Financial institutes are vulnerable to scammers because of various loopholes in their security systems. These loopholes cause financial institutes to lose their profit and damage their brand reputation. To prevent companies from financial scams, they must comply with rigid regulations. Know-Your-Business (KYB) is one of those that combat various types of financial scams, such as money laundering and terrorist financing. KYB is a process to identify the business before onboarding. It referred to attesting the client’s documents and personal information, including cross-referencing their owners from watchdog databases. The KYB onboarding process assists companies in identifying their new client and in compliance with Anti-Money Laundering (AML) regulations.
Threats for Financial Institutes During Onboarding Business
Financial institutes have to combat various types of threats while onboarding clients. Without authentic identity verification, financial institutes unknowingly help scammers in their illicit activities. Disguising the company’s original ID is harmful to all businesses involved. Untransparency in the business’s ultimate beneficial owners and financial statements poses a significant risk to the financial institutes. It also enhances the illicit activities in the financial institutes industry and damages the integrity of the global financial ecosystem. Given below are the threats caused by an inadequate onboarding verification process.
Fake Companies
Financial institutes must ensure that the company with whom they are starting a new relationship is illegal and not involved in illicit activities. Various scammers are constantly trying to exploit the security of the financial system to proceed with their illicit activities. They create fraudulent companies to register in financial institutes and comply with regulations. If the company doesn’t vigilantly follow the KYB onboarding process, the risk of financial scams rises.
Money Launderers
The scammers use financial institutes to launder their dirty money. They utilize their services for layering their cash with the help of the fake money flow. Scammers disguise the source of funds, and with proper KYB verification, companies can verify the company’s background. Not proper verification enhances the chance of financial institutes unknowingly being involved in money laundering.
Inadequate Customer Experience
As the financial landscape is growing constantly, the competition is also rising. Customers need a convenient onboarding process, they want a secure and speedy procedure. During the onboarding, financial institutes must collect various information and then attest these all to ensure the company’s identity. This process is time-consuming and costly for financial institutes. To comply with the onboarding regulations, financial institutes must continue monitoring the businesses after onboarding them to report suspicious activities. They supervise the client’s activities without interrupting their services. Real-time transaction monitoring among the high-level services is a complex task. That is why many financial institutes struggle to comply with regulations along with customer satisfaction.
How Remote KYB Onboarding Protects Financial Institutes From Threats?
Automate KYB onboarding verification prevents the companies from financial scams and enhances security. Digital KYB verification utilizes machine learning and AI technology to secure companies from scammers. It accelerates the process and reaps accurate results at a low cost for the financial institutes.
Gather Information
In traditional business verification, customers visit the office and submit identity proof documents for KYB compliance. The financial institutes then gather all required information and proceed collected documents for further verification. With the automated KYB onboarding, customers can upload these identity-proof records on the KYB verification software.
Automated Verification
Manual verification is time-consuming and costly. Financial institutes hire the compliance team, and employees verify the documents manually. Employees attest papers by verifying their security features such as name, fonts, signatures, and borders. Automated KYB verifies these through machine learning and robust AI technology. These computerized algorithms check the document security features and ensure the papers are not counterfeit. The automatic verification guarantees the papers are in their original format.
Digital Data Validation
Scammers forge the data on official papers and use these papers to misuse the financial institutes’ services. Data validation time-consuming and reduces customer trust in the company, but it is vital to prevent financial scams. To overcome this shortcoming in the KYB onboarding, advanced technology has optical character recognition (OCR) to convert the written data into computer-readable text. After converting, it stores that in a secure database to cross-reference these against the various watchdogs such as politically exposed persons (PEPs), money laundering, and financial criminals.
Due Diligence
Due diligence is essential to ensure the financial institute onboarding is under the legitimate owners. The due diligence referred to verifying the company background by attesting their ultimate beneficial owners (UBOs) and checking the source of funds. To conclude KYB’s due diligence, financial institutes cross-check that the people behind the business are real people and not involved in illicit activities.
Out Come of KYB Onboarding
Overall, KYB onboarding protects companies from financial scams, including money laundering and terrorist financing. Moreover, it also assists in client onboarding risk assessment so financial institutes and companies know the risks of working with each other. Online KYB software also accelerates the e-commerce onboarding process by providing one platform to comply with all regulations.
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