Kyc Process As Anti-fraud Measure

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The goal of KYC at the online payment gateway and others is to keep criminal elements from using banks or financial institutions to launder money. They can also better understand their clients and their financial transactions thanks to related procedures.

KYC as an anti-fraud measure
KYC, or Know Your Customer, is a process in which you verify your customers' identities and assess their suitability, as well as the potential risk of illegal intentions toward your business relationship. The term is also used to refer to the laws that govern banking and anti-money laundering. Companies of all sizes use KYC processes to ensure that prospective customers, agents, consultants, or distributors have a positive attitude toward fraud and bribery. Banks, insurers, export creditors, and other financial institutions are increasingly demanding detailed due diligence information.‍

Money laundering
The methods of laundering money from criminal activities have changed with the advent of the digital age and the spread of peer-to-peer services, mobile banking, and various types of cryptocurrencies. Illegal funds are ...
... transferred to online brokers who specialize in this area, where they are routed through various legal financial ecosystems before being used in further criminal or terrorist activities. Money laundries use the largest e-commerce platforms because they offer the most benefits: the best online payment gateway systems, ease of use, and global reach.‍

Real-life examples
It was recently revealed that criminals and their partners used bogus Airbnb bookings to launder money. The perpetrators booked rooms on this platform with stolen credit cards and paid for their "stay" online, converting illegal income into documented earnings. A similar system has recently been discovered in which illegal income is laundered through fraudulent transactions in Uber. A similar method, which involves laundering illegal income via Uber through fraudulent transactions, was recently discovered. Brokers use stolen credit cards to book "spectre courses" with cars registered as partners in this case. Because of the ease with which these services can be exploited, as well as the difficulty in detecting such a practice, these methods are quickly becoming popular.‍

Simplicity creates opportunities
Money laundering via online platforms is appealing because it is simple, quick, and inexpensive, and it has a global reach. This method eliminates the need to set up a bogus company or identity, as well as the need to maintain the appearance of legality. As a result, the scope of this phenomenon is rapidly expanding. It is estimated that global retail e-commerce trade will increase by 2.2 billion dollars per year, giving criminals more opportunities to conceal illegal transactions among a large number of legitimate ones. Furthermore, the proliferation of cryptocurrencies and the development of alternative payment platforms raises legitimate concerns that "legalizing dirty income" will become even more difficult to track down.‍

KYC Standards
The goal of KYC is to keep criminal elements from using banks or financial institutions to launder money. They can also better understand their clients and their financial transactions thanks to related procedures. This enables them to properly manage the risks. KYC procedures can now be implemented by a variety of Internet companies in addition to banks. Their policies are typically founded on the following key components:‍

• Customer acceptance policy
• Customer identification procedures
• Transaction monitoring
• Risk management

KYC complexity
Although the KYC program protects both parties, such procedures are not without risk. This, for example, delays the onboarding process for customers because they must ensure compliance with the requirements and provide additional information. The latter may cause problems because some customers may object, even if they have nothing to hide. Account owners may receive requests for the same information from different departments within the same institution on multiple occasions. All of this results in customer loss for financial institutions. Furthermore, the cost of the KYC program is very high – sometimes too high for some institutions or businesses.‍

The development of IT solutions to support KYC, AML, and compliance processes is progressing toward further digitalization of these processes. In terms of onboarding, we're talking about solutions like AI-based face and emotion recognition or searching the Web for negative press. These new tools will make KYC procedures more cost-effective, precise, and user-friendly.