Over the past decade, financial institutes were the biggest targets of money laundering that called for hefty fines or penalties crossing billions of dollars. One such example of money laundering is SEB Sweden (Nordic Bank scandal) – it involved the movement of illegitimate money through various European banks with an estimated value of around $200 billion. The regulators in Sweden handed over a massive fine to SEB Sweden with almost $6 billion.
However, this means that organizations shouldn’t only be focused on multiplying their profits. The companies should also be able to identify their customers to meet stringent KYC AML compliance. Because businesses could eventually expose themselves to criminals with new business partnerships by not fully knowing about their past and present. Therefore, companies could be exposed to hefty fines, penalties, and lawsuits. Moreover, businesses could also suffer from reputational damage to their brand name.
Nowadays, industries are facing an unprecedented power of technology that is creating economic opportunities in each sector. But, it has also significantly increased complexities across the globe. As criminals use it to find loopholes within the security systems – it builds pressure on organizations to recognize and analyze who they are doing business with. Therefore, this pressure continues to manifest in the form of AML KYC regulations.
What is KYC compliance?
Know Your Customer regulations are often referred to as verification of customer’s identity – either before or during the time of business. This term is also referred to as KYC authentication that involves authenticating the identity of banking customers for analyzing and monitoring the customer risks. Moreover, KYC is also legally required to measure anti-money laundering practices.
However, KYC laws are a critical aspect of keeping up with customer risk assessment and anti-money laundering regulations. Implementing an effective KYC method usually involves identifying the customers and tracking their financial activities that might pose risks to the entire financial system. Therefore, the question arises who is impacted by such actions?
For this reason, regulators are seen to be practicing strict control over financial institutions for performing a better verification of customer identities. It usually happens while opening and maintaining the accounts. Organizations have to practice KYC due diligence to know and retain their customers. Whether or not companies are subjected to AML KYC regulations, more organizations are now adopting KYC compliance to protect their business and customers.
Moreover adopting stringent KYC regulations is fundamental for protecting the organization from various fraud attempts and losses that result from illegal funds. For this reason, KYC is often referred to as the steps took by various businesses for:
- Authenticating the customer’s identity
- Fully comprehend the nature of customer activities
- Finding the source of illegitimate customer funds
- Analyze the money laundering risks attached with each customer
- Tracking the customer’s financial activity
How AML KYC Regulations Affect Customer Experience?
For some regulated organizations, implementing AML KYC regulations often prolongs the most simple activity like opening a new bank account. According to an estimate, banks usually require around 24 days to complete an entire customer onboarding process. But this would only increase pressure on the organization, as regulations become more stringent. However, it’s quite important for industries like finance that are posed with a high-risk to ensure thorough assessment. In most cases, AML KYC compliance creates friction in customer experience. This results in a high customer abandonment rate and increased losses in revenue.
For this reason, incorporating an automated KYC and AML solution could prevent organizations from high-risk situations. Moreover, organizations like financial institutes can ensure a seamless customer experience during an onboarding process.
Importance of Enabling KYC AML Compliance
How do you verify someone and who they are claiming to be? For various financial services providers, KYC compliance plays a vital role to enable a secure customer experience while opening accounts and performing a financial transaction. Banks have to mitigate fraudulent risks by fulfilling all requirements of KYC AML compliance. This would ensure the protection of customers during an online transaction and offer robust security.
For this reason, organizations need to integrate a robust identity verification solution for meeting KYC compliance. For this reason, industries need to make a switch from employing human resources to automation for conducting KYC authentication. Moreover, enabling stringent verification methods like document verification would offer more accurate results.
In the face of high-risk situations composed of hefty fines and penalties due to fraudulent activities – most regulators and organizations trust the reliability of electronic KYC compliance. This means that organizations don’t have to make their customers wait for several days – they could ultimately perform verification in a few seconds. By leveraging the power of machine learning, artificial learning, and human experts, organizations can have a look at best-in-class identity verification tools. It would help businesses to meet KYC AML compliance without losing a potential customer base and large revenue.