The Digital Identity Verification process is the best possible firewall for any financial institution. Financial Institutions nowadays have to follow many norms established by US authorities and international authorities to safeguard the national internet and stop terror financing and funding to illegitimate sources. Among those norms, KYC, AML, and CIP are the major ones. Now that AI is introduced in this field, the work of identifying verification has been drastically reduced. Let’s take a look at some of the major requirements for identity verification in the financial sector.

Know Your Customer (KYC)

KYC norms make companies responsible for verifying the identity, suitability, and risks involved in continuing a business relationship with a customer. Nowadays, majorly every financial institution must follow KYC norms, be it a stock market operator, banks, NBFCs, or any other financial institution.

Below are some of the main key points of a good KYC policy:

Monitoring of Account Activity

Any kind of suspicious activity from any illegitimate source should be taken care of immediately. This can be done by checking relevant documents such as the source of the funds and sender information.

Risk Management

Well, well, well, talk about a good KYC policy and miss the risk management? Doesn’t sound nice, right?

A good KYC policy should always take care of the customer’s risk profile. A frequent regular internal audit should be maintained to ensure that banks are following KYC policies.

Customer Acceptance Policy

Banks should clearly state the type of documents they require to open a bank account of a customer. Opening a third-party account that is not verified must be strictly prohibited as this promotes money-laundering and all sorts of unlawful activities.

Anti-Money Laundering (AML)

AML laws are specifically made to target criminal activities that are not regulated by any institution and used to fund terrorism. Banks (or any financial institution) have to comply with these rules to stay aligned with the government’s directions.

Is there any difference between AML and KYC?

Even though these two terms sound very similar, they are not.  AML is Anti- Money laundering, whereas KYC is Know Your Customer. But expanding the acronym doesn’t make it clear, or is it?

So, let’s take a deep dive into these terms. All the financial must follow the KYC norms to register a customer into their organization as a customer. But AML rules operate on a broader level. AML is more specifically related to measures that an institution has to take to prevent or tame money laundering, terror financing, and other crimes. Both AML and KYC norms are necessary to maintain a secure financial institution. If you want to learn more on this topic, click on the link to dive deeper into it.

Concluding Note:

Advanced AI-based identity verification setup is nowadays not a luxury but a necessity. You should definitely think of having it for your product as it adds a sense of trust to your product.

Hope you will think about it; till then,

Stay Safe and Keep Smiling!!!