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Safeguard business identity and secure account with KYC authentication. Online software streamlines procedures to make verification easy for companies.
Know your Customer (KYC) is a crucial process that companies should perform to authenticate the identities of their clients. It’s essential in financial services, Banking and Insurance (BSFI) industries as it involves a high risk of fraudulent activities and money laundering.
From the range ten years-2017 to 2027, global spending in the identity verification market is expected to grow by more than 13$ Billion, increasing from 4.93 Billion in 2017 to over 18 Billion in 2027.
Why is KYC Verification Necessary?
KYC verification is necessary for discouraging financial crimes such as terrorist financing, identity theft and money laundering. By conducting KYC checks, companies ensure that their clients are honest and possess no financial fraud.
KYC verifications also oblige businesses to comply with diverse regulations, including Counter-Terrorism Financing(CTF) and Anti-Money Laundering(AML) regulations. Non-compliance with these regulations results in several financial and legal consequences, including penalties, reputational damage and fines.
Streamline the Onboarding Process: KYC Verification Methods 101
KYC Authentication can be performed through different approaches, depending on the customer’s location and business requirements. Some of the typical KYC methods are:
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ID Verification
This is the widely and most basic used KYC method that involves verifying a client’s identity by using government-issued IDs such as driving licences, national identity cards and passports. It can be executed manually or through automated solutions such as optical character recognition(OCR) technology.
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Address Verification
The customer’s identity can be easily verified by using his address through different documents such as bank statements, rental agreements and utility bills. Address verification supports businesses, ensuring that the client is a legitimate resident of the specific country and stops criminal activities, e.g., address spoofing.
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Document Verification
Document verification revolves around verifying the client documents authenticity, such as visas, passports and work permits. It can be executed conventionally or by using automated solutions such as document verification software.
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Biometric Verification
Biometric verification verifies clients’ identities by their unique physical traits such as iris scans, fingerprints and facial recognition. Biometric verification is viewed as the most secure KYC method because it’s impossible to spoof biometric data.
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Enhanced Due Diligence (EDD)
EDD ensures to perform additional checks on clients who seem to be high-risk or suspicious. EDD checks involve conducting interviews, gathering additional documents or performing background checks to ensure the client has an honest identity.
KYC Verification: The Game-Changer for Financial Institutes and Beyond
KYC verifications provide various business benefits that including:
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Risk Mitigation
KYC verification helps companies recognise and identify potential risks linked with clients such as terrorist financing and money laundering.
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Cost Savings
KYC verification helps companies in reducing costs that are associated with the conventional way such as data storage and management.
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Improve Customer Experience
KYC verifications can be executed efficiently and quickly by using automated solutions, reducing the time needed to onboard new clients and improving the customer experience.
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Compliance
KYC verification ensures that businesses can comply with different CTF and AML regulations that reduce the risk of financial and legal penalties.
Explore the Challenges of KYC Verification: An Overview
Despite the benefits, KYC verifications possess different challenges for companies such as:
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Cost
Implementing KYC verification services is expensive, specifically for SMBs.
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False Positives
KYC verification can produce false positives that result in delays and additional costs for companies.
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Privacy Concerns
KYC verifications involve accumulating and storing sensitive client data that raises privacy concerns.
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Complexity
KYC verification can be a complicated and time-intensive procedure specifically for organisations with huge customer databases.
Summary of Findings
In conclusion, Know Your Customer (KYC) verification is a crucial process used by companies to prove the identity of their clients and assess likely risks that are linked to their activities.
KYC verification is a crucial procedure for businesses in the BFSI industry to control financial fraud and yield various regulations. KYC processes vary depending on industry and jurisdiction, but they usually involve accumulating and investigating personal information such as an address, name, government-issued identification and date of birth.
KYC verification assists in preventing fraud, terrorist financing and money laundering and it also supports companies in complying with rules and regulations. Moreover, it’s a complicated and time-intensive procedure that requires thorough planning and management to make sure that it’s conducted effectively and efficiently.
However, KYC verification is a crucial aspect of modern business operations and organisations should prioritise it to make sure that they can recognise and handle potential risks to their companies and their clients.
