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It is not just the financial services sector that is required to comply with anti-money laundering regulations. Businesses too are now required to implement certain regulatory measures to curb money laundering. A term that has recently been coined for such requirements is Know Your Customer’s Customer or KYCC. With increasing rules and regulations now being put forth by global regulatory authorities, banks and other businesses will now need to implement sound measures for Know Your Customer’s Customer.
Let’s get some background as to why KYCC is important. Entities like dummy or shell corporations are used for a number of purposes. Those motives need not be illegal every time; they can also be used to limit the liability of a company or for privacy purposes. But under a common perception, they are used for illicit purposes like money laundering, embezzling, or tax evasion. This is due to the fact that shell corporations tend to have lesser legal compliance requirements.
As regulatory bodies like FATF or FINMA tighten the laws to combat money laundering, the leniency afforded to shell corporations diminishes. Heavy fines and penalties are being set for corporations and financial institutes all over to implement strong compliance procedures. There is an added pressure to implement a robust process of AML around the world. KYCC or Know Your Customer’s Customer also falls under such rules and regulations.
Regulatory authorities have made it mandatory for businesses to have proper KYC and AML check systems. Combating Financing of Terrorism CFT which involves investigating, analyzing, deterring, and preventing funding for activities intended to achieve terrorism. KYC services back these regulations to stop money laundering in the first place.
Laws in most countries now require businesses to properly identify their customers. Moreover, they also require that a bank must make sure that their customer’s activities are legitimate and do not have any risk for money laundering associated with them.
Reasons Why Business Need Digital KYC Solutions
- To Deter Fraud
- Increased Security
- Better Customer Relationship
- Ensure Greater Accuracy
- To Abide by Regulatory Authorities
- To Provide a Win-Win Situation
- To Provide Shield for Minors
How does KYCC help in Achieving Compliance Regulations?
The complexity of financial transactions and the increasing advancement in technology make the whole process of maintaining and monitoring the financial system a challenging task. Keeping a track of one’s customers alone can be an onerous task on its own. Add to it the responsibility to monitor and KYCC, your workload just got unimaginably tedious and complicated. However, the risk of letting your business fall into the pit of money laundering or other financial crimes is an even worse fate. The global financial regulators are no longer willing to let corruption and tax evasion fester. This makes it inevitable for the financial services sector to implement faster digital verification systems to speed up the process. KYC documents can be used to collect the needed data to verify a customer.
KYCC in businesses enables them to achieve an added level of security for their compliance measures. It allows banks to assess whether their customer’s customer is legitimate and every stakeholder in their business has genuine practices. As every country strengthens its laws on money laundering, it is becoming a necessity for banks and other companies to establish the lawfulness of their customer’s customer’s activities.
Moreover, obeying compliance requirements is not the only plus point of KYCC or know your customer’s customer. It also allows a financial institute to manage its external risk and to build proper protection against money laundering and other illicit activities. Not building such compliance measures can have serious and dire consequences for a business. Noncompliance and detection of fraud or financial crimes in a company’s activities can involve heavy fines, sanctions and not to mention the loss of perfectly good credit to the business’s name.
Implementing KYCC Measures in Your Business
The first step in doing so is to implement a customer identification process. An effective customer identification program can enable the bank or corporation to make sure their clients have an authentic identity. This can be done through online identity verification. IDV allows banks to verify their client’s customers in a seamless and fast manner.
Most banks do not want their identification procedures to be long. Nor do they want to process and monitor large amounts of data. For this very reason, a lot of KYC service providers are rendering electronic identity verifications and AML checks for businesses including banks and financial institutes.
ID verification of customers is performed through document verifications, that allows them to digitally scan their documents for corroboration of their details. KYC verification service providers like Shufti Pro have a document verification service that scans a user’s documents, and the details within it, in seconds. This is performed through OCR or Optical Character Recognition.
Business verification has never been easier and efficient. Through digital identity verification solutions, banks can now establish the best methods to fulfill compliance and regulation procedures. Before now, companies have relied on manual or outdated verification procedures that are painfully slow and cumbersome.
Know Your Business KYB is the due diligence review of the business and industry against Money Laundering techniques. It allows you to develop policies and assess suspicious activities or transactions. Corporate businesses can determine whether the business they are dealing with is legit or just a shell company that is present on papers through KYB checks.
In the UK, these regulations are defined by Electronic Identity Verification (eIDV) and 4th AML Directive by the European Union. These directives dictate the KYB regulations to corporate entities. In the US, Customer Due Diligence (CDD) measures are being imposed to determine the true ownership of a business.
Online identity verification is used to validate identity. This technology mitigates the risk of online scams and identity theft. There are many challenges faced by businesses for identity verification. This software helps restrict the access of unauthorized persons. This technology can be used to provide intelligent access within the premises of offices. So business needs to have the best identity verification solution for seamless processing.
Importance of KYCC in businesses
All financial institutions are obligated to have appropriate procedures and processes to comply with regulatory compliance. KYCC can help businesses in the following ways:
Seamless KYB onboarding
AI-based KYCC solutions can help financial institutions to streamline their business onboarding processes. These solutions can make the entire business onboarding process simpler, and quicker, reducing the onboarding costs altogether.
Ongoing business verification
Remediating businesses can help analyze corporate client files on a regular basis to assess risks and changes within the company’s infrastructure, executives, and beneficial owners. It also includes ongoing AML monitoring for businesses.
Access to global business registries
Some KYCC solutions provide easy access to updated company information for business verification through global business registries which in return makes the compliance process easy.
Frictionless API integration
API integrated KYCC solution collects data from various reliable sources, all businesses have to do is enter their required details to access the information. This API integration eliminates the complexity of onboarding and monitoring corporate clients.
Businesses nowadays are looking for cost-effective, remote, and automated software to perform necessary business regulatory checks. KYCC verification solutions are designed to minimize extra compliance costs and time.
Shufti Pro’s KYCC services are top of the line that makes business verification easier for banks and other companies. Its customer identification process is fast and easily integrated into any given organization’s interface. Additionally, Shufti Pro also provides AML background checks as well that can screen a person’s name against global watchlists. This can allow companies to keep track of not only their customers but their customer’s customer’s financial status.
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