Technological advancements revolutionized the world in different aspects. It has changed the way of living by giving us extravagant facilities and much more. Now, people are shifting towards online services as they save time and are more reliable as compared to manual services. With the attraction of people in using online services, businesses also shift towards online mode to generate more revenue. No doubt, shifting towards online mode facilitates both businesses and customers but the chances of online frauds and identity theft are also increased. According to a source, $107,600,671 are lost in online fraud till yet in 2021 worldwide. It is the need of the hour that businesses should comply with AML-KYC services to know their customer.
On the other hand, money launderers are also there to harm the country’s overall economy that results in economic deprivation and widening the gap between the rich and the poor. Businesses are under huge pressure to perform robust KYC measures to prevent money laundering. Because a large amount of money is laundered every year that is equal to $800 billion. There is a dire need to have a proper mechanism to stop money laundering and online financial crimes. The process of “anti-money laundering” was introduced to deter money laundering when FATF came into existence in 1989.
Anti-money laundering is the act to stop money launderers from obtaining illegal money and making it legitimate by using different means. Money launderers invest black money in crypto markets and other such institutions to hide. To stop money laundering, businesses should know their customers well enough. For this, AML-KYC compliance is a must for them.
A Quick Get to Know About KYC
“Know your customer” also known as KYC is a process to confirm the identity of the customer to make sure that the person is not a potential threat to the business. The purpose of the KYC automated solution is to identify the customer, verifying its real identity, and ongoing monitoring of its regular activities. It can be done by matching the personal information of the customer against global watchlists, sanctions, and a politically exposed person’s list.
The financial action task force and the respective regulatory authorities of different countries made the AML and KYC requirements more strict to prevent money laundering. It is noticed that in the last few years, banks are fined billions by financial regulatory authorities for not complying with AML regulations. So, businesses are more attentive towards fulfilling the regulatory measures to avoid hefty fines. It is the first and foremost responsibility of any business to meet KYC standards to have risk-free services.
All financial institutions such as banks, stock exchanges, insurance companies, crypto markets, etc should comply with AML regulations to avoid hefty penalties. To fulfill AML standards, businesses should need to know their customer’s regular activities and keep ongoing monitoring of potential customers. The purpose of AML screening is to facilitate businesses that their customers are not high-risk customers. It is done mostly when a customer wants to open a bank account or wants to go abroad. Although all countries have their own financial regulatory standards that they have to follow. Except for those regulations of their respective countries, businesses have to follow FATF 40 recommendations to meet security standards.
Non-Compliance of AML-KYC regulations Leads to Financial Loss
If the businesses do not comply with regulations led by financial regulatory authorities, they have to pay hefty fines. In this way, the chances of online fraud and money laundering are also increased. On the other hand, customer’s trust is also lost by the institution and the brand reputation is spoiled.
AML-KYC solution helps businesses to confirm their customers in real-time by matching their data against sanctions or PEPs lists. It facilitates them by complying with regulatory standards to avoid hefty fines. AML-KYC solution also helps businesses to provide their customers a risk-free service and a good customer experience. By complying with AML-KYC standards, the brand image of businesses will also be improved.