The Role Of KYC in Banking to stop financial crime and money laundering

Financial institutions are at serious risk from counter-terrorism financing (CTF) and anti-money laundering (AML). The key component of consumer identity is KYC (Know Your Customer). In the battle against financial crime and money laundering, KYC is a crucial component. Since it is the first stage in the process and identifies the consumers, it is the most important component of customer identity. The risk of money laundering, terrorist financing, corruption, fraud, bribery, and other unlawful financial activities is greatly reduced by check.

Know Your Customer in Banking

In banking, KYC assures that all of its clients, employees, and consultants are anti-bribery. Customers are being asked for extensive due diligence data by a growing number of financial service providers, including banks, payment firms, lending organizations, investment companies, money transfer companies, cryptocurrency exchanges, export creditors, and other financial institutions. When opening an account, KYC is a required procedure to periodically identify and confirm the customer’s identity.

Over the past 15 years, online KYC verification has evolved into a requirement for access to numerous banking services and other sectors. In order to verify that their customers are who they say they are, banks must therefore utilize KYC legitimately. If the customer does not comply with the minimal KYC criteria, the bank may refuse to open an account or terminate the business relationship.

Why Is KYC in Banking Important?

It is crucial to offer clients a quick and simple certification or identification process. However, the method of gathering and processing identity documents may be challenging for the client. Strengthening identification laws also makes it more difficult for banks to manage and oversee different channels, which in turn complicates the client experience.

Even though it is not desirable, this slows down the procedure, which could lead to a circumstance where the customer loses interest in the registration process and decides to quit doing business with you. Banks would suffer greatly if they lost these consumers, thus the advantages KYC provides are tremendous for providing quick and simple accreditation or identity for your customers.

What Is KYC in Banking Process?

The KYC Know Your Customer procedure entails identity verification, face verification, document verification, and biometric verification. Its goal is to give instruments to avoid financial terrorist activities. The Know Your Customer processes should be used at the beginning of any commercial engagement when registering a new customer in order to adhere to international legislation against money laundering and terrorist funding.

Banks should incorporate the following four key components into their KYC policies:

• Policy on Customer Acceptance
• Procedures for Customer Identification
• Transaction tracking
• Management of risk

Why Is KYC in Banking Compulsory?

Financial institutions are obligated to take due care to identify who their customers are, for example, and what kind of transactions they are accepting, as it is a crucial part of countering all kinds of unlawful financial activity, such as terrorism financing and sanctions.

All relevant steps are taken as part of the KYC procedures used by banks to verify the legitimacy of their clients and evaluate risks. These procedures aid in the detection and prevention of money laundering, the financing of terrorism, and other nefarious corruption schemes. To reduce fraud, banks must abide by KYC compliance and anti-money laundering requirements. Banks are responsible for KYC compliance. If there is a violation, harsh sanctions may be applied.

For instance, in the last ten years, non-compliance with AML, KYC, and sanction penalties has resulted in fines totaling $ 26 billion in the USA, Europe, the Middle East, and Asia-Pacific. Sanction Scanner’s API, integration, and capacity to produce local lists allow it to fully meet the needs of banks in this area. Your operations expenses and development time are decreased.