When it comes to digital banking and compliance, robust KYC practices not only prevent fraud and financial losses but also strengthen a firm’s ability to conduct business with confidence.
This is typically because of the four key elements of strong KYC practices that make sure firms know who they’re doing business with and what to expect from that relationship.
We’ve identified the four essential elements of effective compliance in KYC practices for digital banking in order to show you how they help improve the competitiveness of businesses of any size or scale:
Identifying and Verifying a Customer’s Identity
While this might seem like a basic step, it is critical to the entire business relationship as it is the foundation upon which trust is established.
Not only is there a myriad of ways to fake one’s identity or steal that of another person, but this process is still one of the major problems facing many digital banking and other institutions every single day.
An effective compliance process predicated on KYC practices established to combat this kind of fraud make sure this problem does not poison the business relationship.
Identifying and Verifying the Beneficial Owners of Legal Entities
This process links companies and other legal entities with which you do business to their ownership structure. A dual-layered process, the ability of KYC practices to identify the relevant stakeholders in a company gives businesses a more well-rounded view with whom they are conducting commerce and how to best approach the relationship.
Understanding the Nature and Purpose of Customer Relationships
These two facets combine to help give both the digital banking institution as well as the company employing its services the ability to generate a risk profile and outline the contours and purpose of customer relationships.
A risk profile gives all relevant players a glimpse into any potential pitfalls in the customer relationship as well as delivering actionable data from which firms can make business decisions regarding the future.
Monitoring for Fraud, Risk, and Outdated Information
Ongoing monitoring for fraud, potential risks, and even outdated information means that all parties in a business relationship can operate with the confidence that they know who they are dealing with at the end of the day.
Of particular concern to many businesses conducting commerce internationally is the risk of fraud and robust, well-developed KYC practices largely eliminate this concern with a stringent and thorough analysis of the relationship as it develops over time.
The ongoing monitoring aspect of this process is of particular importance as it allows firms to operate with confidence as well as offload the administrative burden often associated with dealing with security risks and fraud.
The efficiencies this can generate at scale are some of the most powerful innovations of the Fintech industry over the past several years and have empowered firms to operate within new markets with surety and security.
The Future of Banking Technology
In recent times some financial institutions started applying a number of innovative approaches when verifying the profile of their clients and processing KYC compliance.
There are tech solutions available and integrated in the services process of some digital banking solutions providers, which cam identity and run a verification process which ties the digital identity of a customer to an authenticated government-issued ID for example.
In that scenario once a banking customer’s digital identity has been validated, it is further established and processed with a selfie photo and certified liveness detection to ensure that the legitimate customer is present during future payment transactions.
This is not the future but the present. And the same powerful combination of verifying who someone is, binding that person to face-based biometrics, and further securing the transaction with certified liveness detection, allows financial organizations and payment solutions providers to operate more securely and stay in compliance with the myriad of the regulations set.