While blockchain is believed to improve cybersecurity and have a positive impact, on the other hand, blockchain can cause significant disruption and improve Know Your Customer (KYC) and Anti-Money Laundering (AML). On one hand, technology helps, but on the other, it paves the way for cybercriminals to adopt advanced money laundering techniques. Money laundering has been around for a long time.
Know Your Customer (KYC) and Anti-Money Laundering (AML) is essential for identifying customers as well as for preventing and detecting crime. However, for financial institutions such as banks, this can be a long and expensive process that can be burdensome.
KYC: What is KYC?
By doing KYC, the business has the ultimate goal of knowing the identity of customers before or while doing business with them. Banks and institutions of all sizes are famous proponents of KYC. KYC policies have been around for a long time and are becoming increasingly important for issues related to corruption, terrorist financing, and illegal tax evasion.
Know Your Customer (KYC) is a specific detail that a company maintains as the final criteria for identifying customers interested in doing business with them.
KYC compliance is supported by many banks and some organizations. KYC rules and policies have been around for a while and have proven to be of great value across the board. Some of the biggest challenges facing KYC requirements today include corruption, terrorist financing, and illegal tax evasion.
AML: What is AML?
Scams are ubiquitous in banks, the payment industry, businesses, etc. Therefore, it is essential to minimize process risks and produce systems that are free. Special laws and regulations have been enacted to prevent illegal operations. These are necessary to make transactions safe and secure, which is why Anti-Money Laundering (AML) is necessary. Unfortunately, however, cybercriminals are looking for new ways to steal money and take control of the trading system. It is therefore important to update the procedure for your AML solution.
Anti-Money Laundering (AML) can be described as a set of guidelines or laws designed to prevent the proceeds of illegal activities.
The problem with current AML is that it cannot cope with changes in the complexity and scale of financial transactions that are problematic for combating money laundering. These problems allow criminals to find more ways to deal with illegal financial transactions.
What are the problems associated with the KYC and AML process?
As banks deal with a large number of individual or corporate customers, it is very important to know the details of their customers. However, the various procedures related to KYC & AML make the entire process time-consuming, cumbersome, and complicated.
The KYC AML process has many issues that prevent it from working smoothly. Here are some issues that arise during routine KYC:
-Processing time delays
-Customers providing fake and bogus data
-Expenses related to the process
-Identification of fraudulent data
-Verification of the integrity of customer documents
-Tracing and tracking customer transaction behavior
-Analyzing customer risk based on information provided
Technological advances enable the creation of rigorous AML and KYC processes that completely reduce the complexity of transactions. However, the above issues require secure, transparent, and trusted technology such as Blockchain to build strong KYC and AML systems.
Why blockchain is required for AML and KYC?
While blockchain technology has proven to be very effective and attractive for the success of cryptocurrencies, it is not the only one where it can be used.
Distributed systems are used for a variety of use cases involving different sectors of companies and industries. An authenticated and secure way to capture and transmit data is through the use of KYC/AML. The blockchain serves as a highly secure platform for capturing data and information related to KYC and AML compliance.
When using a blockchain platform, customers must generate a block containing all information related to KYC and AML compliance. The details and information are then encrypted and the user is given a digital access code that must be entered to view the data.
So how can financial institutions take advantage of this? The answer is that in order for someone to register with some banks, they have to provide an access code to these financial institutions so that the bank can access your information and then automatically go through.
Working on Blockchain-inspired KYC and AML
If you want to use another bank's transaction services, blockchain can help reduce overall costs. Instead of asking your bank to resend your details, you will be asked for a KYC ID. After verifying your identity and providing your KYC ID, this ID will be used to verify the authenticity of your data using the same blockchain as your public key.
In addition, when an anti-money laundering (AML) system is in place, blockchain technology will track all transactions and detect illegal activities. Using this technology, you can prevent cybercrimes, hacker attacks, and data leaks.
Here are some benefits of using Blockchain technology for KYC & AML:
Creating a common KYC and AML registry that can be used by different banks and financial institutions. This greatly speeds up the process and lowers the cost of KYC compliance. If the customer is registered with the bank, the bank representative can obtain an access key to access their identity data. This saves customers the trouble of fetching this data in bulk every time.
KYC and AML registration can also be used for internal banking purposes. This helps banks overcome the hassle of compliance issues whenever a customer wants to buy a new service or product. This will be very beneficial for banks as it will reduce costs and speed up procedures.
Bottomline
While the potential of blockchain technology for KYC, digital identities, and anti-money laundering is still largely untapped, it is important that all market participants work together to find solutions that allow them to focus on their customers. To be a successful proposition, blockchain technology must meet challenges such as KYC, digital identities, and AML. The power of this technology is due to network effects that only occur when market participants work together on a mutually beneficial solution. Cooperation between all parties allows us to focus on the needs of the customer.
So, a great use case can lead us down an exciting new path where we can finally see these problems solved!
Clarisco Blockchain Deployment
Rely on the best blockchain experts to help you achieve the most success using blockchain in your KYC/AML processing challenges. We, clarisco solution have techie experts who can help clients develop different ways to get the most out of digital ID creation and integrate advanced blockchain solutions to provide simple solutions to complex problems. At the heart of our efforts to implement blockchain is to provide our customers with transparency, improved performance, higher levels of security, and freedom from third-party intermediaries.
Do you want to develop a safe and secure Blockchain-based AML/KYC platform for your business? Get a free consultation and share your ideas with a panel of blockchain experts.
