Banks and other financial institutions are the financial gatekeepers of the country. Due to this fact, they have a high responsibility to keep up with strong safeguards to prevent any financial crime. The financial institutes have to work with the regulatory bodies to make sure they are complying with AML and KYC.
Nowadays, criminals intend to use sophisticated methods to breach the system and gain ahead with their malicious intent. Although the reason to commit a financial crime almost stays the same, their goals might differ. Some money launderers use the banking system to launder their dirty cash to make it look legit. It not only destroys the bank’s repute but also puts it at extreme risk of heavy penalties and fines.
To capture criminals in their tracks, AML KYC compliance carries high importance to identify and stop criminal activities. These compliance procedures consist of multiple verifications and cross-checking methods to ensure that criminals don’t escape through the net.
Although some people are mistaken to closely relate the AML and KYC compliance. AML (Anti-Money Laundering) deals with tracking money launderers against global watchlists and PEP lists. On the other hand, KYC (Know Your Customer) deals with knowing the customers for who they are and what they claim to be. AML is a parent term for various methods to prevent money laundering and KYC is one such method. However, some organizations wrongly assume that it’s enough to pass the KYC requirements and don’t fully comply with AML regulations. The cost and time required with installing AML procedures are comparatively higher than the KYC.
Luckily though, with AI-enabled aml kyc solution – organizations can significantly cut down the cost, time, and errors.
Integrating AML KYC Solution To Meet Current KYC And AML Regulations
When AML KYC compliance was first introduced. Regulators didn’t specify the standards to verify consumers. However, the regulatory bodies were hoping that banks and other financial institutions would address the minimum requirements of some specific rules regarding AML compliance. The regulatory bodies were expecting the institutes to take more serious measures to stay in compliance.
Therefore, the entire system proved to be somewhat incapable to meet some requirements laid out with AML verification and KYC standards. For this reason, there is a rising need to streamline and standardize the process across the entire financial spectrum. This meant streamlining the process from large enterprises to small banks.
Allowing all kyc services providers to manage compliance with KYC automated solutions could ultimately benefit large enterprises. It would also help the organizations to leap forward with constantly evolving aml and kyc procedures. Moreover, this would also help to streamline the customer journey and vet bad apples out of the system. Manual oversight could also be kept at the minimum, thus focusing the human workforce on more important tasks.
Customers usually face friction with KYC procedures while signing for financial services. This, however, generates a poor experience for the users. For instance, different banks require different document types to verify customer identity – as KYC tends to vary with each bank. Some banks use passports or driver’s licenses while others might call for a social security number or birth certificate.
Best KYC And AML Practices Banks Can Follow
It is quite important to perform due diligence procedures for customer accounts. For this reason, banks have to strongly uphold aml kyc compliance or they could run security risks with their institutes.
Banks should follow these tips to ensure meeting the minimum standards regarding compliance:
- At the initial step of the onboarding process, banks should ask their clients to submit different government-issued IDs for aml and kyc verification. However, the IDs should be asked randomly.
- Integrate an automated aml and kyc solution that helps to automatically screen customers’ backgrounds against various global watchlists. This would help to expose high-risk people during the onboarding process by matching people with a politically exposed person (PEP) list.
- The automated aml kyc solution consistently examines all existing customers during their lifespan.
Everyone has to bear the cost of fraudulent activities whether it’s a bank or a customer. For this reason, financial institutions must implement stringent aml kyc compliance procedures to grow the integrity of their institutions. So banks need to maintain clear standards – as it would help to fight against financial crime.
