KYC or know-your-customer, is a significant technique for financial institutes to verify the identity of customers. Banks and other financial institutions must comply with the rigorous policies of government bodies. eKYC verification service providers are the one-stop solution for financial institutes. By automating the KYC Process, banks can comply and enhance customers’ onboarding experience.
eKYC verification process protects companies’ reputations by reducing the risk of fraud for their organizations. Financial institutes such as banks constantly encounter various scammers. These scams can damage the company’s reputation. Moreover, it also can cause regulatory fines and worse, owners can face legal consequences. Financial institutes are required to comply with the US Patriot Act by implementing Customer Identification Programs (CIPs) and Conducting Customer Due Diligence (EDD).
Customer Identification Program (CIP)
The CIP is developed to enhance the rigorous KYC regulation. It protects financial institutions from money laundering, terrorism financing, and other illegal activities. It has a vital role in KYC: it identifies the customer’s legal identity and uncovers the hidden reality by monitoring their past transactions. The main goal of the CIP is to inform organizations that customers are the same persons they claim to be.
CIP law demands financial institutes verify customers’ identity before onboarding them. For this, customers must submit their identity proof documents. The eKYC verification enhances the CIP process and provides an effective risk analysis procedure. Proactive customer risk analysis assists financial institutes in mitigating the risk and defending their system. For successful CIP and complete customer risk analysis, eKYC solutions are ideal for companies.
Customer Due Diligence (CDD)
The regulatory sector has made it essential for financial institutes to report suspicious activity. To monitor any illicit activities of the customers, organizations need to rely on eKYC verification. The KYC enhances due diligence and accelerates the process of getting to know a customer. CDD is essential to manage risk and protect businesses. The eKYC process identifies the customer effectively and assists organizations in understanding their customer better.
To comply with CDD, financial institutes divide it into two parts where the simplified due diligence (SDD) is for onboarding low-risk customers. They have less account value, they don’t need to provide in-depth information. Only simple identity documents can be used to onboard these customers. The other is enhanced due diligence (EDD), which entails verifying the clients and business with in-depth information. Typically financial institutes do EDD for higher-risk clients, it gives them more evidence about the company.
eKYC Verification Streamlining the Process
Having a 25% or more stake in a legal business triggers the requirement for all banks to gather information about the owner’s name, birth date, address, and social security number. The KYC process for all businesses is the same to know their customer. Given below are the steps to follow for eKYC onboarding:
Fill Out Form
The user or customer who wants to open an organization account must register for eKYC verification on a digital platform. These forms usually demand the customer’s personal information, such as name, date of birth, or official email, for registration.
Gather Data
Financial institutes use eKYC verification platforms to collect identity documents verification. eKYC solutions provider can cover a vast range of documents. It also can verify the various papers depending on the nation and state. Leveraging technology assists companies with remotely collecting and assorting the documents according to date and name.
Verification of Documents
eKYC verification software extracts the data and then saves that into a secure database. It utilizes optical character recognition technology (OCR) to extract data from printed documents. After extracting data from all papers, matches the provided information and data extracted to ensure they are identical. Moreover, it also cross-checks the records and extracts information from the government repositories. It reaps genuine results so financial institutes can onboard customers confidently.
The Final Step
In the final step of eKYC verification, it utilizes machine learning algorithms to analyze the risk to the customer. Using historical data, machine learning algorithms predict or categorize events. After the verification procedure is completed, the users will get the results by email or phone number. If the eKYC is successful, the user is usually regarded as validated and can begin using the desired service by creating an account. If there are any inconsistencies or problems during the procedure, the user may be required to give further information or visit a physical branch for additional verification.
The bottom line of eKYC Verification
It is compulsory for financial institutes to verify customer identities to comply with other regulations. It’s important to note that the effectiveness of eKYC verification using machine learning algorithms depends on the quality and relevance of the data used for training, the choice of appropriate algorithms, and the expertise of data scientists and risk management professionals involved in the process.