Regulatory functions within an organization are generally regarded as cost centers, but some smart companies are actually turning the concept of compliance into a competitive advantage. Couple it in compliance technology, people, and processes, some organizations have a revenue engine driving revenues. Anytime the compliance function integrates into everything in the business, the value is clients, faster onboarding, more streamlined procedures, reduced fraud, and then no fines for regulatory violations. The article delves further into the KYC four pillars.
Critical Factor in Compliance in KYC
Among other compliance priorities for many organizations, there is Know Your Customer or KYC. Several reasonable formats might argue that the KYC checks should necessarily adopt a format from clients before onboarding customers into the company. Such KYC checks are essential for anti-money laundering (AML) requirements, fraud and cyber crime, delaying organized crime syndicates, and ensuring legal compliance. KYC compliance, however, tends to be rather cumbersome for both businesses and the law-abiding consumer, who has to submit documents to fulfill such obligations.
KYC complications
It is burdensome KYC, and most companies subject themselves to processes that are inefficient. Great resource-wasting internal resources, and man-hours can be seen in companies due to KYC inefficiencies. Also, criminals are increasingly using something such as a synthetic identity that seems genuine and cannot be identified by legacy systems. Manual reviews slow up a process for user approval and bring dissatisfaction to customers. Also, they mean high costs of operation and user onboarding that have a negative effect on business as it can slow down the growth and make it difficult to enter new markets.
Here’s what happens: companies use strict authentication measures to counteract fraud. These, however, have the adverse effect of making the process too cumbersome for consumers, who likely abandon it. Now the users have to go through a very frustrating experience. A KYC process has to be defined in a manner which will maintain user experience along with full compliance against fraud and cyber-attack prevention.
Four Pillars of KYC
Ultimately, the ideal KYC solution ought to solve for these four areas. These four pillars for KYC AML are:
- Accuracy
The solution should verify with significant accuracy concerning the identity details like name, address, date of birth, and the government-issued identification documents of customers.
- Conformity
In addition, it should be able to comply with all existing regulatory obligations, for instance, AML and GDPR requirements, as documented above. Furthermore, it should modify its processes and procedures as necessary to conform to changing conditions in the regulatory environment.
- Speed
This is, because the most accurate and correct compliant solution will be worthless if it takes long to on-board new customers. It ought to authenticate the identification of the customer, perform verification at a very high speed, and give a clear result.
- User engagement
You also need to make it very seamless and quite friendly. It should be applicable to your customers as well as your organization, thus being available and easy to use on any device or platform.
How Important It Is: With this incorporation, a Customer Onboarding Solution can be brought into your workflow to offer easy on-boarding to your customers while promoting a positive KYC experience, thus enhancing your customer’s trust and encouraging continued engagement. This would compels your customers to come back to you for more.
Other such pillar that can also be considered for KYC is:
- Identity verification
Identity verification refers to the first and perhaps the most important component of Digital KYC Verification, helping the business identify a person as he or she claims to be. It comprises, in this digital process, collecting as well as validating personal information like names, addresses, as well as identification documents like Aadhaar and PAN cards.
Reason For Considering: As you bring in new customers, you need to make sure that the customer takes financial security as a big business for the customer. Only right identity verification help towards preventing fraudulent activities as well as meets regulatory requirements. This improves combustion in establishing a secure and trustworthy relationship with customers. Nowadays, businesses are moving towards advanced customer onboarding solutions, which would combine technologies such as facial recognition or fingerprints to verify the documents submitted.
- Information Privacy
That solution will also safeguard the personal information of the customer and his data. Security measures include encryption, multifactor authentication, and several other protection actions against data breaches and unauthorized access.
Why It Matters: Businesses increasingly conduct digital activities, making security a major concern among them. Thus, incorporating healthy security measures regarding every part of your online business is pretty important. These measures are practically essential in preventing data breaches, and they build trust among your customers.
Final Words
- As such, these five fundamental pillars of Digital KYC include the concepts as:
- Identity Verification.
- Risk Assessment.
- Compliant Management.
- Customer Experience.
- Data Protection.
All these KYC pillars will make it easy for an organization to design a robust KYC structure for its customer base. And that would not help in meeting the regulatory requirement but would also improve customer satisfaction overall.