KYC and AML – Limited to Just Financial Institutions?

The acronyms of KYC and AML are definitely not new to the people in the financial industry and so Know Your Client requirements and anti-money laundering regulations are quite regularly heard around regulated markets. The reason for identity verification & kyc to be so prominent is because of their importance as a requirement by global AML regulations around the world. Also, the capacity of these measures to mitigate fraud is one of the two core requirements of any AML and KYC program. The other being to prevent the institutions from being used in illicit activities through the manipulation of money.

However, is AML and KYC just restricted to financial institutions? Probably not, considering the need to vet customers of their identity is a requirement faced by every type of business operating in today’ modern landscape. Let’s dive in deeper and explore some other possibilities.

The Need to Vet Customer Identities

As technologies improve before our eyes, the rapid change from traditional processes to digital processes is happening as we speak and read. The global use of technology has rapidly risen, attributed to a multitude of factors that include, the rise in mobile technology and hardware devices, and a wave of ‘trend’ that takes along the society. The ease of use has allowed more people to be connected through portable devices across the internet than ever before. In order to grab the potential pool of connected people, businesses ventured into establishing digital setups to capitalize on this market.

Digital businesses are at a disadvantage with no in-person verification. Thus in order to establish a transparent onboarding process for these individuals. A digital process of identity verification was necessitated. The rise of technology and the possibility to perform more physical process digitally, like high profile transactions and digital account opening has led to institutions from outside the financial sector to implement AML and KYC measures.

Additional Applications of KYC and AML

We already know how important identity verification & kyc is for regulated financial institutions. As discussed earlier, technology has made possible other industries to form and capitalize on the digital landscape. One great example is ‘e-commerce’ platforms, that have revolutionized how people buy and sell online. Eliminating the factor to ever visit a physical store. In order to ensure a customer onboarding on a platform is authenticate, KYC services are employed to vet the individual through identity and document forgery checks.

Traditional banks are challenged by the rapidly rising digital financial services industry. That is combining financial service with technology to produce FinTech solutions. These solutions provide competitive prices to an individual over traditional banking channels and account for the shift towards digital financial services. In order to vet these individuals, digital identity verification & kyc is employed to verify their identities. In these cases, with available information, additional CDD and EDD measures can be applied based on the risk profile of the onboarding customer.

KYC and AML are no longer just limited to financial institutions, as the digital landscape is changing to adapt more institutions under the regulated institutions definitions. More businesses require KYC to verify their customers to ensure adherence to regulations and trouble-free operations.

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