Why KYC is more important now than ever

Photo by Markus Winkler on Unsplash

We all know how COVID-19 has profoundly impacted the entire world. People are now staying at home, a lot of industries are suffering, and labor markets around the world were disrupted in 2020 on a historically unprecedented scale.

Of course, Know Your Customer or KYC is also being affected by the pandemic.

Know Your Customer is the process of identifying an individual or corporation before entering into a business relationship.

Wherever you are in the world, business owners must fulfill certain day-to-day customer due diligence requirements. The process includes verifying your customers’ identity (KYC) and applying a risk-based scoring model to understand how your service can be exploited to aid terrorism or launder money.

Financial criminals are becoming ever-more sophisticated. Verifying customers’ true identity and completing due diligence has never been more important, or more difficult.

How is COVID-19 impacting KYC?

While economies decline and employment rates drop drastically, cases of fraud are known to rise during recessions.

The pandemic has been an eye-opener for capital market firms hit by market volatility, systems unable to cope quickly with change, the need to set up work from home schemes and security, and changing relationships with customers. These changes has all been visible to KYC and onboarding functions that have been pushed to accelerate digitalization, pare down document exchange once more, and reconsider optimal operating models.

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COVID-19 has represented a huge test for associations who are obliged to perform KYC checks and observing. Adjustments have to be made and some organizations already did, but there are still a lot which are struggling and have been hit particularly hard during this time. Banks and other major financial establishments are struggling to attempt to set up online KYC, particularly when you consider how ill-equipped the entire world was for the Coronavirus.

Photo by Markus Winkler on Unsplash

Why KYC is more significant now?

Banks and other financial institutions must have strong KYC procedures in place so they can ensure that their clients are not involved in money laundering or in the financing of criminal organizations. The KYC process helps avoid severe reputational and financial penalties imposed by regulators. Banking is an industry with inherent risk of financial frauds and money laundering so it is extremely important to perform background screening procedures on customers to mitigate fraudulent activities.

With financial criminals and lawbreakers on the rise, cybercrime around the globe has expanded in the course of recent weeks and will keep on increasing as long as it proceeds. As the world requires whole enterprises to be more advanced, it’s imperative that these KYC methods are comparable to their antecedents. Thus, numerous organizations are going to third party KYC services to fill the gap. All companies are striving to prevent and detect the risks brought by these cyber criminals in a timely manner, and in these cases, outsourcing is often the best option.

The journey to successfully fight fraud doesn’t end in a single day. It’s a continuous process in a practical world, where everyone must recognize that compliance is a passage that requires commitment and effort within the wider organization, as we all look forward for the better days ahead.

Global ID is an all-in-one Anti-Money Laundering (AML) and Know Your Customer (KYC) software trusted by different payment platforms around the globe, including Ole Platform. With Global ID, you can confidently balance AML compliance demands along with your core business operations.

Let Global ID help your organization in meeting your compliance obligations and address your trust and safety concerns.

Visit www.globalid.io today to learn more.