Know Your Customer – Shield Prevention via KYC Compliance

September 9 // 0 Comments

With the availability and use of the internet becoming widespread, everyone is connected in the digital space. Businesses and their customers look for digital platforms for transactions and payments. This provides convenience and allows business operations to be carried out from any place at any time, but there are also risks involved.

 

Fraud has been a concern for businesses since the time the internet didn’t even exist, but now it has increased exponentially. Fraudsters use the improvements in technology to their benefit for illicit activities and manipulate systems. KYC solutions have been implemented for quite some time for customer verification, but KYC compliance procedures are now being made more effective.

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What is KYC Compliance?

KYC procedures were traditionally carried out manually and took long hours, which wasn’t favorable for businesses or their customers. Additionally, those methods also decreased productivity while increasing costs. To improve this process, digital KYC compliance solutions came in the form of SaaS products. These services provide the tools for online identity verification using advanced technologies like AI, OCR, and biometrics.

 

Online identity verification for KYC compliance is a process that involves checks for authenticating an individual’s identity. These checks include document verification, face verification, address verification, and AML screening. With these KYC compliance solutions, banks, financial institutions, and businesses can prevent fraud in their systems.

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Document Verification

As part of KYC compliance solutions, document verification uses OCR technology to extract the required information from customers’ documents. The customers are required to upload images of their identity documents for verification, and OCR extracts information like name, date of birth, and expiration dates. These are cross-checked against the information entered by the customer through the digital platform.

As an important part of customer identity verification, due diligence processes involve the monitoring and analysis of background data including the customers’ transactions and other account activity. High-risk entities are screened for possible political connections or involvement in money laundering cases.

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Create trusted user identities with Document Verification.

Traditionally, you have to rely on signals to trust a new user – on a device IP, a phone number, or credit database look-up. But these signals can also be abused by fraudsters.

This creates constant uncertainty, so you can’t focus on the user’s experience, and instead start treating them with suspicion.

Onfido Document Verification lets your users scan a photo ID from any device, before checking it’s genuine.

Combined with c, it’s a seamless way to anchor an account to the real identity of a customer.

Face Verification

To comply with know your customer regulations, biometric technology is used in face verification where AI is used to detect the details of the individual’s facial characteristics to verify their identity. Face verification makes verification much easier and faster because there are no passwords or PINs involved. Also, passwords are complex and hard to remember and are usually not considered as secure authentication methods because they can be hacked.

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However, biometric data is encrypted and difficult to hack. Face verification involves the customer choosing between photo verification and video verification. In the case of photo verification, the user is required to send a photo, whereas video verification involves the system scanning the customers’ faces through the webcam. Face verification uses AI in various incorporated technologies that work together to eliminate fraudsters. These include liveness detection and 3D depth sensing.

 

Liveness detection helps determine whether an actual person is present in front of the camera or a photoshopped video is being presented to spoof the system. It does this by checking the movements that are unique to that particular individual such as gestures, the blink of an eye, and smiling. Similarly, 3D depth-sensing analyses the contours and edges of the face, and determines whether it’s the same person as in the photo on the government-issued ID document submitted earlier.

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As an important part of customer identity verification, due diligence processes involve the monitoring and analysis of background data including the customers’ transactions and other account activity. High-risk entities are screened for possible political connections or involvement in money laundering cases.

Address Verification

Address verification as part of KYC compliance is used by digital businesses and banks to check the legitimacy of their customers before onboarding or providing services. Address verification eliminates identity theft and chargeback frauds, as well as increasing the accuracy of shipping and deliveries.

 

Address verification uses the documents like bank statements, utility or tax bills, passports, and identity cards to verify customers’ identities. In some cases, the customer can choose which document they want to get verified, and otherwise, the company asks for specific documents.

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Just like document verification, address verification also involves the customer uploading scanned versions of their documents with their present address. The system then verifies the information by scanning and matching it with previously recorded data about the customer.

How can I verify addresses?

There are two easy ways to verify address data in your contact lists. The first is to use a USPS® address verification tool. These tools can verify both US-based addresses as well as international addresses in batches. The second method is to use an address validation API. This technical tool connects to your website, Mobile application, or other technology to validate addresses in real time.

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As an important part of customer identity verification, due diligence processes involve the monitoring and analysis of background data including the customers’ transactions and other account activity. High-risk entities are screened for possible political connections or involvement in money laundering cases.

AML Screening

Apart from KYC laws, there is also AML compliance that requires businesses to perform due diligence on their customers. In the cases where a customer is a high-risk entity, the company performs enhanced due diligence.

 

As an important part of customer identity verification, due diligence processes involve the monitoring and analysis of background data including the customers’ transactions and other account activity. High-risk entities are screened for possible political connections or involvement in money laundering cases.

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Final Thoughts

To sum it up, the increasing fraud in digital business platforms calls for security solutions. KYC compliance standards are well-established banks, fintech companies and businesses require to incorporate SaaS systems to verify their customers. KYC solutions use various integrated technologies to perform customer identity verification and due diligence to eliminate the risk of fraud.