this, the institutes use different strategies to transform their illegal money into legal money. If such features do not take into consideration, it creates problems later on.
The execution of KYC makes sure that the clients complies with the rules and regulations so that the onboarding process streamlines for the clients. Hence, the KYC can be helpful in maintaining the faith of the clients in the service. It can be beneficial in the active screening of clients in accordance with their risk-based profiles. It has significance for effective fraud prevention.
The Link Between KYC And Other Authentication Procedures
The procedure not only helps organizations with a comprehensive service but also facilitates the banking customer in understanding the service. The procedure helps in client onboarding for financial companies with faster and high accuracy. The facial recognition component uses AI and HI to perform customer identification as fast as possible. The customers who want to introduce the KYC service in their industry can also get support from the following:
- Facial Verification
- Address authentication
- Document certification
- AML monitoring system
- 2FA- Factor Authentication
How CDD Is a Driving Force Behind KYC?
The process of CDD put in place to maintain trust with a client and assess the risk linked with it. The CDD can support banks and financial companies to deal with threats coming from fraudsters. For example, the PEPs, terrorist organizations, and identity thieves.
Three Stages of the CDD Process
- The Simple Due Diligence Process: If there is a low risk of money laundering, the full diligence process is not necessary.
- The Basic Due Diligence Process: The data acquired by the customers for identity authentication and assessment can be related to the risk associated with it.
- Enhanced Due Diligence: The clients with higher status have to deal with EDD for which they have to provide additional information. This is collects in order to create an in-depth understanding of clients’ behavior.
The documents issued by the government e.g. ID cards, licenses, and credit cards need verification. Furthermore, there are employee letters, insurance companies, and bills that can help with customer identification. This is the procedure of online document verification in a simplified manner.