In this modern era, businesses have benefited from technological innovation, but fraudsters have also devised sophisticated ways to achieve their malicious purposes. Cybercriminals always want to get their hands on sensitive user data to exploit banks, credit unions, and e-commerce platforms in order to commit fraud and legalize their black money. This is where the importance of implementing the online KYC verification process cannot be underestimated.
A big obstacle is that cybercriminals can use businesses to launder money, making them an accomplice in the crime and showing non-compliance with global and local AML regulations. Unfortunately, black money supports terrorist financing and identity theft cases. In this light, regulatory bodies punish all enterprises that do not stay put with the given standards. Hence, both online KYC verification and AML compliance are compulsory for modern-day industries.
Complete Process Behind Online KYC Verification Systems
The AI-driven KYC validation process is important to validate the identity credentials of onboarding customers. The complete procedure is below:
Ensuring Accurate Data Collection
This phase is about gathering Personally Identifiable Information (PII) the collection from the new customer. The user must provide all the required details during the account registration process.
Demanding Additional Evidence
This stage is about asking the user to provide supporting proof for comprehensive ID validation. This step is essential to ensure the originality and authenticity of data.
Validating Data in Real-Time
After the completion of the second step, the system identifies the documentation template and examines it against various checks. This is to ensure that there were no document forgeries. After validation, the OCR technology extracts the data and sends the final results to the client. The following section highlights three important components of the online KYC verification process.
Customer Identification Program
In the online KYC verification procedure, the Customer Identification Program (CIP) is the first stage. This is where the identification of high-risk clients must happen to reduce the risk of fraud. The main purpose of CIP is to ensure that a genuine entity is always performing financial transactions. This step is essential to fight money laundering and terrorist financing cases to protect the mainstream financial systems.
In CIP, financial service providers must collect user data to open a bank account. The experts must gather the following information:
- Full Name of Client
- Address
- Date of Birth (DoB)
- Identification number
After the data collection stage, the system verifies the information against various pieces of evidence that can come from biometric verification or document verification solutions. Additionally, CIP includes risk examinations of clients’ and business accounts. Consequently, online KYC verification procedures play an important role in fraud prevention. This is where business experts decide whether to opt for Customer Due Diligence (CDD) or Enhance Due Diligence (EDD) processes.
Customer Due Diligence
This is a basic risk evaluation process in which a user’s data is checked against KYC protocols. In KYC compliance, this is the second component where the system asks for basic information. In CDD, the customer must provide the following information:
- Full Name
- Address
- Correct Age
- Date of Birth (DoB)
After this phase, the system assigns a rating according to credentials after performing the AML screening procedures and ensuring financial credibility. If the system highlights a high-risk entity, the risk is high, and experts must perform Enhanced Due Diligence for comprehensive analysis.
CDD helps experts determine how much a customer profile is a risk for concerned institutions. In private and offshore banking, experts must perform CDD procedures to identify any suspicious identities in the system. CDD provides a pragmatic approach that can easily highlight money laundering and terrorist funding cases in the mainstream financial systems.
AML Screening
There is so much more to KYC compliance, and performing one-time customer validation does not finalize the credibility of any identity. This is where experts must perform perpetual ID screening in an organization to mitigate fraud risk effectively. Ongoing financial transaction monitoring can help identify suspicious exchanges early on before the situation exacerbates.
For this reason, professionals must follow a risk mitigation strategy for active fraud prevention. The parameters must include the following:
- Identifying transactions above the set limit
- Highlighting frequently happening financial transactions
- Showing suspicious activities
Concluding Thoughts
Implementation of online KYC verification solutions is essential for all modern-day business sectors. In order to stay put with the latest KYC & AML standards, organizations must opt for a KYC solution that is in accordance with KYC compliance. Working with a third-party service provider can offer a one-stop solution for corporate professionals. In this way, users can benefit from real-time online KYC verification services that ensure global coverage and are multi-lingual. Hence, the AI-driven digital solution can comply with data protection standards for quick customer onboarding.
