The brightest trends that are going to embrace KYC and AML processes in the nearest future
CDD procedure i.e. Customer Due Diligence is an integral step at the beginning of the financial relations with the companies from such industries like banking, fintechs, sharing-economy, crypto-projects, telcos, aviation, gambling and many more. CMO of BASIS ID — Anton Ossipovski covers the purposes of the customer’s risk evaluation, what it consists of and what to expect in the nearest future in the following discourse.
To begin with, it is necessary to determine the purpose of the CDD procedure. Many people think that CDD is performed solely for compliance with the requirements of the financial regulators such as SEC. Indeed, compliance with the regulatory requirements is important for the successful operation of a company, however, risk mitigation is as important. If an enterprise knows who their client is and confident in their due diligence — the possibility of fraud is drastically reduced, which is useful for any company. The process of CDD consists of two major parts: at first, a so-called KYC (Know-Your-Customer) procedure, or in other words the identity verification, is performed. It is necessary to confirm the identity of a person that wishes to utilise the service. Secondly, when the identity of a person, based on the acquired identity documents, address, additional paperwork, biometrics and other data is confirmed, the person is checked against special databases that contain criminal or exposing records, such as terrorism financing, money laundering, politics, sanctions and so on.
At the moment, most companies utilize almost the same CDD procedure, where a person sends in a photo of the document, a photo of themself and personal data. After some time, if everything is fine, they gain access to the service. However, let’s look a bit into the future and what can become game-changing in the CDD.
At the moment there already are projects that aim to revise the traditional approach to the KYC/AML procedure applying the technologies of fragmented registry with time markers and transaction blocks. However, they don’t succeed by putting such high stake at it. Blockchain isn’t a platform for further development, but an opportunity to improve the core service. How can it improve the service? To begin with, the decentralised data storage with all its positives — uptime reliability and security from hacker attacks. There is much more: for instance, accessing the anonymized data for third-party analysis and data processing. Data received from the Open Banking Protocol can’t be matched with a specific person, however, allows analysing it and comparing it by multiple parameters. This lifts the principle of security to a whole new level. It is also important to keep in mind the ability to keep and track records of the processes.
Quite often artificial intelligence is considered as a fancy name for the machine learning. However, it’s not like that. Artificial intelligence is already able to process natural speech, use neural networks and fuzzy logic. Such toolset doesn’t simply enables to teach the systems how to improve the quality of the KYC/AML procedure, but also to enhance the whole experience and accuracy for the numerous aspects of the verification. if now the uploaded photo has to meet certain quality criteria, then in the future a neural network will be able to improve the quality by augmenting the image, which can be especially crucial for the countries in, for example, Africa and Eastern Europe, where technologies are not advanced. Apart from that, natural speech processing will allow co-operating with the user in real time, assisting them with the application, guiding the actions and correcting the requirement of additional data for a successful CDD.
Obviously, AI is fundamental for the automatization of the processes, which will cut both cost and time.
You probably remember forums or communities, where you could get into only by an invitation? Naturally, open organisations can’t afford to put such a powerful entering filter. However, we still have a crediting system, when you need to provide a guarantor in order to be approved for a big credit amount. Offline it takes ages, is complicated and requires personal attendance. Imagine a world where social contacts that utilize some service could confirm and verify personal data thus allowing to use functions of the service for the next one in the chain. Clearly, this gives a powerful instrument to assess the risk of interaction with a specific user. We already have social networks designed to share data with your friends and acquaintances, at the same time, they are a huge database that gathers the personal data. Allowing to access social networks of a person going through the CDD opens a whole new horizon for the scope of the collected data. This includes broadening the biometric analysis and processing of the behavioural data such as text input and video footage. In a case when the social contacts inside the service are also contacts on a social network the user experience can be improved to a whole new level.
Imagine how many opportunities are then opening for a sharing-economy!
We, at BASIS ID, endeavour to deliver a CCD service, that gives our clients a state-of-the-art product with an excellent end-user experience
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