Kyc onboarding ensures the business complies with anti-money laundering (AML) regulations. The process occurs as a new customer approaches the company to open an account. The process is used to verify the customer’s identity and the amount of risk the customer poses.
KYC Onboarding
Kyc onboarding checks whether the customer is legitimate or not. Before giving an individual access to the account or the services, the company must carry out KYC. It is a customer due diligence (CDD) process that the company follows before onboarding a customer. KYC onboarding aims to prevent fraud, money laundering, and identity theft.
The document requirements in the KYC onboarding process depend on different industries and vary worldwide, but the basic information a business must collect from a customer are
- Name
- Date of birth
- Address
The first step is to gather information from the customer, and then the information collected must be verified. It should be confirmed that the person who provided the information is the same person it belongs to. Customers should be provided with a piece of information that is unique to the authority they are opening. The US demands social security numbers from its consumers, whereas the UK requests national insurance numbers. With the KYC onboarding process, a company must keep track of a customer’s account activity and transaction history to ensure that the account is theirs and that no suspicious behavior has occurred.
The Procedure For Onboarding To Satisfy KYC Standards
The KYC onboarding process checks the identity of customers and the risks associated with doing business with them. Kyc checks not only the customer’s identity but also the customer’s intentions and what they want.
The KYC onboarding process involves the following steps in verifying the customer’s identity.
- Collect the required documents from customers to extract data from them.
- Carry out background investigations to verify the legitimacy of documents
- Verify the customer’s criminal history by doing historical checks.
- As part of customer due diligence (CDD), assign the customer a risk score of high or low.
- Create a relationship with them and implement appropriate AML monitoring procedures for day-to-day monitoring.
AML And Customer Onboarding
The KYC onboarding process forms part of anti-money laundering (AML) and counter-terrorist financing (CFT) regulations. As a central part of these regulations, businesses must perform this before customer onboarding. AML monitoring measures require monitoring in two stages, first, when a customer approaches for account opening, and second, throughout the process, to check the account activity, transaction history, and risk assessment. The customer’s account activity must be consistent to match patterns. If a customer’s profile changes suddenly, it will indicate suspicious activity.
A company will not comply with AML and KYC standards if it is unable to complete the KYC onboarding procedure. The result will be significant financial loss and reputational harm for the company.
How Can The Onboarding Procedure Be Made Better?
The smooth KYC onboarding process plays a vital role. If a company’s onboarding process is clunky and inefficient, it struggles to convert customers. So, businesses should find a way to automate the KYC onboarding process without compromising on any regulations. Using efficient KYC and AML solutions, a company automates document checks by 98% and verifies customers in 6 seconds.
Streamline Processes
The KYC onboarding process can be streamlined by eliminating unnecessary steps. The paperwork can be short; leveraging the digital KYC verification to automate the process.
User-Friendly Interfaces
Design user-friendly and accessible interfaces for customers to provide KYC instructions. It makes the onboarding process smoother and provides clear guidelines to customers about KYC onboarding.
Digital Identity Solutions
Explore digital onboarding KYC solutions like biometric verification, multifactor authentication, and online document verification. It enhances the accuracy of identity verification and prevents fraud and financial crimes.
Final Thoughts
KYC onboarding process identifies customers before account setup. Then the process runs throughout and monitors the account status and transaction records. Monitoring will help prevent fraud, criminal activity, and money laundering. Businesses must complete the process before giving access to the customer. If a company fails to comply with KYC regulations, it will have to bear serious negative consequences.