Know Your Customer – Eliminating Fraud Rate with Kyc Fundamentals

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With the advent of innovative technologies and solutions, the fraud rate is getting higher. Fraudsters find opportunities and loopholes in every new technology that is launched to serve some purpose. They exploit vulnerabilities in the system to find ways to fulfill their malicious desires. Most of the industries that are targeted by these fraudsters include the ones that run some financial system, for example, financial institutions, real estate, cryptocurrency service providers, insurance companies, etc. in addition to this, online platforms that include e-commerce industry, online gaming, the gambling industry and bank portals, etc.

Know Your Customer, that was just previously adopted by traditional institutions manually to identify onboarding identities is, now, need for all online platforms to process. The online fraud can be reduced with the help of a stringent Online KYC Process that identifies and verify each onboarding entity and eliminate a number of fo scams. A large number of fraudulent activities include identity theft, data breaches, online payment scams, money laundering, terrorist financing, and cyberattacks. The major reason that gives birth to these frauds is unauthorized access.

Especially, the companies holding sensitive user data are more prone to data breaches and identity theft. Stolen identities are used to create accounts on legitimate websites and perform malevolent transactions through stolen credit card information. This can be eliminated by verifying the entity every time it asks access to some online account, database or online services.

Replacing Traditional Verification methods with Digital Verification

Manual user verification in banks is a time-consuming process, requires more resources and human power to conduct KYC. Fintech and banking industry is revamping traditional verification norms with digital identity verification solutions that help organizations not only banks but other industries that deal with finance and user data to adopt them.

A streamlined verification process helps in identity verification within seconds in real-time. An online account opening has become efficient with digital and innovative solutions that are harnessed by various industries. To comply with the local regulatory authorities and to ensure security both at the user and administrator end, online know your customer is becoming vital.

Fundamentals of Know Your Customer

The basic process of KYC ensures its 3 fundamentals that are discussed below:

Customer Identification Program

Customer Identification Program (CID) is a process in which financial institutions need to verify the people who are supposed to conduct transactions through their platform. It serves the purpose of eliminating money laundering, terrorist financing and performing illegal transactions.

Customer Due Diligence

Customer Due Diligence (CDD) ensures identity verification and analyses the associated risks through an individual. This includes verification of identity against several criminal records to verify that identity is not involved in any criminal activity previously or currently.  CDD ensures screening of customer and identity verification checks through which an honest identity can be filtered out.

Enhanced Due Diligence

Know Your Customer includes Enhanced Due Diligence process that verifies identity against a number of sanction lists and databases of criminals and exposed personalities such as Politically Exposed Persons (PEPs). In this way, any illegal entity will jot be facilitated through the legitimate platform.

In case of any discrepancy in the adoption of the aforementioned methods, regulatory authorities are stringent to take actions that might include harsh penalties that could be harmful fo business reputation. To avoid fines and incidences of fraud, it is crucially important to comply with the requirements of relevant regulatory administration.

To conclude, industries that conduct the identity verification process include a screening of customers using know your customer services that conduct digital verification in real-time. This efficient verification process helps to reduce the fraud rate by eliminating the headache of manual verification through online Know Your Customer.

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