The Significance of KYC in the Banking Sector

Businesses are taking the digital road for enhanced operations and the coronavirus pandemic has fanned the flame. Banks and other financial institutions are benefiting from the advent of technology and the manual, time-consuming processes are no longer a challenge. Digitization has eased all processes and the effortless methods are making them more convenient. On the contrary, fraudsters are also excelling in their expertise. Artificial Intelligence is helping them in coming up with better ways of terrifying people, especially the banking sector. Money is their target and banks are the ideal sources of income. So, criminals are targeting goldmines across the world for acquiring as much money as possible. 

How can banks prevent criminals from causing issues for them? It is not as difficult as it sounds, because know your customer (KYC) is there to help all banks. Know Your Customer verification can also be carried out via digital means, and it has numerous benefits for the banking industry. Keep reading to find out the significance of KYC identification.  

Prevent Scams 

Identity theft, account takeover fraud, synthetic identity, money laundering, terrorist financing are some of the scams that people often hear. Banks have to bear huge financial losses due to these frauds. Criminals use forged identities to successfully implement their evil plans. Stealing bank account details and using it for their illegally earned money is very common. 

Combat Money Laundering 

Money laundering has significantly increased over the past few years. Approximately two to five percent of the global GDP is consumed in money laundering which accounts for USD 800 billion to USD two trillion every year. Banks must consider Know Your Customer and anti-money laundering checks to reduce this number. It will ensure that every customer is legitimate and criminals stay away from financial institutions. 

Identify Money Mules on Time 

Money mules are third-parties that are hired by money launderers to make their dirty work simpler and convenient. Sometimes, money mules are also unaware of the activities they are performing? Sounds weird, but launderers get in touch with legitimate people on social media and earn their trust. Once done, they will transfer money to the victim’s account and ask him/her to transfer the payment into some other account. Unknowingly, a money mule is added to the laundering chain. Banks can verify all the customers before completing any transaction so that the source of money is known and money mules are caught on time.

Secure Customers 

Securing customers is the target and KYC verification ensures that all the customers’ data is secure on the platform. Without verifying any customers, it will be tough to secure them from identity theft, chargeback, and money mule scams. Furthermore, account takeover is also on the rise, and debit card fraud is also taking over banks. It wouldn’t be a wise choice to onboard customers without verifying them beforehand. 

Comply with the KYC/AML Regulations 

The stringent regulations from regulatory authorities are very complex to comply with, and the banks have to face a lot of hassles. Nevertheless, a digital identity verification solution is there to help you out. It only takes a few seconds to verify every document. The strict laws are not a problem to deal with if banks incorporate digital identity verification. 

Improve Customer Experience

Banks are known for their slow procedures and the tough times customers have to bear with; therefore, improving customer experience is a goal yet to be achieved. However, know your customer verification through digital means is one way of achieving the goal. In seconds, KYC experts can check for forged identities and filter fraudsters before they cause any trouble for the business. Enhancing customer experience is not a problem for banks anymore. 


Banks and all other financial institutions need a robust solution for combating crimes like terrorist financing, money laundering, identity theft, account takeover, and chargebacks. Know Your Customer verification not only helps in combating crimes but also ensures that all customers have the best experience with the bank. With a digital identity verification solution, banks can ensure that the customer drop off reduces. Moreover, complying with the stringent KYC/AML regulations from the FATF and FinCEN will not be a problem.

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