In the present series, verifying identity is a priority and it’s been represented in the way of KYC and AML verification in financial & banking industries to resolve numerous pain points. It has been utilized for development and as an offense. We shall explore various industries and sectors where blockchain technology is being implemented to solve real-world problems.
Blockchain technology has gained significant attention due to its potential to revolutionize across industries. One area where blockchain can have a profound impact is in the field of Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations.
Where do we need KYC?
KYC is required in banking to invest in Stock markets, pre-approval loans, and investments, KYC is the mandatory process of identifying and verifying the client’s identity when opening an account and periodically over time.
You may need a personal info card provided by each country of origin, photocopies, and e-signature to verify your KYC & get approved. You can complete your KYC at your home as eKYC via Video conference. However, the current KYC and AML processes are cumbersome, time-consuming, and often involve duplicative efforts for both customers and financial institutions.
- Customers provide fake data/documents (misuse of technology)
- Analyzing customer risks based on information provided
- Verification of the integrity of customer documents
- Processing time delays (takes a minimum of 2 business days)
- Tracking & monitoring of customer transactional behavior
In developed countries like the U.S., Europe, the Middle East, and the Asia Pacific, a cumulative $26 billion was collected as a fine for non-compliance with AML, and KYC.
The advancement of technology like Blockchain technology, can streamline and simplify the KYC and AML processes by creating a decentralized and immutable ledger of customer information. In recent years late 2017 digital currency has been adopted globally in all sectors.
Here are some key ways in which blockchain can be utilized in the KYC and AML processes:
- Blockchain technology shares the data into small chunks of blocks wraps up the data to provide security and stores the data across multiple nodes in the network. As each block transmits in a network and people who are online can access it but can’t breach the data even though it happens they can’t reach the complete piece of information as it’s stored in multiple nodes, This eliminates the risk of a single point of failure and reduces the chances of data breaches or unauthorized access.
- The decentralized nature of blockchain ensures that customer data remains tamper-proof and transparent. Once customer information is added to the blockchain, it cannot be altered or deleted without the consensus of the network participants. This ensures the integrity and accuracy of the data, reducing the risk of fraudulent activities.
- With blockchain, a digital identity is created for each customer that contains their KYC information. This identity can be securely shared with multiple financial institutions, eliminating the need for customers to repeatedly provide the same information. This streamlines the onboarding process, reduces customer frustration, and saves time and costs for both customers and financial institutions.
- Blockchain provides real-time updates to customer information. Any changes made to the customer’s profile, such as address or employment details, can be instantly recorded on the blockchain. Also, customers receive an update in SMS/email as a push notification ensuring that data has been modified /updated by the concerned person. This ensures that financial institutions have access to the most up-to-date information rather than inaccurate data.
- Blockchain enables collaboration between different financial institutions by providing a shared platform for KYC and AML data. Modern applications of banking & financial sectors can apply for loans, investments in terms of Recurring deposits, Fixed deport, purchases of trade like options trading, and stock investments under single KYC completion. You can work on cross features via your mobile apps as well as websites from your doorsteps.
Customers can grant permission to specific financial institutions or regulators to access their KYC data, ensuring that their information is only shared with authorized parties. These advanced features using blockchain provide secure and efficient sharing of customer information, reduce the duplication of efforts, and improve compliance with regulatory requirements.
Thus by implementing KYC and AML processes on the blockchain, financial institutions achieve several benefits, including increased efficiency, reduced costs, enhanced security, and improved compliance. So get started with blockchain implementation for your business needs & provide your customers with more control over their data more securely and promptly know more by reaching BSEtec – a leading blockchain development company that can assist with all your queries.
