Definitive Guide on KYC Solutions for Banks, Financial Institutions and Fintech Companies

The finance industry has always borne the brunt of all new anti-money laundering (AML) compliance regulations. This includes customer due diligence for Know Your Customer (KYC). Failure for non-compliance in Fintech, banks, and other financial institutions impacts all of us. The main goal behind the global implementation of KYC solutions is to make customer onboarding, protection, and AML compliance easier.


Why Do Banks, Financial Institutions and Fintech Companies Need KYC Solutions?


Apart from hefty fines and AML non-compliance, KYC checks are important in banks, financial institutions, and fintech companies because they are the hub of every country’s economy. With globalization, a data breach or the onboarding of a shady element in one of these financial entities has the potential to bring the world’s economy to a halt. It’s strange to realize that proper ID validation and document verification can be all that stands between your money and it is used to finance illegal activities.

For this reason, KYC checks in the finance industry have become more rigorous as the years pass. With more pressure from external regulators, customers, and mounting cyberthreats, financial institutions recognize the need for automated KYC solutions that can provide enhanced due diligence in conjunction with a smooth customer onboarding experience.

Given the current state of the global community which has left a lot of us financially vulnerable, KYC verification has to evolve past being a customer onboarding checklist that only meets the needs of basic customer due diligence. KYC solutions for banks and other financial institutions need to include employee onboarding and continuous monitoring of both employees and business clients. Where Business to Business (B2B) client onboarding is concerned, enhanced due diligence should be the standard. Therefore, automated KYC checks should include:-

  • Real-time identity verification that caters to mobile ID verification and document verification.
  • Focus on B2B Ultimate Beneficial Owners (UBO’s)
  • Ongoing behavior monitoring and risk assessment
  • Watchlists, sanctions, spam lists, and adverse media screenings
  • Automated workflows that are artificial intelligence (AI) supported for faster data analysis and case management

At the end of it all, no matter your KYC compliance solutions, there is still the human element that needs to be dealt with. Your compliance officer and other KYC staff should be well trained to identify potential red flags, system blockages and rotated frequently according to new AML/KYC compliance regulations. In addition to training, ongoing behavior monitoring should be a part of your employee onboarding and should take priority as much as regulatory reporting.

Definitive Guide on KYC Solutions

Implementing Enhanced KYC Solutions in the Finance Industry


Banks, fintech companies, and other financial institutions are aware of the constant threats they face and are willing to invest in enhanced KYC solutions to protect their customers. Sadly, private citizens and business entities don’t always consider such drastic KYC solutions. This creates gaps in AML/KYC compliance and allows for bad actors to slip through unheeded.

As per the new AML compliance measures, there has to be a united global front across all sectors when it comes to the implementation of KYC verification and customer due diligence. This can be the only way forward for complete protection for all. Besides global ID verification and UBO ID validation, a strong focus on ongoing behavior monitoring and risk assessment should be the next vital step in your KYC checks.

As part of your ongoing risk mitigation strategy, your KYC solutions should focus on:-

  1. Address – How long has the customer lived there? Do they move a lot? What type of area is the proposed business location? does he live or practice business from high fraud areas?
  2. Occupation – Is this person in a high-risk field like Accounting? Do they have job security? Do they have medical or life insurance? The lack of the last is a higher indicator of potential risk. According to an auditing study, even ‘honest’ people are more likely to commit fraud due to dissatisfaction in the workplace or from financial pressures.
  3. Documents presented: Can they be easily modified? Who are the original creators of the documents? Are the documents presented accurate? This is why document verification is as important as ID validation.
  4. Transactions – Unusual large transactions or cross-border activity. No ID validation for transaction recipients. Strange erratic transactions with no clear sources.
  5. Changes in Behavior – Is it just a bad day or a drastic lifestyle change? Good or bad you need to know the reason behind any sudden behavioral changes. In one auditing case study, behavioral changes were the only indication there was fraudulent activity.
  6. Methods of Payments – Look out for currency changes, high-risk payment providers, and payment methods like cryptocurrency and bank wires. High-risk payment methods usually originate from high-risk payment providers or merchant accounts. For the recipient, this means payments can be easily disrupted and increase the risk of chargeback fraud.
  7. Watchlists Mentions – Has your customer any relationships with people on adverse media watchlists, suspicious activity reports (SAR), or political activists? Are they from one of the sanctioned countries? Were they involved in any past criminal activity including being on spam lists?
  8. Documentation Management – Stringent record-keeping and ready access to customer records saves time during ongoing transaction monitoring and makes configurable risk scoring easier. Your KYC verification system must be able to seamlessly integrate into your client’s records for better behavior monitoring.

Ongoing monitoring for risk mitigation is the key to implementing effective KYC solutions. To keep your eye on potential threats, you need automated KYC verification services that account for ongoing behavior monitoring, global ID verification, documentation verification, and management. You must always be aware that the threat is more likely to come from within, therefore using an external id verification solution should be part of your AML/KYC solutions.


How Our KYC Solutions can Protect the Finance Industry?


Global impact and collaboration are the themes of the updates in the Bank Secrecy Act (BSA) AML regulations. Ensuring every industry is united against fraud, corruption, money laundering, trafficking and the financing of terrorist activities is the only way forward to global ID verification of financial fraud threats. In keeping with the theme of global collaboration, the BSA has identified a few key industries that need additional enhanced due diligence. Coupled with industries that are the usual suspects when it comes to fraud, we can pinpoint their loopholes and address the necessary KYC solutions.


Occupational Fraud within the Finance Industry

Next to CEO and Executive Management, Accounting occupations are the highest risk for fraud. Paired with the fact that executive managers in finance usually have accounting backgrounds, any employee in the finance industry is 39% more likely to be your bad actor. Luckily, a lot of these fraudsters are caught by fellow employees, however, that success only worked well with training as most of the successful fraudsters knew how to override internal controls.

The highest method of success in tackling occupational fraud in the finance industry whether it was a small or large institution came from external forces. As much as 67% reduced losses when there was an external audit of the internal controls.

Sadly, for the banking and finance industry, there is only one option to better security in the KYC processes and that is through AML/KYC solutions from IDMERIT. We have years of experience in the banking and finance industry and with behavior monitoring and IDMtrust, we can help you choose your employees and assess those high-risk occupations.


Business Email Compromise in Manufacturing


Business Email Compromise (BEC) is not limited to just the manufacturing sector. The rise of BEC in manufacturing started over the last two years. This is mainly because of a few key factors; lack of security controls, no cybersecurity foresight, and basically being careless with personal and company data. The problem in the manufacturing industry is that a lot of money was spent on securing physical goods, people and locations, but not on emails and data.

It is only now that manufacturing executives have begun to see the potential threat of cyber criminals through BEC. Just like the health sector, they didn’t see the data being valuable to anyone but them. So, through compromised emails, they were bombarded with false invoices, ransomware, and data theft.

If these manufacturing executives had partnered with us, through IDMconnect, they would have been able to better verify important utility bills and documents. Through IDMdevice, they would be better able to identify who was really on the other side of that email.


Trade-Based Money Laundering In Arts and Antiquities


For someone who is not in the art and antiquities industry, but has watched a lot of movies, it seems very strange to the average person, that only now regulators have realized the potential for money laundering in this industry. There are a lot of movies with people smuggling drugs, people, animals, and money under the guise of being art. And as art often imitates life, it seems that is the case in reality too.

On the lower end of the spectrum, trade-based money laundering involves falsifying invoices and quality misrepresentation. On the higher end, it’s lying about what’s really in that shipping container. Art and antiquities is one industry that needs global ID verification, AML compliance, and automated KYC verification services. Port scanners are one thing, but being able to trust the employees on the ports and the businesses that ship is another.

For this industry which is ripe in money laundering practices like online gambling, we recommend our entire IDMkyX platform, especially with IDMaml.


KYC Solutions to Environmental Crimes


Another key area of focus in the updated AML/BSA compliance regulations is environmental crimes. This includes illegal mining, logging, waste, and wildlife trafficking. According to the Financial Action Task Force (FATF) 2020-2021 Annual Report, criminals have earned $152 billion annually from illegal logging alone.

In an industry where the key players are spaced out into remote areas, implementing KYC solutions may be a challenge for key decision-makers. Individual bad actors acting alone may be hard to trace and identify and unlike other industries, ID validation systems aren’t fully automated or even globally connected.

Thereby the first step in this industry would be automated KYC checks that can provide real-time identity verification. Once we can verify the identity of anyone at any time, we need to be able to tackle it anywhere. For that, we need global ID verification with access to over 90 countries that work with geopositioning satellites and mobile ID verification. Intense global reach is the only way to effective identity verification solutions.


KYC Solutions by IDmerit

Even outside these catchment industries, global KYC solutions and AML compliance should be a part of all sectors of the economy. As decreed by the Financial Crime Enforcement Network (FinCen) and other AML regulators, it is only through global collaboration we can effectively combat the bad elements of cybercrime, money laundering, and terror financing.

This is why your business needs the global reach and experience of IDMERIT. Globalization and technological advancements have made business transactions easier, but they have also opened the door of your business to digital and global threats. Nor can you stay blinded to potential internal threats. By using IDMkyc, you will be better able to protect your business from internal threats as well as external global threats.

No matter the industry, verify anyone, anytime and anywhere with IDMERIT. Speak with our KYC Specialist now!

Posted in KYC
Tony Raval
Tony Raval

Tony Raval brings more than 15 years of leadership in data technology as the Founder and CEO of IDMERIT, headquartered in Carlsbad, California. He leads an executive team including top data tech veterans to execute on his passion of creating a global data universe generating true and trusted intelligence. IDMERIT’s competitive success has come from the company’s ability to perform cross-border transactions, for which Tony and his team have developed a meticulous process and progressive technology. The company was launched as the result of a highly effective engagement with a leading global financial institution, whereby the company was uniquely able to triangulate multiple elements to create a comprehensive, and yet, frictionless experience. Tony has provided data intelligence to companies such as Google, SalesForce, and HP as well as clients across financial, government and other sectors seeking a superior partner in compliance and mitigating risk. He holds a Master’s Degree in computer engineering and data sciences, is an active member of the Entrepreneurs Organization San Diego and dedicated mentor to new entrepreneurs in EO’s Accelerator Program, enjoys meditation and running, and he and his wife Sonal recently celebrated their three-year-old son's birthday.

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