KYC Banking Helping to Prevent Money Laundering And Terrorist Financing


KYC banking is employed at the time of customer onboarding to reduce crimes like money laundering and terrorist financing. Further, it is used to mitigate risks of financial fraud, identity theft, money laundering, and financing terrorist activities. The importance of the KYC process helps banks to understand customer behaviors. Banks are liable to obtain basic information of the customers like their name, address, reason of transaction, and other financial funds transfer. 

KYC banking verification processes help in avoiding financial and reputational fines. Banking is a sector that is inherent to financial fraud threats so it is extremely significant to perform background screening processes on users to reduce fraudulent activities. 

3 Components of KYC 

To run an effective KYC banking, there are the following three KYC requirements for banks that are needed:

Customer Identification Program 

CIP requires that banks and other financial institutes take the proper step to ensure that your customers are who they say they are. 

Customer Due Diligence 

CDD is a process that enables the banks to acquire information about customers that would tell to what extent a customer exposes the institution to a range of risks. 

KYC banking can be done by identity document verification of customers. Identity documents may include ID cards, driving licenses, passports, and credit/debit cards. The identity of customers is verified by screening the identity information against sanction lists, PEPs, criminal lists, and unreliable customers lists. 

Continuous Monitoring 

A bank must understand the customers’ profile and how they would be using their account, assess the users’ profile and check the transactions performed by the customers and make sure they sync with predicted behavior.  

Why was KYC banking implemented?

know your customer was implemented in the banking sector to reduce the risks of money laundering and terrorist financing. 

Because money launderers and other criminals tend to make illegal moves to mask their true identities at the time of customer onboarding, therefore, banks are required to verify their customers are who they are. 

With the banks and financial institutes getting KYC banking in their procedures it is no doubt that they are headed towards verifying their customers remotely. 

Technology in KYC Compliance 

In a conventional setup, companies or banks verify their customers in simpler ways. Banks after developing technologies started verifying their buyers with more advanced KYC banking verification processes. 

KYC requirements for banks employed methods that were based on something that customers knew. Like the methods of traditional passwords or something, they possess ID badges. 

However, with the passage of time, they shifted their verification processes from what they know to what they possess to actually what they are, i.e. biometrics. 

Based on facial characteristics, it is obvious that nobody can steal your facial features therefore, it is a reliable source to undergo KYC banking

Banks now do ID verification with biometrics to add the value of the identification process that is a powerful defense mechanism and maintains AML/CFT compliance. 

It is also important in onboarding legitimate customers that will also create a seamless customer experience as well. 

Future Of KYC banking Technology 

The banking sector using the procedures of client KYC verification in their system is onboarding legitimate customers that do not possess any potential threats to the sanctity of a business. Banks are the institutions that are on the head list of fraudsters to commit crimes. Being victims of crimes like money laundering and terrorist financing, banks are losing their funds and the significant customer credential in the hands of fraudsters. 

Therefore, they are required to have a seamless KYC banking verification process to ensure that they onboard legitimate customers that do not possess any threat to them. 

Integrating their systems with ID verification processes and biometric facial recognition, they have enhanced their defense mechanism. KYC banking is the ultimate solution in the future for banks to have a streamlined customer onboarding and mitigating the risks of money laundering and terrorist financing. 

Summing it up 

Banks are the hot issue when it comes to the rising trend of money laundering these days. It is not easy to eradicate this fraud completely from the systems. But KYC banking is used to identify the banks’ customers to ensure that no criminal can take advantage of the banking services. 

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