Technological innovation has helped modern-day industries flourish and enabled fraudsters to use sophisticated techniques and achieve their nefarious goals. Cybercriminals gravitate toward banks, financial institutions & other industries to benefit from various facilities.
Nonetheless, modern financial firms want innovative digital solutions that deter high-risk entities and only attract genuine customers. In this case, only a state-of-the-art online KYC verification can address the above challenges and discourage external attacks
Understanding the Importance of Online KYC Verification Process
The KYC system is critical to protect mainstream financial institutions. Cybercriminals gravitate toward organizations that have traditional security systems. The primary purpose is to exploit the loopholes in their mechanisms and gain free advantages. In this light, modern-day corporations must opt for the latest digital solutions for fraud prevention, such as KYC online verification process.
Another major issue is that modern-day businesses sometimes become accomplices in money laundering activities. This makes them non-compliant with AML regulations. Unfortunately, fraudsters can use the money for terrorist financing and drug-related activities. Businesses that remain non-compliant with international standards must experience hefty fines or permanent bans. Therefore, AML compliance and the online KYC processes are crucial.
Taking proactive safety measures helps companies to fight fraud in real-time. For example, cutting-edge solutions can deal with data breaches, ID theft, and account takeover cases.
Several fraud cases happen as a consequence of unaccredited access to digital platforms. Banking service providers must perform online KYC solutions during onboarding to deal with the issue. This progressive approach prevents fraud and ensures compliance with international regulations.
KYC Verification Process Steps
Previously, traditional banking institutions had a procedure for ID verification of their customers, but the online KYC verification process is modern. The process has the following three stages:
- Collecting Data
The first stage in the online KYC verification process is gathering Personally Identifiable Information (PII) from users. At the time of registration, the system asks the client to provide the necessary details.
- Providing Supporting Proof
After completing the first stage, the system instructs the consumer to provide identity proof as supporting evidence. This progressive approach validates the data and ensures its authenticity.
- Validating Data
At this stage, the system has already determined the document template and is checking it against several criteria. This process is important to detect any forgeries in the records. After validation, OCR technology extracts information from the given records.
Customer Identification Program (CIP)
In the online KYC verification process, implementing CIP is the first step. High-risk customers must be identified at this point to reduce the likelihood of fraud. Performing CIP is important as it helps guarantee that the user entity is genuine. Thus, this approach is important to mitigate money laundering and terrorist financing cases.
Customer Due Diligence (CDD)
The next step is to compare the user’s details with the required Know Your Customer (KYC) documentation. This is the second stage of Know Your Customer compliance when basic personal information is collected in real time from customers. In CDD, the system collects the following information:
- Full Name of Client
- Address
- Correct Age
- Date of birth (DoB)
The information mentioned above helps verify customers during the onboarding procedure. The customer is rated based on their credentials once they complete AML screening and financial credibility checks. The customer is identified as high-risk if the user ID is in global watchlists or PEP records. This is where Enhanced Due Diligence (EDDises necessary.
CDD process shows the risk associated with consumers’ profiles. In private and offshore banking, CDD steps must happen comprehensively to discourage high-risk entities CDD is a compatible method that can expose criminals involved in money laundering and terrorist funding cases.
AML Screening
Maintaining KYC compliance takes time and effort. Credibility checks of consumer credentials should be ongoing processes, not just one-time events. This is where perpetual screening can facilitate financial institutions to deal with the risk of fraud. Ongoing monitoring quickly highlights suspicious transactions and cash flow in mainstream financial systems.
For this purpose, experts have introduced a risk management technique that contains various parameters for ongoing monitoring. It includes the following guidelines:
- Transaction above the specified limit
- Numerous transactions in short periods
- Suspicious activities
Final Thoughts
Utilizing an efficient online KYC verification solution can cater to the business needs of all corporations. In addition, modern businesses need to choose a KYC solution to keep up with the most recent Know Your Customer and Anti-Money Laundering regulations. Businesses might speed their progress toward their objectives by working with an outside service provider. Competent suppliers can offer solutions that ensure global support of various documents. Hence, the latest digital solution ensures data protection during customer onboarding.
