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Online KYC Checks – An Absolute Need in the Modern Era




The rise of digital platforms and technologies has caused new crises in the cyber world. New types of online scams and frauds are increasing at a higher rate. To tackle this situation, identity verification solutions provide a great number of advantages. In order for businesses to perform their functions smoothly, the Know Your Customer (also known as KYC) process can be used to detect the true identity of its users and reveal any financial risks in accordance with money laundering and terrorist funding activities. This is an essential function as more and more clients are connecting digitally from all corners of the world justifying the dire need for verification of their identities. 

Authentic Customer Onboarding with KYC

The KYC authentication program is the backbone for effective identity verification for businesses involving the exchanges of money. Banks and financial institutions require verification of a client before opening an account or processing transactions in a successful way. With the growing importance of KYC and anti-money laundering (abbreviated as AML), corporations are devoting resources and time to comply with regulations in order to reduce phishing crimes, data breaches, and identity theft in the cyber world. 

Three Compliance Requirements of KYC 

At the beginning of customer onboarding, KYC Due Diligence is used for the identification of clients and detecting whether they are actually who they claim to be or not. In addition to that, three more steps are used for client KYC verification which are:

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1. Customer Identification Program

In a customer identification program or CIP, financial institutions pull out a certain amount of personal information to verify entities including name, date of birth, address, and identification number. Furthermore, it is then matched with documents to verify the reality of the customers so that additional action could be taken. 

2. Customer Due Diligence 

CDD or Customer Due Diligence is a program that consists of monitoring of customer’s activity throughout the transaction period or any suspicious activity. It also assesses whether the information provided by the customer during the registration time is correct or not. It also concludes how much risk an individual can provide to an organization.

3. Enhanced Due Diligence

The process of EDD, also known as enhanced due diligence, is used to assess high-risk individuals which require additional information as compared to the basic information derived from the customer due diligence program. Those people possess a higher probability of getting involved in money laundering cases and might have a connection with terrorist funding. It involves checking the background information, sources of funds, and adverse media. EDD is generally used to trace politically exposed persons (PEPs), government officials, and financial associations who might have a higher risk rating. 

The Legal Importance of AML

In order to achieve regulatory compliance, KYC anti-money laundering (abbreviated as AML) measures are placed in firms to estimate controls and processes to monitor and perform screening obligations in corporate sectors. Its laws are instructed by both the local and global authorities in the world. KYC and AML are interlinked in soo many ways yet KYC is a component part of AML which specifically verifies the customer’s true identity before any transactions are made. 

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Are KYC and The Banking Sector Interconnected?

KYC banking is a procedure that has a high level of significance in financial organizations. Before a client’s request of opening an account in the bank is accepted, there is a ton of work that needs to be done. After the document verification process, banks need to understand the basis upon how the customers are going to utilize their accounts, assess their risks, and determine whether the decisions they might take in the future are going to align with their restricted guidelines or not. It enhances the customer relationship between the bank and the consumer by establishing strong bonds of trust and transparency. Therefore, online KYC checks hold a great amount of importance in banks.  

Wrapping it Up

No matter wherever the people are sitting in any part of the world, becoming a victim to phishing crimes, illicit scams is easy. Financial institutions need to implement an efficient KYC solution to eliminate such problems. Furthermore, online KYC checks are executed at the time of customer onboarding, making it a hassle-free process for the customers as well as for the businesses. It relies on the collection of identity information of the client, moreover, an analysis is conducted to do verification upon the compiled data to examine for potential risks it can provide to the organization. As more and more customers are onboarded quickly and to tackle the changing dynamics of AML and KYC, the assessment process should be ongoing to monitor and ensure that a customer’s risk profile keeps on matching with the previous review of the firm. Lastly, if a financial corporation detects any suspicious activity, they should report it immediately so that further steps could be taken to deal with it.

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