KYC Banking – Globally Securing Banks from Rising Frauds and Thefts

Juliet D'cruz

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The world is advancing at a swift pace and technologies are easing difficult tasks. But along with ease are rising frauds and scams. These frauds and scams are paving the way for theft, blackmailing, and corruption. The last two decades have seen the biggest technological advancements, and it has also seen fraudsters changing tactics.

The majority of the time, the victims of fraud are digital banking services. The shift of banks to the digital world has been beneficial as well as detrimental. Banking apps, payment transfer channels can be hacked or misused by criminals.  Financial firms such as banks and audits need to immediately counter these frauds for KYC compliance

The banking sector is highly affected by fraudulent activities. The crime rate is increasing and AI solutions are right in the market to fulfill the prevention needs.

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How is KYC Banking Useful?

The financial sectors have been using the old school method of verifying a customer wanting to open a bank account. The bank asks the customer to enter income details, job status, and other details when wanting to know the eligibility criteria of opening an account. Additionally, they ask for ID documents such as passports, ID cards, or driving licenses and then fingerprint scans for KYC banking. These verifications were priorly done manually and were prone to multiple errors. 

But as the technologies are advancing, the traditional method of data collection is changed to online KYC banking. Customers do not have to be personally present when verifying themselves now as a KYC requirement for banks. Hence, banks are adopting smart KYC banking solutions making the whole process seamless. The banks use artificial intelligence technology to prevent any mishaps of stolen identities, fake profiles, and much more. 

The Process of Know Your Customer Banking Compliance

The automated procedure of KYC banking is very effective and gives precise results. Furthermore, it acts as a defense mechanism to combat financial fraud. 

  1. Information gathering – The information of the customer is collected and the system asks the user to input all identification information to open the account. 
  2. Uploading supporting documents – To verify the customer, artificial intelligence-based technology for KYC banking asks the customer to upload supporting documents. Documents such as smart cards or passports are uploaded as identity proof. 
  3. Identity verification for KYC screening – The documents uploaded and the information entered are correlated for KYC screening. OCR technology extracts information from the uploaded documents and the data is verified. It is performed to make sure the customer is who he claims to be and the identity is not stolen. 
  4. Results dispatched – After customer verification is performed, results are delivered to the clients and are stored in the back office. This data can be used at any time they want to. 

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Benefits of Customer Due Diligence for Banks 

  1. Fraud detection – KYC due diligence has helped businesses in customer compliance before onboarding them. Fraudulent customers can easily be detected and caught when verifying them. Additionally, enhanced due diligence on customers who are flagged can help businesses monitor their transactions and catch any transaction that is misleading or suspicious. Frauds such as identity theft where customers appear with fake documents can be caught through online KYC banking by the document verification. The technology verifies the documents through the recent selfie of the individual and runs AML and CFT checks.
  2. Maintaining the secrecy of data – FinTech companies and banks withhold sensitive information that needs to be protected through added security. Online KYC verification allows securing data so that it does not go into the hands of fraudsters.
  3. Minimizing money laundering risks – When customers are signed up for banking services, flagged customers are regularly monitored. The monitorization of transactions reduces the chances of money laundering and makes it easy for banks to comply with AML and CFT regulations.
  4. Increases customer experience – Happy customers are loyal customers therefore beneficial services such as online onboarding facilities increased customer experience.  When customers get to know that the banks are valuing their users by effectively monitoring and reducing any chances of errors, they are automatically bringing in more customers. This is because happy customers also naturally market the bank they are satisfied with. 

Final Thoughts 

Financial businesses need to perform KYC checks to enhance security measures. Banks are sanctities customers trust and deposit their money in their safe and make transactions. This is why KYC banking is equally important to minimize the risk of fraud.