Introduction
Customer identity verification is a crucial task that KYC performs. This is vital for the functioning of banking sectors, insurance and financial institutions rely on KYC for their operations. Regulatory bodies have mandated KYC for everyone who undergoes the verification process and needs valid authenticity.
In traditional banking, the manual verification process has been a primary challenge. They are time-consuming, have errors, and are not secure. However, introducing blockchain technology has changed the performance of banks and financial institutions.
The KYC process is essential for complying with regulatory bodies, ensuring valid identification, and protecting against AML and fraud activities. Using blockchain for KYC verification will be an alternative to the traditional KYC process. It helps the business to gather information from various service providers in a single place and ensures it is safe and immutable.
In this blog, we’ll understand Blockchain essentials in KYC and their compliance.
1. Unleashing Blockchain for Seamless KYC Processes
With the help of blockchain, financial institutions and other industries can simplify the verification process while reducing fraudulent activities and manual work. Its decentralized ledger system offers a real-time monitoring system that facilitates the sharing of constantly updated information between different parties and institutions. Blockchain enhances the KYC process due to its potential to create secure, immutable, and transparent identity verification records.
2. Blockchain Transforms the KYC Process
Reduces Manual Process: Blockchain technology helps reduce manual labour processes and eliminates the paperwork and costs associated with it.
Enables Real-Time Monitoring: KYC blockchain systems facilitate the sharing of constantly updated information accessible to other parties or institutions. This is achieved through the implementation of immutable and transparent distributed ledgers.
Accuracy and Trustworthiness: Blockchain uses hash, which makes the process tamper-proof and secure. It reduces errors and fraud by ensuring the data is accurate, facilitating the verification process faster and cost-effectively.
Source: Images depicting the KYC Process before and after the use of blockchain.
3. KYC Compliance on the Blockchain
Customer Due Diligence (CDD): Conduct thorough due diligence on customers to understand their risk profile and business activities. Blockchain can facilitate the secure sharing of CDD (Customer due diligence) information between different businesses while ensuring data privacy and security.
Integrated Privacy: One has to follow data protection regulations such as the General Data Protection Regulation (GDPR) to protect the personal information collected during the KYC process and ensure that the data is stored and processed securely.
Anti-Money Laundering: Implementing measures to avoid the practice of money laundering activities, which includes monitoring and reporting suspicious activities and implementing AML policies and regulations.
Customer Identity Verification: This includes collecting the important and necessary details such as Name, Date of Birth, and address from the customer for identity verification with the help of blockchain and storing it securely.
Extended Due Diligence: It involves gathering more comprehensive information and implementing more attentive monitoring.
4. Top Trends in 2023
Future Proof of KYC Process with Blockchain.
KYC Compliance Measures.
iDenfy partners with Syntropy to enhance Web3 and KYC Compliance.
ADIB became the first Islamic Bank to go live on KYC Blockchain.
Conclusion
Blockchain technology has the ability to transform KYC Compliance processes by enabling decentralized ledgers, immutable verification, and enhanced data security. As technology develops further, KYC systems for financial institutions and other industries are changing the game by simplifying the verification process, which also reduces fraudulent activities.
Comments