In this digital world, we interact with a lot of people online. In this online interaction, the biggest question that arises is whether this interaction and connection is secure or not. With the introduction of artificial intelligence, all types of social and financial interaction between different people and companies are going digital. These interactions include using social media sites for social interaction and online banking to transfer money from one account to the other.
In these digitized interactions, people sometimes suffer from some kind of online fraud. New methods are devised by fraudsters and looters to loot people online. According to research, Americans lost $770 million to social media scams in 2023. There were around 95K fraud reports and most of them were lodged by teenagers.
To tackle these online fraudsters and scammers, different financial companies have developed different compliance methods. The best method is the KYC compliance method. This method is used to protect all businesses from being a victim of scams, and fraud.
What is KYC Compliance?
The full form of KYC is to know your customer. The KYC method is used to fulfill the identity verification document process of a new client. This method provides maximum security and a lot of companies rely upon this method. It is a checking point used by companies to know the identity of a client or a company before they get into business with them. Banks and other financial corporations also use KYC because a lot of money is involved in their interaction and they attract a lot of fraudsters and scammers. While this compliance method is very important, other methods like KYB and KYT are also important in securing businesses and their online transactions.
What are the KYC Laws?
There are certain laws of KYC that apply to all financial organizations and companies that use online transaction methods to transfer their money. These laws are implemented to prevent fraudsters and criminals from money laundering and other types of criminal activities. The laws also help organizations better understand their clients. These laws include:
AML KYC Compliance:
Anti-money laundering regulations are used by different companies and organizations to prevent money laundering. In the US the bank secrecy act was introduced in 1970 and it is one of the most important laws to fight money laundering. This act helps in safeguarding the assets of a particular company. In today’s time, the banking sectors of the world are in complete compliance with the AML KYC.
The AML KYC helps organizations in stopping scammers and fraudsters from becoming customers by monitoring different suspicious transactions. The money laundering act 2017 also helps in tackling fraud. This act helps in stopping terror financing and other illegal activities.
KYC Requirements for Banks:
The KYC regulations for banks help them in identifying their customers. This also helps them in taking necessary actions against illegal and fraudulent transactions. All the banks have to comply with the KYC regulations to fight money laundering. The governments impose heavy fines on banks that do not comply with these regulations. From 2008 to 2018 around 26 Billion dollars have been paid by banks because of their non-compliance with the KYC regulations.
The basic KYC Processes include:
Biometric Verification:
Biometric verification is one of the best methods through which an organization can stop money laundering. It is a basic checkpoint that helps banks and companies to identify their customers. Billions of dollars are saved every year due to this process. The biometric identification method includes fingerprint scan, face recognition, and voice recognition.
ID Card Verification:
Every person in this world has a different id card. The number of that id card helps in identifying a person. Banks use the KYC method of ID card verification to identify their customers. When the id card verification is connected with face and biometric verification it becomes near impossible for someone to commit financial fraud and launder money.
Document Verification:
One of the most important steps to stop financial fraud is document verification. The process of identifying user documents to fully authorize someone to interact with users, clients, and businesses is called document verification. This is one of the most important parts of KYC compliance and it helps in the verification of a person’s identity. The documents include all types of documents that can confirm a person’s identity like a passport or driving license. AI is used to scan the documents and match them with the information provided by the client initially to make sure that the person is real and not a fraudster.
Conclusion:
To fight and prevent financial crimes such as money laundering, different organizations and banks use KYC compliance methods. These methods are supported by different laws to prevent online scams. It is the best way to verify the identity of a person.
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