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Steps to drive global growth while adhering to local AML and KYC regulations

It is convenient and much more efficient for people to conduct financial business on the web. On the flip side, the growth in online transactions has led to a substantial increase in fraudulent activity, which has governments and regulators around the world concerned. Research undertaken by TransUnion recently found that fraud in financial services increased 149% globally when comparing the last four months of 2020 with the first four of 2021.

There is a wide variety of anti-money laundering (AML) and know your customer (KYC) directives, regulations, and laws, to help prevent fraud throughout the world. However, they are not unified in their focus and implementation. Harmonisation of these laws is unlikely to happen even though it would make sense if this occurred. Instead, we will see a plethora of legislation and directives on AML and KYC of varying vigour worldwide, which will pose a potential barrier to those financial services businesses looking to operate globally in an increasingly digital world.

As the laws become progressively more stringent financial institutions that break them could be hit with huge fines and reputational damage beyond the borders in which the infringement has occurred.

The answer for financial institutions to avoid flouting local AML and KYC laws and regulations, whilst also targeting global growth, is to undertake a best practice approach to ID verification.

Real time ID verification

The foundation to achieving cross-border AML and KYC compliance is provided by electronic identity verification (eIDV). Automated eIDV enables the real time cross-checks of contact information supplied by the prospective customer – their name, telephone number, email address, or home address - at the onboarding stage. For eIDV to work effectively it must have access to a global dataset of billions of records, including government agency, credit agency, and utility records, as well as politically exposed person (PEP) watchlists. Using an eIDV tool with these components will provide confidence to those in financial services that they are compliant with existing local AML and KYC regulations, whilst also ensuring no negative impact on the customer journey.

Retrospective ID investigation

An important factor for financial institutions to consider is that previous onboarding procedures may be insufficient for more stringent contemporary AML and KYC regulations. With new laws increasingly commonplace, organisations will find themselves in jeopardy if they neglect their historic customer contact data. Luckily, the ability to undertake retrospective ID investigation on a global level solves this conundrum.

Retrospective ID investigation can be delivered in two ways. The first involves actively engaging with existing customers, not only to ensure compliance, but to gain further insight and updates for use in future targeting efforts. Unfortunately, this approach can be costly for the business and involves additional administrative communication that can annoy customers.

The other option employs existing technology, such as eIDV - that delivers real time checks behind the scenes at the onboarding stage - to undertake ‘live re-onboarding’. Without the need for customer engagement, an eIDV tool can commence high volume retrospective ID processing to ensure compliance with the more stringent AML and KYC regulations.

Verifying authenticity without human involvement

An automated document verification process is critical for effective ‘live re-onboarding’. For this to work banks need access to scanned customer ID documents, such as driving licences, passports, and utility bills that are already likely stored per customer due diligence parameters. Then by applying the appropriate optical character recognition (OCR) and machine readable zone (MRZ) technologies it is possible to eliminate costly physical checks and the potential for human error to determine whether the scanned ID document is authentic and valid in real time. OCR and MRZ technologies are also crucial for the real time onboarding of new customers, with prospects scanning or taking photos of their IDs and sending them to the financial services organisation for evaluation.

It’s important to recognise that the photo ID embedded in these scanned documents supports biometric ID verification, such as facial recognition, which helps those in financial services securely speed up engagement with customers.

Artificial Intelligence for improved compliance

AI is set to play an increasingly important role in eIDV, by helping to deliver KYC and AML compliance. One form of AI, semantic technology, associates words with meanings and recognises the relationship between them. The machine reasoning and automated pattern recognition provided by this technology can identify possible fraudulent applications in real time. Also, through semantic technology, it is possible to apply context and make inferences with data; this ensures properly validated identities as well as broader data quality and integrity.

With increasingly stringent AML and KYC regulations sweeping across the globe, it is time for those financial institutions serious about worldwide growth to use an eIDV tool with document verification and biometric technology built in. Along with its speed, efficiency, and cost benefits, eIDV empowers banks to deliver best practice ID verification methods on a global scale for superior, no-hassle AML and KYC compliance.


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