Financial Services

Revolutionising KYC processes: The role of technology in compliance

The Know Your Customer (KYC) process is integral to security practices in various industries, particularly banking and finance. As we transition into a highly digitised world with interconnected financial systems, KYC compliance gains unprecedented importance in safeguarding the security and integrity of financial service providers and their customers.

What is KYC? The role of KYC in compliance

KYC is a set of identity verification procedures through which businesses authenticate their clients. KYC typically includes customer identification, customer due diligence (CDD), and ongoing monitoring for suspicious activity.

The primary goal of KYC compliance is to safeguard businesses and financial institutions from being utilised as channels for money laundering, terrorist financing, fraud, and other illegal activities. Additionally, KYC also protects customers against identity theft and the legal consequences of unintentionally facilitating crime.

KYC is, therefore, a non-negotiable aspect of regulatory compliance in most organisations.

Driving efficiency with KYC technologies

Traditional KYC processes are tedious, time-consuming, and manually intensive. They involve extensive documentation and are prone to human error and delays. Moreover, in digital ecosystems, traditional security measures fall short as financial crimes grow in number and sophistication.

Automation and sophistication in compliance processes are pressing priorities today. In response to the demands of the changing regulatory landscape, businesses are increasingly leveraging digital technology to increase the speed and accuracy of KYC compliance.

Below are some of the latest technologies that enable KYC automation, simplify identity verification, and ensure ongoing monitoring and risk assessment:

Robotic Process Automation (RPA)

RPA automates various KYC processes that were previously handled manually. These include collecting customer information, data entry, and report generation. RPA is pivotal in reducing costs, streamlining customer onboarding, and freeing up human staff for more complex compliance-related tasks.

Document verification systems

These systems use Optical Character Recognition (OCR) and Near Field Communication (NFC) technologies to extract data from identity documents such as ID cards, passports, and utility bills.

They auto-verify this information through various techniques, including –

• Comparison with previously uploaded information
• Edge detection and colourspace analysis to rule out instances of tampering and forgery
• Special feature identification to authenticate security features such as watermarks, stamps, and holograms

Biometric identity verification

Biometric verification is a quick and secure method of authenticating customer identities for KYC compliance. The greatest advantage of biometric indicators is that they can be integrated into multiple gadgets, including smartphones, ensuring convenience for users.

Besides being customer-friendly, biometric technologies are an effective weapon against identity theft. They include -

Liveness detection

This technology uses deep learning and motion-based algorithms to ascertain that the biometric data being presented belongs to a live person and is not recorded or deep-faked.

Facial recognition

Facial recognition works by comparing the customer’s facial features, captured on camera, with corresponding images on identity documents.

Voice recognition

This technology analyses the customer’s vocal features, such as tone, pitch, and accent, and uses the signature ‘voiceprint’ for identity verification.

Fingerprint recognition

This is a common biometric method that authenticates customers based on their unique fingerprint impressions.

Iris recognition

Iris detection technology uses near-infrared (NIR) sensors to authenticate individuals by the unique details of their iris.

Electronic IDs (eIDs)

eIDs are digital IDs issued by government authorities. They enable customers to authenticate their identities online without having to provide physical documents for KYC compliance.

Blockchain technology

Blockchains offer a secure, decentralised ledger for storing and sharing customer data, such as identity documents, proof of address, and transaction information. Blockchains can streamline KYC compliance procedures by effectively meeting CDD and regulatory requirements.

The key benefits of blockchain technologies in KYC are -

• Building trust by affording customers significant control over their personal data
• Enhancing security through access controls
• Mitigating chances of data tampering and duplication

Artificial Intelligence (AI) and Machine Learning (ML)

AI and ML are invaluable in automating KYC processes and enabling risk assessment and fraud detection. AI/ML tools can analyse vast datasets, swiftly identify anomalies, and flag potentially fraudulent activity in real time.

Regulatory technology (RegTech) solutions

RegTech is an emerging field that leverages technology to automate regulatory processes, including anti-money laundering (AML) and KYC compliance.

RegTech solutions involve a combination of advanced digital technologies, such as blockchains, APIs, and cloud computing, to ensure that KYC procedures are aligned with the latest regulatory norms.

Benefits of KYC technologies

Technology has revolutionised KYC as a service, streamlined compliance, and helped to foster trust between financial service providers and their customers. Here are three key benefits of KYC technologies:

Improved efficiency and accuracy

KYC process automation eliminates human error in data entry and verification and expedites customer onboarding. Automation also facilitates scalability and resource optimisation.

Greater security

KYC technologies provide enhanced security through biometric verification, real-time risk monitoring, data security, AI-enabled fraud prevention, and much more.

Enhanced customer experience

By offering seamless digital experiences and streamlining the end-to-end compliance process, KYC technologies significantly enhance the customer experience.

How can Infosys BPM help?

Infosys BPM Compliance services are designed to help you transform end-to-end KYC processes through technology-enabled solutions. Our offerings include comprehensive support across KYC, AML, trade surveillance, and fraud detection and prevention operations.

Streamline your regulatory procedures with BPM Compliance.