Do you realize how risky a specific business relationship is?
Well, if you provide financial services, you are legally required to know that. A set of anti-money laundering (AML) regulations obliges financial services companies to run automated KYC verification checks. KYC procedures help them comply with a law, prevent fraud, enhance customer communications, and obtain other benefits.
To get these advantages, you have to establish customer identity and estimate money laundering risks based on collected data. Although you can do this manually, such an onboarding process will take ages. That’s why leading financial institutions opt for automated KYC verification and use advanced data verification tools.
Our article will focus on address verification solutions for KYC procedures and other ways to check customer identity. Read on to discover:
- What is KYC verification: definition and requirements
- Automated address verification and other checks for KYC compliance
- Inkit Verify for automated address verification
What Is KYC Verification?
KYC verification (Know Your Customer or Know Your Client) is a set of procedures established by financial organizations to assess customer risk. They check the information provided by a customer to verify the identity and make sure no money-laundering can happen.
Since manual KYC checks would be super time-consuming and inaccurate, automated KYC verification is preferable. Banks and other financial services companies usually integrate several automated solutions to validate different customer identity aspects (e.g., address data, ID number, financial history, etc.). In automated KYC verification, all KYC processes are aligned and run automatically.
Automated KYC verification is necessary both to protect an organization from illegal activities and stay regulatory compliant. Thus, KYC checks and AML regulations are closely interrelated. Usually, the KYC procedure is a part of the anti-money laundering policy of a bank.
KYC Requirements for Financial Institutions
The legal requirement to perform KYC verification appeared in 2001 with the Patriot Act. It augmented the Bank Secrecy Act of 1970 to additionally regulate the activities of financial institutions. Since then, the KYC procedure has become stricter and requires financial organizations to implement the Customer Identification Program (CIP) and Customer Due Diligence (CDD).
Customer Identification Program (CIP)
The CIP procedure is another word for customer identification. A bank asks customers about identifying information, including name, date of birth, address, identity number, and other details depending on the CIP process established in the organization. To collect this data, the bank usually requests a driver’s license or a passport. Then it matches this information with the official database to complete data and address verification.
Customer Due Diligence (CDD)
Although the Patriot Act doesn’t directly demand a CDD, without it, banks won’t be able to file suspicious activity reports, and hence, stay compliant. Customer due diligence is the financial analysis of an individual to predict what types of transactions they will make and detect any suspicious behavior or financial transactions. The customer is assigned a risk rating that determines how often the organization needs to monitor their account. CDD also helps to find out high-risk customers and restrict the services offered to them.
Note. Both due diligence and CIP procedures require personal data and address verification. So if you manage a financial organization, make sure to implement automated data collection and processing. Regardless of checks’ depth – standard validation or extensive due diligence – customer identity verification is a must.
Automated Address Verification and Other Checks for KYC Compliance
Now when you know what KYC verification is, it’s time to discuss how to implement it. As we have already mentioned, financial organizations should invest in automated KYC verification checks and delegate all the routine tasks to software. In this field, manual data processing is too risky and harms regulatory compliance.
Automated address verification is one of the elements of automatic KYC verification. Find out more about how to run address verification automatically and other ways to revolutionize the KYC onboarding process below.
Automated address verification
Identity documents provided for customer verification must include address data. It helps to ensure that the person who completes an action (e.g., opens an account) exists. It also prevents any fraud or illegal activities.
To run automated address verification, you will need to integrate specialized software like Inkit. Inkit’s Reach Enablement Platform cleans customer databases, standardizes them, and matches address records with the latest information shared by the USPS. All these steps happen automatically once you connect Inkit with your system. The tool also offers automated address autocomplete, which enhances the quality of collected data and speeds up the onboarding process. The combination of address validation and autocomplete is an effective solution to collecting quality data from the start and also checking it.
Learn more about address verification for financial services
Intelligent document processing
Intelligent document processing relies on machine learning, intelligent character recognition, and natural language processing to extract data from documents. You can use it to process invoices, bills, mortgage applications, contracts, purchase orders, etc.
When it comes to automated KYC verification, intelligent document processing is of particular use. It will allow you to automatically obtain the necessary personal information from customers’ verification documents and record it in your system. This automates a large share of routine tasks related to KYC regulations.
Chatbots for customer communications
To facilitate the onboarding process and communicate with people when they need help, you can use automated chatbots. Such software provides answers to the most common questions and considerably enhances the customer experience. Chatbots will also allow you to collect data from customers and explain why you need this information if necessary.
AI for due diligence
Artificial intelligence can analyze information in a way that people can’t. It determines risks, tendencies, and expected actions based on the previous behavior of customers. Thanks to this, you can automatically predict high-risk activities before they happen and take steps to prevent them.
AI for due diligence is a useful addition to automated data and address verification. It offers an advanced level of customer checks that will help you stay KYC compliant. First, you check personal and address data through automated KYC verification and then automatically monitor customer activity.
Inkit Verify for Automated Address Verification
Inkit’s Reach Enablement Platform has two things that make it particularly good for automated KYC verification. It supports address verification and easily integrates with a range of third-party services.
Inkit includes the Verify tool that matches address information with official USPS records. It automatically checks the data in your system to standardize it and detect invalid addresses. When necessary, Inkit can also automatically generate custom documents and send them to the delivery point. As a result, you get automated address verification, document rendering, and delivery within a single platform.
As to the integration capabilities, Inkit Connect supports hundreds of services, starting from CRM systems to analytics. If you need to implement customer due diligence or any other KYC solutions, you will be able to integrate them with address verification smoothly. This should allow you to build a multi-component KYC process and achieve the maximum level of automation.
Want to use Inkit in your organization? Contact us to discuss the deal.