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KYC in Banking

The banking industry faces a significant amount of fraudulent activity as it deals directly with money. Now that the world has gone online due to the digital revolution, there is an increase in criminal ventures in banking. People can use stolen or fake identities to manipulate the system and steal or launder money. This is why KYC in banking is an absolute necessity to fight financial crimes. KYC in banking is carried out by recording the basic information of the client to verify their identity. This process also includes anti-money laundering checks to ensure a completely risk-free process. 

Consequences of Not Complying with KYC in Banking

Bank Secrecy Act of 1970 is a step taken to eliminate identity theft, money laundering, and other crimes related to the financial sector. According to this act, all the banks must identify and verify their customers. This process of verifying and identifying the customer is known as KYC or know your customer. There are regulatory bodies around the world like FATF, FINMA, Europol, FinCEN, etc. that keep a check on the banks and businesses to see if they are complying with KYC/AML. 

From 2008-2018, the total amount of penalties in the U.S, Europe, Pacific Asia is around $26 billion due to the non-compliance with KYC/AML. Let’s not forget the damage to the reputation that must have cost a lot to these financial institutions. In spring 2020, according to Fenegro the gross amount of penalties faced due to non-compliance with KYC, AML is 5.6 billion. 

$336 million was fined to 3 Swedish banks for not complying with KYC/AML. Authorities in the US fined an Israeli bank more than $900 million for tax evasion and money laundering. A well-known German bank was fined $150 million dollars by NYDFS to deal with famous personalities involved in money laundering activities. 

The Need for E-KYC Solution in Banking 

We have learned so far how important it is for the banks to comply with KYC/AML policies. However, it is rather expensive to comply with KYC regulations. It can cost banks around $500 million annually for complying with KYC regulations.

Not only that, the KYC process if done manually is a very lengthy process that can delay customer onboarding. It can take around months for the banks to start dealing with a new customer. This can annoy the customer and the bank can lose potential customers. Customers want an easy and efficient process and they might just walk away. The cost of hiring and managing the staff for the KYC process is an added burden.   

This is why there is a need for technology in carrying out this process swiftly. There is AI-based software that can perform KYC processes in banks more accurately within seconds. 

KYC Bank Solution 

Any person can now be verified through the KYC solution. When a person goes to a bank to get their bank account opened or if they want to open their bank account online, all they have to do is just submit their basic information like their name, date of birth, photo, ID document, etc. Then this information is verified through AI solutions. Whenever the need to verify the person’s identity arises, all they have to do is submit their picture along with a picture of their ID document and their identity will be verified against the previously submitted documents at the time when they opened their bank accounts. The authenticity of the picture and ID document is also verified to make sure that there is no fraudulent activity going on. This process is extremely effective and takes only a few seconds.