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In a company, the very first step in a Customer relationship is to Know Your Customer. Most of us, we consider ID verification and KYC both are similar. They are the same in some instances but when we combine compliances and legal requirements with ID verification, the end result is KYC (Know Your Customer). In a more technical way, we can say that KYC is a process where a business or a company performs some steps in order to verify the identity of a person. This process can be at the start of doing business or during as well.
The Process and How Does it Work?
It is primarily the combination of both, verification and identification of the identity of a person. It explains a process where certain checks and controls are applied in order to check whether the person is having any relation with terrorism, corruption, or money laundering. It consists of a process where a person is verified with the given information, whether he is actually who is saying he is.
How the KYC Process Begins
It may start with the following steps.
1- Customer Identification Program (CIP)
It is a general practice for all the banks and financial institutes, where they are collecting basic and necessary information from the clients, that includes:
Date of Birth.
2-Customer Due Diligence
It consists of 3 levels.
A- When a basic or low-level risk is involved, mostly in basic bank accounts, then Simplified Due Diligence is conducting.
B- Basic Due Diligence is required for all kinds of customers for verification of their identity.
C- To mitigate risk associated with a certain customer, Enhanced Due Diligence is required to check for any deeper level of activities associated with the same client.
3- On-going Monitoring
Sometimes you have to check a certain person after initial monitoring because it is not enough. There are multiple factors that conclude this strategy, which includes unusual cross border activities, involvement with any sanctioned persons, or if there are any unusual ups and downs in their activities.
After the initial information collected from the clients, these are cross-matched with the database to make sure whether the person is not involved in any illegal activities. One of the databases is Anti Money Laundering screening.
One of the legal requirements in the process of KYC is AML screening. Anti-money Laundering (AML) consists of the laws, directions, and methods aiming to anticipate goons from masking wrongfully gotten reserves as legit funds. These laws and regulations consist of different databases from around the globe. And targets the persons who are involved in the process of manipulation of the market, trading of illegal goods and services, tax evasion, and corruption in different public and private funds. Even their activities are monitored if they are using any methods to conceal their money, which they have derived from different crimes.
Every country prepares a list of all criminals and shares with Interpol in order to highlight them in the international market so the other party must know them before doing any business activity with them. There are some regulatory bodies that provide a list of these ill-goons, some of them are as follows.
1- OFAC (The Office of Foreign Assets Control)
2- EU (European Union)
3- DFAT (Department of Foreign Affairs and Trade)
4- UN (United Nation)
5- PEP (Politically Exposed Persons)
6- IMF (International Monetary Fund)
and the list goes on.
Once a person is screened from all the AML data sources, and he is nowhere to found in these data sources, then the next step is to verify the person against the document he presents during verification.
In order to mitigate online frauds, the KYC process should include Facial Verification. Certain parameters are performed in order to smoothness the process. Which are as follows:
1- To check for any deep-fakes while taking a picture.
2- To check for any 3D-Depth Detection.
3- Liveness Detection.
4- To check for Micro Expression analysis.
5- Artificial Intelligence Mapping techniques.
These are a few of the measures that are taken to arrange to guarantee smooth operations.
Authentication of Document
In the process of KYC, document authentication is a compulsory element. The client presents an ID document and after initial verification by an expert (that might be a person or a system), the picture present on the document will be cross-matched with the selfie. If both are the same person then the system allows initiating the next step. Certain measures are taken in order to verify or authenticate a document. Sometimes, the information present on the document, compared with the data sources, so the authenticity of the document cannot be challenged.
The Industries where KYC Proves Art and Parcel for their Operations
The following are the sectors where the KYC process is compulsory.
3- Online Study.
5- Login Access to a certain service or premise.
The Advancement in KYC Process
Much obliged to the foremost progressed counterfeit insights advances, onboarding forms have been completely moved forward and digitized. They have maintained a strategic distance from any sort of contact and trouble for the client to get to the farther contracting of items and administrations in a completely secure way. With these advancements, it is only a matter of seconds to ensure swift and smooth onboarding.
With every day passing, where lots of advancement is happening in technologies, there is a huge possibility of mass loss in terms of money and credibility as well. But thanks to KYC Identity Verification Service providers, these possibilities have reduced in a significant way and mitigate the chances of Money Laundering as well by intimating well in advance for persons who are involved in any sanctioned activities in any part of the world.