Financial institutions are under immense pressure to employ robust preventive measures to avoid online financial fraud. Financial institutes are the hotspot for cybercriminals to commit online crimes as they involve more online transactions as compared to other industries. A large amount of money is laundered every year due to substandard ID verification solutions by banks and other financial organizations. If we talk about the latest statistics on money laundering, the number is breathtaking. According to UNODC, EUR 715 billion money is laundered every year. There is a need for stringent AML solutions to be employed by financial institutes all over the world to reduce money laundering.
On the other side, banks lose billions in the name of non-compliance fines every year which is a wake-up call for financial firms to meet security regulations. If the situation goes on, it becomes difficult for banks to survive in the market or to generate good profit. Robust AML solutions help banks and other financial entities to comply with financial regulatory standards and to fight the evil of money laundering. The primary objective of anti-money laundering is to locate money launderers and stop them from making their black money legitimate. Let’s see how anti-money laundering compliance helps financial bodies to prevent these crimes.
How Anti-money Laundering Assists Financial Institutes to Avoid Online Frauds?
Bad actors discover innovative strategies to commit online financial frauds such as money laundering. That’s why financial regulatory authorities such as FATF and other global regulators are trying to make AML and KYC regulations stringent to keep fraudsters at bay from them. But it makes it difficult for financial organizations to meet security regulations designed by FATF (Financial Action Task Force) and the respective authorities of different countries. Anti-money laundering is responsible for making the laws, rules, and policies for financial institutions to prevent money laundering.
It aims to stop cybercriminals from obtaining black money and making it illegitimate using different means such as investing in cryptocurrency, drug trafficking, etc. There are some standards that businesses should follow to meet AML regulations. Let’s have an overview of KYC and AML compliance one by one that businesses should perform to avoid financial loss.
Why Know Your Customer is Essential to Avoid Online Frauds?
The regulatory authorities made it compulsory for businesses to perform robust KYC checks to avoid fraudsters entering into their systems. Know your customer ensures that the customer is legitimate or not before onboarding by performing a risk assessment. Mostly, KYC is performed before opening an account such as opening a bank account or social media account to verify the true identity of the customers. KYC also helps businesses to perform customer and enhanced due diligence to ensure secure onboarding of customers. After KYC checks, AML screening is the next step to check the financial status of the customers.
AML verification of customers and businesses is compulsory to comply with security standards. It helps businesses to confirm whether their customers are involved in any suspicious activity or not. AML systems screen the customers by matching their personal data against AML watchlists, politically exposed persons’ lists, and sanctions lists to check the legitimacy of customers. The ongoing AML also helps financial institutions to conduct regular AML monitoring of their customers to know their activities regularly. Ongoing monitoring eases the customer onboarding process and stays ahead of fraudsters to maintain AML and KYC standards.
How KYC and AML Compliance Help Businesses to Avoid Fraud?
KYC and AML Compliance help businesses to perform a thorough screening of their customers that helps them to locate suspicious persons or money launderers to commit crimes. They ensure the legitimacy of the customers before onboarding by using various authenticity checks to prevent financial fraud. It also facilitates businesses to fulfill regulatory standards to avoid hefty fines.
Wrapping It Up
Online identity verification services eliminate the need for customers to visit physical workstations to fulfill KYC requirements. AML solutions help businesses with swift customer onboarding within seconds. KYC and AML compliance assists financial institutions to provide their customers a secure platform for making risk-free online transactions. It also facilitates them to maintain ongoing KYC to keep a check on the current status of the customers. AML solutions also help banks and other financial institutes to keep money launderers at bay from them to improve their profit.