Are you looking to streamline customer onboarding while complying with anti-money laundering (AML) laws? KYC automation can help! This blog post will cover the differences between KYC and AML, the laws concerning KYC and AML, and how KYC automation can help you save money and optimize your customer’s experience while ensuring compliance with all applicable regulations.
What is KYC?
Know Your Customer (KYC) is standard across many industries that ensure businesses can verify a customer’s identity and any associated risks with the customer relationship. KYC requires customers to provide a personal identification profile and has three components – the customer identification program (CIP), customer due diligence (CDD), and enhanced due diligence (EDD) of a customer’s account once it is opened. Automated KYC processes use remote identity verification software to quickly and securely collect and validate identity documents, including passports and other government-issued IDs. This technology can streamline the KYC process while reducing the cost of manual checks and improving compliance with laws and regulations. By the end of 2023, more and more banks and financial institutions will be implementing KYC automation to facilitate a smoother and more secure onboarding process.
What is the relationship between KYC and AML?
KYC verifies a customer’s identity, while Anti-Money Laundering (AML) involves detecting and reporting suspicious activity to prevent money laundering. Banks are subject to strict laws concerning KYC and AML, including a requirement to implement policies to monitor customer activity and report suspicious transactions. Banks must also ensure compliance programs meet regulatory requirements and establish reporting policies for suspicious activities.
KYC is a broader set of guidelines for verifying the identity of customers, which usually includes questions such as whether the person opening a bank account is a real person, if they live at the given address, and if they are of legal age. KYC also involves ongoing monitoring to ensure the customer is still eligible for services. Automated KYC solutions can help streamline this process by utilizing remote identity verification.
AML falls under the KYC regulations but focuses more on financial activities and money laundering. AML consists of use cases such as automated KYC processes, enhanced due diligence, reporting policies, AML screening, and compliance program requirements. Examples of money laundering activities include fraud and tax evasion. Businesses must comply with AML regulations and have a clear plan to reduce the risk of money laundering.
Why is it essential to comply with KYC and AML Regulations?
Businesses have an ethical responsibility to adhere to KYC and AML laws to help prevent money laundering and other financial crimes. Failure to comply can result in fines, sanctions, or criminal prosecution. By implementing automated KYC processes, companies can ensure they comply with relevant laws and regulations while streamlining customer onboarding. Additionally, AML screening tools can help businesses identify suspicious customers before they can engage in any illegal activities.
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How can KYC Automation help my business?
KYC verification is essential to many businesses’ onboarding processes. Unfortunately, manual KYC is expensive, inefficient, error-prone, and time-consuming.
An automated KYC process can offer numerous benefits, such as saving time and money while optimizing user experience. It can also help businesses meet their KYC and AML compliance requirements while providing an efficient way to manage customer onboarding and identity verification. An automated process also increases accuracy, delivers faster onboarding times, improves customer experience, and reduces manual effort.
The case for automated KYC – real-life applications
Digital customer onboarding
With the emergence of digital banking, more and more customers are signing up online. This increases the risk of money laundering, as online financial institutions and other e-commerce platforms don’t have physical contact with the customer to check their identity. Automated KYC processes combine technologies such as identity verification software, enhanced due diligence, AML screening, and reporting policies to confirm the identity of customers quickly and securely without needing physical contact.
Age verification is a critical part of automated KYC and remote identity verification processes. It helps businesses comply with AML regulations. Online gaming platforms, online casinos, alcohol retailers, and tobacco vendors use remote age verification as part of their KYC processes to ensure they are not serving minors.
Driver verification is an important process for ride-sharing services or delivery companies that rely on drivers to complete customer orders. Identity verification ensures that the driver is who they say they are by verifying their identity documents such as a passport or driver’s license. AML screening helps to protect companies from financial crime and money laundering by detecting suspicious patterns of behavior in the driver’s banking activities.
The identity verification industry is expected to grow tremendously in the coming years. According to a recent study, the global market size of identity verification solutions is expected to grow from $9.7 billion in 2020 to $18.3 billion in 2023. This increase is due to pressure from governments and regulators to implement strict AML compliance programs and heightened demand for automated KYC processes. Compliance with KYC and AML regulations is essential for banks and other institutions to protect themselves from money laundering and other criminal activities. Automated KYC processes can simplify and speed up the customer onboarding process while providing organizations with an efficient way to adhere to applicable laws and regulations.
Take your remote customer onboarding to the next level – say “yes” to increased conversion and regulatory compliance and “no” to money laundering and fraudsters. Connect to the most powerful, global, accurate, scalable, and user-optimized KYC platform with a single API. AU10TIX has the only global identity management solution built to outsmart fraud with 100% automated technology.