KNOW YOUR CUSTOMER (kyc) is the process which business and financial institutions use to identify their clients or customers,it helps companies to identify the authorized personnel of their company only and to avoid any fraud eg anti -money laundering (AML) and counter terrorism financing (CTF) regulations. The main purpose of KYC is to prevent any illegal activities such as money laundering and Fraud ,the main purpose of KYC regulations is to identify that the entities and people who are involved can be identified and that they are legitimate. The stats show that US financial firms pay 25.5 billion per year in AML compliance costs in order to prevent money laundering
18 out of 20 or roughly 90% of the largest banks in Europe have received sanctions for money laundering cases.
The major approaches that are used for identify verification are listed below:
- Fcae verification
Face verification is the process of using facial recognition technology in order to verify the on boarding of the employee or an entity ,it is commonly used in the banking services as well as financial and e-commerce services as well.
The face verification key processes are:
- Capture: the customer’s facial image is captured using a webcam and sometimes a live image as well. The main purpose is to keep a track of the customer’s who are becoming customers of your company.
- Database comparison:The extracted facial features of the customer helps the company compare your entered credentials against their pre-existing databases to match the online customer database if the entity is valid or not.
- Verification decision:Based on the analysis done by the database system , the software then identifies if the identity is a match it will then allow the customer to proceed ,this falls under the customer checklist section which is the process of identifying which customer is legitimate and which one is a fraud.
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Document verification
Document verification is KYC means to verify and authenticate the identification of the customers who try to get inside the system, it is a crucial process in the banking industries as well as financing institutions in order to prevent the hacking or unauthorized access to the system .
The document verification usually involves the following steps are
Document collection: it is the process of collecting the data and further verifying it. All of this process is done online in order to check the customer status online.
Document authentication:this process involves the checking of any sort of forgery being performed or alterations and sometimes tampering as well
Data extraction:
The relevant data is extracted from the employees .it is done using the optical character recognition (OCR) ,this step helps automate the verification process and reduces manual effort.
The next step in the data verification is the process of Address verification
Address verification services:
Efficiently extracting the individual’s address from their identity document through OCR which is done in Real time to basically know the customer requirements,real time address document validation.
The next step is the address verification process in which the kyc will review the given document and identify the address details,the verification process may be done manually or automated.
Address lookup:
Conforming if the address URL is valid or not, comparing it with old databases to check if the online status of the customers in valid or not .
Geo address check:
This is the process where you cross check the user -provided data with geolocation of the data by verifying accurate time lapse decisions.
Two factor verification in KYC
It is a security process that requires two different forms of verification or process before granting access to the system or service
- Traditional KYC Process: The KYC process typically involves collecting personal information and documentation from customers, such as government-issued IDs, proof of address, and other relevant documents.
- User Registration: During the registration process, the user provides their personal information and necessary documentation as part of the KYC process.
- First Factor Authentication: After submitting the required documents, the user will be asked to create a username and password for their account. This is the first factor of authentication, which is something the user knows (password).
CONCLUSION
To conclude it is best to say that the amount of fraud and the money laundering which is being performed on a daily basis in the banking system and other financial institutions gives us the idea that KYC if done performed correctly prevents all the fraudulent matter in the organizations it gives the information regarding the customer’s online statuses ,gives the idea of customer’s solutions and the checklists as well and know your customer’s checklist. It is the future of Online banking and other financial institutions with 100% transparency.
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