Know Your Customer (KYC) processes are a key pillar of Anti-Money Laundering (AML)/Combating the Financing of Terrorism (CFT) efforts around the world.
Global and national regulators are increasingly implementing laws that compel companies and organizations that provide financial or related services to carry out robust KYC on their potential customers.
KYC is considered to be a first line of defence against financial criminals and the risks of identity theft, fraud and other illicit activities – and as such, regulators are becoming increasingly serious about seeing that it is properly implemented.
In parallel, KYC processes have come a long way over the last several years, with innovative new technologies developing end-to-end compliance tech that has significantly improved how KYC is carried out across the board.
In this article, we’ll be taking a look at how a complete, integrated KYC solution can benefit compliance programs for companies across a wide range of industries – and the advantages of implementing one compared to using multiple compliance systems.
Integrated vs Fragmented KYC
KYC is a blanket term that is used to refer to an assortment of processes and checks that are used to establish and verify an individual or entity’s true identity.
The most prominent of these processes include:
- ID document verification (IDV)
- Liveness checks that establish whether the person applying for a service is the same person as that represented in their submitted ID documentation
- Biometric selfie confirmation
- Crypto wallet screening
- Know your business (KYB) checks
- Advanced ID data verification
- AML screening against global sanctions, PEP and adverse media lists.
In addition, companies from certain high risk industries can choose to implement Enhanced Due Diligence (EDD) processes on potential customers in order to ascertain if they have ever been the subject of adverse media, and to gain a greater understanding of their digital footprint and professional / financial / legal track record.
Businesses are obviously involved in a wide a diverse range of different activities, and the specific KYC processes they need to implement will vary depending on the industry or activities they are engaged with, their risk profile, and the specific regulations they are subject to.
Some activities – such as crypto or precious metals trading – are higher risk from an AML perspective than others. Others, such as ICOs, are more risky from a fraud perspective, with ICO or token sale issuers having a higher chance of being both the perpetrators and victims of fraudulent purchases and sales.
The way many businesses have traditionally implemented KYC is by taking a manual, fragmented approach – essentially implementing various different KYC processes using different tools, methods and resources, including human compliance teams.
What this usually looks like in practice is that companies will tend to adopt and use different tools for carrying out the various processes that make up KYC: one tool for ID verification, another for AML screening, another for KYC checks, a different one for crypto wallet checks, and so forth.
There are numerous problems with this approach:
- Data collected from fragmented sources is difficult to process as it is often gained using different metrics and values. This adds to the already extended time it takes to move between tools and platforms, making it very difficult to make a fast onboarding decision.
- Companies are unable to quickly respond to changes in their client base if a different type of KYC check is required, restricting their ability to scale and respond to market changes.
- The lack of uniformity in compliance checks means that data that is obtained in onboarding processes is inconsistent and evaluated according to non-uniform metrics and values, increasing the risk of onboarding clients with misunderstood risk profiles.
- Carrying out KYC checks in parallel to an onboarding process – rather than as part of the onboarding process – creates more friction for customers with the risk of higher abandonment rates – and lost revenue.
- The lack of automation in manual processes introduces the significant risk of human error, in particular when companies are attempting to onboard high volumes of new customers using a human compliance team.
- Human compliance teams require significant financial resources – Financial Institutions (FIs) commonly report that compliance departments are some of the most expensive and resource-intensive in their organizations.
In order to address these issues, technology has been developed that provides comprehensive KYC processes that can be fully integrated within a native onboarding process.
In parallel, advanced, automated KYC solutions are both modular and dynamic, meaning that companies can configure their processes to react to different clients according to their unique traits.
For instance, an automated KYC solution can be integrated within an account sign-up process on a platform, which then subjects the applicant to specific questions and screening according to factors such as:
- Risk profile
- Whether they are an individual or a corporate
- The type of services they are signing up for
- And many more
KYC-Chain’s automated, end-to-end and Integrated KYC solution allows companies to streamline the onboarding process for their customers, leveraging advanced technologies such as Passive Liveness to establish frictionless and seamless experiences.
The KYC-Chain solution allows companies operating in industries as diverse as crypto and financial services to precious metals traders, real estate, healthcare and many other gatekeeper industries to:
- Build robust and verified customer profiles,
- Significantly reduce the risk of identity fraud and its consequences,
- Remain compliant with global AML regulations
And it’s possible all through one, seamless and integrated process that significantly reduces onboarding time, minimizes user drop offs, boosts customer satisfaction, significantly reduces the overall compliance costs – and in many cases entirely overrides – the need for costly, human compliance teams.
Looking for a one-stop KYC solution to integrate on your platform?
Get in touch and we can start a conversation about how KYC-Chain can be your partner in the process.