Know your customer is a process used by businesses to verify their customers. Initially, the process includes the name, date of birth, address, and ID number of the customer. It also includes utility bills, passports, and licenses. It helps businesses to know that the people they are working with are the ones who they claim to be. This process is useful in combating crimes especially financial thefts like money laundering. It builds trust among the users and they consider that their information and financial data is secure within the systems. This system can easily detect customers who are at high risk and keep a regular check to prevent any kind of fraud.
What Role Do KYC Companies Play in Compliance and Risk Management?
KYC is a crucial aspect in preventing money laundering and other financial crimes. Companies and businesses are required to verify their customers before and after onboarding them. It will help them take action against those who are at high risk. KYC companies all over the world require to follow KYC rules and standards strictly to prevent terrorist financing and money laundering. The higher authorities should provide more enhanced resources to the businesses to detect money launderers timely. Companies who do not follow the KYC standards have to face heavy penalties and this might be troubling for them.
Moreover, as mentioned earlier KYC helps businesses combat thefts like money laundering and terrorist financing, it identifies suspicious customers timely and keeps a keen eye on them. The regulators can help track the unusual transactions and block the funds that are being transferred to the terrorists. Due diligence solution providers are the one that verifies the customer’s involvement in any of the crimes. This verification prevents companies from onboarding criminals.
How to Choose the Effective KYC Provider
Choosing the right providers is crucial because it can affect the efficacy of the businesses. The companies should consider these aspects before opting for any provider:
- The companies should ensure that the selected provider abides by general compliance standards such as the General Data Protection Regulation (GDPR) and the guidelines.
- Companies should know about the infrastructure of the business, AI capabilities, methods of evaluation, and scalability for enhanced and improved services.
- Businesses and companies should opt for providers that are capable of making smart decisions by using automated services. It is usually a fast and convenient way of proceeding with KYC services.
- Companies should look for the best services of the providers when it comes to security. It should be assessed based on good access control, secure storage, and encryption.
- The experience and the reputation of the provider matter a lot. It can affect the efficiency and trust of the companies and businesses if neglected.
Types of KYC Providers
These are the institutions or companies that provide specific solutions to implement the businesses. These providers ensure that businesses are complying with the rules and regulations provided for the verification of the customers. There are three types such as:
- Traditional Providers
These providers are usually financial institutions such as banks and they manage the KYC process internally. This institution asks the customer to provide their data such as names, addresses, date of birth, and ID numbers to save them for further use. It usually involves the evaluation of documents provided by the user and compared to the databases. As this process is traditional and contains timely checks and balances on its customers, it often calls the user to take updated information for verification.
- Third-party KYC Service Providers
These providers are companies that manage only the KYC processes. They offer effective solutions to be implemented by the companies for verifications. They provide aid to the companies in verifying the documents of their customer including ID numbers, bills, and other documents. These providers are stronger because they can check the records of the customer and the criminal history if any. These providers also keep a regular check on the customer to notice their activities.
- Technology-Driven Providers
These providers ask the customer to submit their information digitally instead of visiting the offices. This automated process is comparatively a fast and convenient process for both the company and the customer. It is done by using machine learning AI and deep learning. AI can verify and analyze a large amount of data in no time. It can timely detect the spoofs in suspicious identities.
Final Thoughts
Several companies or top KYC providers such as FATF (Financial Action Task Force), and BSA (Bank Secrecy ACT) provide the best standards for companies to comply. KYC/AML providers are one of those institutions that provide effective solutions for maintaining a secure and healthy environment. It streamlines the verification process and ensures the trust and security of the companies and their customers.