Before talking about moving KYC procedures online, let’s first understand what is KYC and its importance.

What is KYC?

KYC is an important procedure that is now required by every small and large company to comply with. The term KYC speaks for itself. KYC literally means to know your customer. It involves the verification of the customers with a government-issued identity prior to building business relations with them. The process of KYC includes knowing important details of the customer, from their real name, facial identity, proof of address, and likewise. These KYC investigations are designed in accordance with the set rules and guidelines provided by the governments and can vary in different states and countries.

Importance of KYC in Banking:

KYC norms are given the utmost attention in the banking industry since banks are one of the highly regulated institutions. Banks and other financial institutions are highly critical when it comes to frauds. They are the goldmines for bad guys to execute financial crimes since banking industries as we all know involve heavy volumes of transactions. 

Fraudulent actions can lead to reputational damage! 

Scammers are getting advanced every day, as they keep figuring out new loopholes to gain access. Bad guys get successful with money laundering due to a lack of proper id verification and other security processes in place. The importance of KYC in the banking sector can be ascertained by the increasing money laundering crimes. As per the International Monetary Fund (IMF), money laundering accounts for 2-5 percent of the world’s GDP. Money laundering is a process to conceal the origin of illegally earned money and converting the same into legitimate earnings.

People even tend to hide their legally hard-earned money to evade paying taxes. They use banks and other financial institutions to hide their money from the government authorities by performing various money laundering tricks, thus hindering the growth of an economy.

The absence of KYC and additional precautions can even make room for terror funding possible. Undetected money post laundering tactics can be used to finance criminals and terrorism. Money laundering is about hiding the source of money and making it legal to integrate it into financial institutions. Therefore, most countries, along with the AML measures have implemented Counter-Terrorism Financing (CTF) act and KYC is the heart of such acts.  

Thus, it is essential for the financial institutions to perform various KYC and Due Diligence formalities to have a brief understanding of who their customers are and the pattern of their transactions to fight any sort of illegal crimes as mentioned above.

KYC requirements in different countries:

KYC practices differ and vary with jurisdictions all over the world. Though the variations are not wide and the key aspects remain more or less standard across the various countries. The guidelines of these KYC, AML, CTF regulations are usually laid down by superior bodies like government authorities, central banks, and federal reserves as it is in their interest to protect the reputation plus goodwill of the financial institutions.

Both financial institutions and governments have put various policies and regulations like these to help prevent money laundering and other scams happening around the globe and are continuously searching for better approaches to battle these crimes. 

For instance, the U.S’s attempts of fighting money laundering date as back as 1970 when The Bank Secrecy Act came in. This particular act requires the financial institutions to verify the origin of unusually large sums, check and report in case of suspicious activities and keep records of transactions exceeding $10,000. After the unfortunate terrorist attack in September 2001 in the U.S, the country came up with the U.S Patriot Act to fight such crimes and integrated the KYC laws into the act.

Similarly, other countries are also coming up with efficient KYC rules to combat the different crimes associated with the banking industry. India is one of the fastest-growing tech-hubs that are continuously adopting new regulations to strengthen their KYC practices and making them digital. RBI, the central bank of India claims to introduce guidelines on video-KYC in the near future. 

Changes and amendments were also observed in 2019 to the Canada KYC/AML regulations. The changes were an indication of Canada’s readiness for KYC procedures happening online. The alteration of the phrase of what documents are acceptable to verify the identity from “original, valid, and current” to “authentic, valid, and current” was one of the most crucial changes. Since the change of word original to authentic makes KYC and digital verification more convenient.

KYC process in banks:

KYC requirements differ slightly when it comes to individual customers and business customers.

Individual customers:

• Procurement of a government-issued id document with photo and address proof.
• Verifying the above with the customer in real-time.
• Understanding the financial status of the customers to ascertain the level of risk involved, and determining the origin of unusually large amount transactions.

Business customers:

• Procurement of documents like business registration certificates, financial statements.
• ID verification of the beneficial owners of the legal entities that own/controls the business.
• Understanding the nature and purpose of the business to help determine the risk profile associated with it.
• Continuous monitoring of suspicious activities.

To adhere to these KYC requirements, the financial institutions are required to collect all the identity details of their customers and verify them before building any business relations with them. Before onboarding new customers, banking officials first need to verify the basic id of the potential customers by verifying if the customers are who they say they are. Therefore, new customers are required to get a few identity documents with photo and address proofs. Then a banking official manually verifies all the details provided by the potential clients. As mentioned above, in the case of business customers, the need for additional documents arises like profit/loss statements and balance sheets.

Since everything is going digital, the e-onboarding of customers in the banking sector is also picking speed. Though, online onboarding faces a big challenge of KYC and further Customer Due Diligence compliance as these processes tend to get complex without an in-person meeting of customers with the banking officials. For validating customer’s identities digitally and in real-time, there is a need for an automated, smooth, robust, and user-friendly id verification solution and something which shouldn’t scare the potential customers with complex technicalities. Moreover, online verification of identities requires biometric such as facial recognition and liveness detection to further establish a trustworthy relationship between the banks and their customers and to be 100% sure if the person behind the laptop/ mobile is who he/she says they are.

Meet KYC, AML , GDPR & CCPA Compliance With AZYO!

AZYO Leverages Cutting-Edge Technologies In It’s Solution & Is The Market Leader in Automated Identity Verification! 

The phenomenal solution has developed with an amazing fusion of Optical Character Recognition, Artificial Intelligence, Machine Learning, Blockchain & Facial Biometrics to verify anyone, anywhere, and anytime. 

With the power of Convolutional Deep Neural Networks, Powerful Graphical Processing Units, Advanced Machine Learning Algorithms, AI-Driven Automation, Optical Character Recognition, Blockchain, Facial Recognition & Liveness Detection, AZYO is consistently evolving to verify identities and prevent fraudsters.

Each human face has 128 nodal points. AZYO’s advanced facial recognition algorithms calculate all the characteristics by pinpointing and measuring facial features with nodal points (such as the distance between eyes or the shape of cheekbones, and likewise) from any human face for the purpose of identification or authentication. AZYO’s facial recognition technology with liveness detection solves the biggest problem in the ID Verification space and makes the process of eKYC highly efficient. 

AZYO’s advanced deep learning algorithms intelligently automates and extract the information from identity documents in order to verify the authenticity and eventually validating the real identity. The whole verification process gets completed at lightning-fast speed and in a blur of moments. AZYO incorporates Optical Character Recognition (OCR) to extract structured and accurate data from identity documents. 

To conduct eKYC it is extremely important to have a security solution like AZYO so as to diligently comply with the various KYC norms and regulations remotely on a real-time basis. Its outstanding solution is capable enough to block any unwanted personalities from your premises.

Moreover, requiring every new user to prove they’re real as soon as they’re asked to present an identity document during digital onboarding is itself a huge deterrent to fraudsters who don’t want to show their real face on camera.