Tech-world is full of surprises where challenges lie at the heart of benefits. Business market facing new challenges at a skyrocketing pace. With the rise of new competitors, the financial system is more hybrid than ever before. Financial instability is a significant risk today, and businesses are more concerned about enhanced due diligence to ensure KYC security checks because the financial organization is held responsible in case of any invalid information about the customer. The world is rapidly transforming, and customer identity proof is required in every sector of life. It is hard to imagine moving outside the home with an ID card document. To know your client it is mandatory to filter out low-risk and high-risk customers in an effective way.
Bloomberg exposes Nigerian top official $193 Million theft, which signifies the KYC-based financial frauds. Know Your Transaction KYT is also hooked on fraud detection and anti-money laundering processes.
KYC Inclusion in Financial System
Business expansion is viewed today through the lens of technology advancements. The banking sector or any other financial domain cannot afford to avoid KYC Compliance as financial scams are increasing day by day. Economic growth opens new gateways for financers. This way, the need to know your customer checklist has increased. For instance, a client gets registered in a banking system for insurance service without the implementation of KYC compliance mechanisms. It may hide high-risk clients from the eyes of regulatory authorities. Hence, it can end in mega financial corruption or money laundering. The inclusion of the KYC feature in every financial institution is mandatory to overcome existing or possible risks of financial damages.
EDD in Banking and Why is it Requisite for Seamless Financing?
Rapid digitization is visualized in more banking channels as businesses expand, and more digital banking is utilized for transactions. Without KYC, high-risk customers can get an escape route and successfully execute their criminal schemes. Enhanced due diligence is significant in this way but edd in banking is vital to ensure KYC security checks on every level. There are two different types of customers for verification of enhanced due diligence which include:
- High-Risk Customers
High-risk customers include all those customers’ names who are part of the sanctioned list of politically exposed people. These customers are potentially risky for financial sectors because of the white-collar crimes and ill-gotten money. Forbes exposed Malaysian former Prime Minister Najib Razak caught in money laundering and a $700 Million fine is imposed on him. It strengthens the aforementioned argument that the KYC security check saves the financial industry from covert financial attacks.
- Low-Risk Customers
Low-risk customers are not much risk for financial setup but the consistent negligence in KYC security checks may turn the situation worse. Businesses are almost operating on digital platforms but there are still some gaps that need to be addressed to curb chances for potential financial crimes like money laundering, terror financing, other financial scams, etc.
KYC & AML Solution
Money launderers are ringing serious threat alarms for the global financial system. In this need of the hour, authorities need to formulate revised regulations in view of anti-money laundering compliance. For better anti-money laundering steps, a KYC security check is essential. It is important for the financial sector to keep a lion’s eye on all the customers and financial activities. KYC demands all documents including ID cards, complete satisfaction with audio verification, facial verification, video identification, etc. Money laundering can not be executed without tempering an identity card as an identity card is a very important document to make an individual suspicious to authorities.
Hurdles for E-KYC Inclusion in Financial System
Electronic KYC security check is not as easy as it is perceived because there is a number of challenges in the face of financial inclusion. The barriers are manifested in the form of offshore banking accounts, credit card payments, insurance systems or loan services, etc. So, Criminal minds always stay active in getting illicit finances without any record in the databases of authorities. Atlantic Council paper reveals Caribbean offshore account holder’s involvement in organized money laundering attempt. Although E-KYC security check integration is in process on mega-scale inadequacies, need to be addressed on a priority basis to avoid financial fraud.
Final Thoughts
Businesses set goals for better KYC security check to maintain synchronized and transparent financial flows without any hurdles. Moreover, The law and enforcement authorities define digitized regulations to fight back against financial frauds perpetrated on the pretext of smooth financing. There is a need for uniform legislation and customer due diligence to earn more profit, and due actions could be taken against criminals without discrimination. It is the moment to implement the solution against low and high-level financial risks. So, the customer’s onboarding is brought under the AML and CFT compliance regulations for productive financial progress. Moreover, Customers are the backbone of any financial institution but checks and balances are the prerequisites for uninterrupted financial solutions.