Financial security is a key component in the activities throughout all organizations. When trading goods and services, insurance against risks follow with the contract, in case of banking and financial technologies, they have to include KYC (Know Your Customer) compliant solutions. KYC compliance affects how financial services companies allow clients to open accounts and complete transactions on their preferred device. Users want to bank online, but banks must meet KYC requirements while also struggling against fraud, financial crimes, and mitigating high-risk transactions.
QuickBlox explains how to be KYC compliant, when and why it becomes an essential part of a company’s security policy, and who is responsible for its implementation.
KYC is an acronym for Know Your Client and means specific customer verification rules used by financial institutions. KYC aims to understand the client better, monitor financial transactions, reduce client risks, and prevent bribery and corruption, while not annoying the client with paperwork.
KYC standards assume that the company must identify and establish the counterparty’s identity before conducting a transaction and make sure that the payment will not be related to money laundering, terrorist financing, or tax evasion. Violation of KYC compliance results in sanctions and reputational losses, leading to bankruptcy. To protect themselves, many companies are introducing strict KYC policies that make the clients’ actions and transactions transparent to regulators.
KYC includes several procedures that can be either single or multiple. In general, they are divided into three main components: identification, verification, and client authentication.
It is the stage of providing documents, at which the system gets to know the client and assigns him an identifier on the company’s server. The user gets a login and password, his voice is recorded, or a fingerprint is taken.
It is the stage of checking documents and information provided, after which the system confirms the person’s identity.
It is a confirmation of identity upon repeated contact. At this stage, the user enters a username and password, and the system verifies his biometric data.
At the international level, the Financial Action Task Force (FATF) (Financial Action Task Force on Money Laundering) sets the standard benchmarks for financial security policy. They regularly issue anti-money laundering policy guidance. The official website also has a brief explanation of all terms related to financial security. The FATF creates lists of jurisdictions with the most transparent financial legislation.
The International Monetary Fund (IMF) also counteracts money laundering, addressing issues at the international level.
In the United States, there is the Bank Secrecy Act (BSA) & Patriot Act, a federal law that assists government agencies in detecting and preventing money laundering and terrorist financing.
In the European Union, Fifth Anti-Money Laundering Directives (AMLD5) define the regulatory framework in the financial and banking sectors. It applies to businesses within the EU and those who do business with European residents. It establishes fully secure digital identification methods so that customers can contact their bank, insurance agencies, administration entirely remotely.
KYC procedures are designed to help financial institutions better understand their customers and monitor the risks of transactions. KYC compliance starts when an account is created, or a customer sets to cooperate with an organization. There are several essential elements to ensure KYC compliance:
The bank, insurance agency, stock exchange, or creditor determines who can become their client. Financial institutions consider all factors related to the customer, his activity, his related accounts, and any other relevant indicators.
It is a process of obtaining identifying customer information to determine the true identity of each client. In practice, this means getting a customer’s name, photographing an official document that confirms their identity and residential address, and date of birth.
It allows detecting suspicious activities such as large cash deposits or wire transfers. Thus, transaction monitoring ensures organizations spot financial crimes before they happen or rather early.
The process of identifying and assessing the content of transfers, allowing to control threats to the digital assets, including proprietary corporate data, a customer’s personally identifiable information (PII), and intellectual property.
KYC compliant solutions are also used by non-financial companies for which it is essential to check their customers and users. These include taxi services, online sharing services, HR services, dating platforms, medical organizations, and telecom operators. Emerging technologies have many practical applications, immediately increasing compliance by reducing uncertainty, increasing flexibility, and cutting off costs. Modern KYC compliant software solutions simplify and advance Customer Due Diligence processes faster and more efficiently.
Cloud-based API solutions can collect data from multiple suppliers, help compliance professionals make informed decisions about risk. It means less time spent onboarding clients and more time spent delivering your services. API solutions can be easily integrated into your customers’ applications, ensuring that your data is encrypted and secure.
It lessens the rate of human errors, providing better reporting, and customer onboarding experience.
QuickBlox offers APIs and SDKs for communication solutions that enable clients to establish KYC-compliant processes faster and effectively. The powerful features like text messaging, audio & video calls allow you to connect with your customers and verify their identity.
You can build a white-label communication solution or integrate it into your online banking system. We use the latest security measures to make our product as reliable as possible, so you can be sure that your customers’ sensitive information is safe and sound. By default, we offer our customers a dedicated AWS cloud with full customization. You can also choose any cloud service provider you want or set up an on-premise installation in your local data center.
QuickBlox helps companies stay KYC compliant, reduce fraud, and ensure a secure customer experience.
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