In today’s world, KYC has become an essential element in fighting against financial fraud and crimes, such as money laundering and user identity theft. However, customer identity verification is the first and most important step to perform the KYC process.
With the rise of global AML and CFT infrastructure, numerous financial institutions tend to seek KYC compliance regulations. Yet, these global compliance regulations are influenced by the Financial Action Task Force standards that are implemented in national laws. These AML regulations possess powerful laws against money laundering.
In this KYC AML Guide, you will learn different KYC use cases where KYC is tremendously useful in conquering financial challenges and building user trust.
Explore Five KYC Use Cases
KYC refers to Know Your Customer, which is the process of verifying customer identity to prevent financial crimes. This procedure is executed in all industries that need KYC, which involves the verification of several documents. However, below are some KYC use cases where Know Your Customer is conducted.
Customer Onboarding
Numerous financial organisations need to onboard customers to promote their services and boost their revenue. These customers can be onboarded via mobile applications or digital platforms.
Yet, employing new customers is a risky and challenging task for many enterprises in order to prevent fraud. Therefore, it is crucial to run KYC checks to check the authenticity of the new customer’s identity.
By implementing KYC regulations during the customer onboarding process, it ensures whether or not the client is associated with any fraudulent activities. In addition to this, KYC onboarding runs to prevent unnecessary access to clients’ bank accounts. During the client onboarding procedures, the type of KYC process may vary depending on the business type.
Fraud Prevention
Financial frauds come in many forms such as identity theft, money laundering, and other significant risks that may threaten your businesses and your customers. Nonetheless, with the evolving technologies, financial criminals also seek contemporary means of stealing sensitive information and user identity. It not only affects a company's revenue but also impacts the business’s trustworthiness.
Ongoing KYC monitoring can help keep these criminals away from your business and retain your customers. Financial fraud prevention is one of the KYC use cases where you can implement a customer’s identity and document verification, biometric matches, personally identifiable data, and other elements to prevent fraudulent activities.
Anti-Money Laundering
Anti-money laundering is one of the most important KYC use cases, which is a quite complicated process and requires several processes to be done correctly. However, the AML process is crucial for industries such as financial institutions or banks. Otherwise, it may bring huge penalties. Other than this, you must identify your customer and keep track of their transactions in case of any mysterious activity.
AML involves risk management and staff training processes. That is why it is one of the most complex and expensive procedures to fight against fraudulent practices. Besides, executing AML compliance regulations need a series of third-party apps that might be helpful in making the transaction processes seamless.
Integrating KYC offers a whole solution that meets all AML compliance requirements. It uses machine learning and artificial intelligence that demonstrates a wide picture of sectors with high risks to recognise money laundering patterns, identity theft practices, and hidden connections with PEPs to prevent fincrimes.
User Verification
For online businesses and e-commerce communities, the possibilities of cyber fraud increase. Eventually, these businesses start losing their customers through a lack of user trust. During customer onboarding, neglecting customer verification can also be one of the major reasons for the rise of financial crimes or identity theft.
Hence, KYC regulations are applied within the application during the onboarding procedure in order to verify the client's identity. With access to a significant and constantly growing global document database, it has become pretty easy to verify customer identity. KYC can be conveniently incorporated across numerous platforms to recognise user identity and make onboarding decisions hassle-free.
Automated KYC
Fintech criminals are perpetually evolving and applying new means to conceal their identities and commit financial fraud. That is why you need a solution that digs deep to identify these criminals and detect fraudulent acts.
KYC comes in various types and automated KYC verification is one of them. Automated KYC delivers an extensive and more in-depth identity verification procedure that combines advanced biometric verification along with powerful documentation authentication.
With automated KYC, your customers can go through a quick identity verification process with face recognition in real-time. You can verify these customers and identify risks associated with them. In case of fraudulent customers, you can run further verification processes.
Final Thoughts
KYC has become an essential part of financial organisations that help you fight against fraudulent crimes and develop user trust. In this article, we discovered five KYC use cases. Each of these cases is a crucial element in the KYC procedure to unlock user insights and mitigate financial risks associated with them.
Hence, KYC incorporation offers an extensive solution towards AML that uses contemporary technologies to recognise fin-crimes and prevent money laundering practices. Implementing KYC procedures during the customer onboarding and verification process authenticates user identity that not only helps retain customers but also protects your businesses from being involved in fraudulent activities.
