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How Identity Verification Services make Regulatory Compliance Easier?

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Financial institutions and banks have ended up in a loop of dumping billions of dollars because of ever-tightening regulatory compliance especially in regards to identity verification services and data protection. GDPR becomes mandatory in next few days for all the companies who want to operate in European Union. There are country-wise data protection and banking compliance regulations that are also needed to be taken care of by MNCs and financial institutions wishing to expand into those markets. FINMA regulations in Switzerland and FINTRAC compliance in Canada are few examples of these country specific guidelines.

Regulatory compliance fines over the years have cost financial institutions billions of dollars but the same banks and institutions were already spending billions of dollars for introducing structural changes to make their practices pro-regulations and pro-compliance. So if money is not going to solve the issue of regulatory compliance for banks and financial institutions than what is? The answer is pretty simple: A robust, cutting edge, end-to-end Digital Verification system. It not only reduces the processing time but if a right service provider is chosen, it can enable financial organizations to go about their usual business without having to worry about regulatory compliance and fines that come with these regulations.

Identity Verification Services

An intergovernmental body called The Financial Action Task Force suggests banks and financial organizations following  steps, to make identity verification services more effective for overall compliance observance:

  • Verifying the account owner’s identity
  • Understanding and obtaining information on the purpose and intended nature of the business relationship
  • Ensuring through ongoing analysis that transactions are “consistent with the institution’s knowledge of the customer, their business and risk profile, including where necessary, the source of funds”

Ever since 9/11 attacks, the clamp down on Terror Funding has also raised the stakes for financial institutes and international banks to ensure that the funds they are handling do not end up in wrong hands. FINMA and FINTRAC regulations have strict protocols to ensure that the money being transferred through the banks, working within their respective countries, are in no way related to a terrorist outfit or in hindsight, a person fronting for such organizations.

FINTRAC Regulations

FINTRAC regulations are applicable within the territorial confines of Canada offering protection not only against money laundering but since December 2001, this anti-graft government body has stepped into curbing terror financing as well. In 2006, customer identity verification also became a vital aspect of FINTRAC’s mandate. Today FINTRAC requires its regulated entities to submit following information in order to conduct business in Canadian territory

  • Suspicious Transactions
  • Suspected Terrorist Property
  • Large Cash transactions
  • Outgoing or incoming international Electronic Funds Transfer over 10,000 Canadian Dollars within a 24 hour period
  • Cross border currency reporting

GDPR Compliance

KYC services or providing top of the line Identity verification is useless without protecting the data of the customers held by financial institutions, even if for verification purposes. This is because such vital information also makes financial institutions and organizations prone to data breaches and even misuse of data by the holding organization itself. This led to the launch of GDPR in the first place by EU to ensure digital rights of its users and their digital data as well. Some of the bindings of GDPR are:

  • Encryption of personal data
  • Seeking consent of the person whose data is being stored
  • Data must be obtained for specific, explicit and legitimate purpose
  • Individuals must be able to withdraw consent and can force organization to forget about them

Identity Verification Service, when provided through a full proof system, can safeguard financial institutions and banking industry from any monetary penalties without having to spend billions of dollars worth of annual compliance budget. Shufti Pro is such a product that can easily perform end-to-end digital identity verification in real time and can support banks from any part of the world, operating in any language because of its Universal Language Support. Powered by 1000 whitelists and 3000 databases, AML compliance also becomes easier for financial institutions working under the regulations of FINMA, FINTRAC or GDPR.

Identity verification services not only streamline customer onboarding but it also plays a pivotal role in monitoring suspicious funds transfer, assessing risk for handling the funds of a particular organization/individual and better adoption of due diligence. Identity Verification is not only go-to-technology for financial institutions who want to avoid frequent fines from regulatory bodies but they also safeguard overall interests of customers as well by eliminating the risks of fraud, identity theft and account hacking. Identity Verification can enable banking sector to provide financial services in a more transparent and secure manner, without making any compromise on regulatory compliance.