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Why does the financial industry need KYC & AML compliance? 20 October, 2020   

As per the UN office of drugs and crimes assumes, the global annual money laundering total is 2% to 5% of the global gross domestic product. The large increase is a point of worry for regulatory authorities and organizations. Regulatory obligations are becoming stiffer and know your customer is becoming essential for organizations. With changing global know your customer regulations, the greatest concern of organizations is to smooth their compliance processes with client onboarding. Money laundering is increasing at a faster pace in recent years. Financial organizations are under the strict stringent of global financial watchdogs. Millions of dollars of penalties are imposed on financial organizations in the event of non-compliance. Online KYC know your customer screening solutions answer several concerns of authorities planning to implement know your customer compliance in their industry. 


Common thefts with financial institutions are listed below:

    Money laundering 

    Money laundering is executed to hide illegitimate money. Financial institutions are utilized by fraudsters to launder their illegitimate money in other countries and to finance terrorist funding. Financial institutions are not allowed to expand services to money launderers, in case the financial institutions are not found to be involved in such illegitimate transactions they are penalized as per anti-money laundering authorities.

    Account takeover fraud

    Account takeover fraud is also a very frequent fraud in financial institutions. The fraudsters take over the account of legitimate clients using stolen personal information such as passwords, Pins, etc and utilize it for accumulating cash or to make a payment through that account. This is why financial institutions are funding biometric verification for account takeover.

    Phishing scams

    A very frequent cyber-attack on banks is a phishing scam that is carried out through fake emails sent to the staff of banks. These scams are done to gain illegitimate access to the personal information of an organization. Staff training and firewalls is a good practice to reduce these scams. 

    Fake identities

    Fraudsters use fake identities to open accounts at banks to conduct their illegitimate activities. The most common victims of fraudsters are the bank because they serve the money motive of fraudsters. 50% of those identities were stolen to purchase credit card fraud with monetary institutions and organizations.


            Six ways that KYC can help financial institutions 

    Face verification 

    By simplifying, the client takes a picture with their smartphone gadget or with a laptop. The software makes sure the physical presence of the user. 

    Document verification 

    With the camera of a smartphone gadget or laptop, the software scans documents for KYC authentication. Usually, this includes authenticating government-issued ID cards, utility bills, driver’s licenses. They also verify the format to ensure that the document is legal and original.  

    Two-factor authentication

    The combination of smartphones and the internet is used in the 2FA. The client is then requested to put that digitized code into the site interface to check authenticity.


     AML Screening

    Financial institutions not only have to acknowledge their client but also have to perform due diligence before doing any form of organization with them. 

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