The global financial watchdogs have made it necessary for the banks and financial institution to take part in the fight against terrorism and financial crimes like money laundering that enables the funding of terrorism activities. The priorities for governments are always to be in the good graces of the international regulatory bodies and in order to achieve that, they must make sure of the financial integrity in their economical framework. Financial integrity is achieved through dealing with financial crimes and online identity verification and customer due diligence in the financial system can help to ensure that. With this blog, let’s take a deep dive into the importance of online identity verification to comply with the KYC and AML requirements and achieve financial integrity. 


What is Money Laundering


This is the process of movement of a large sum of money gained through illicit means to hide the origin of the money. Money gained through illegal means like human trafficking, drug trafficking, illegal betting, tax evasion, corruption, robbery etc cannot be used without leaving a trail that leads back to the criminal activity. In order to hide their criminal activities, the criminals try to conceal the money and integrate them into the legal financial system to ensure that when it is used, no attention is brought to its source. This not only tends to ruin the economic balance of the country but also gives rise to criminal activities. This is why it is extremely illegal and authorities are always finding ways to curb it. 


Financia Action Task Force (FATF) is a regulatory authority that fights against the money laundering and funding of terrorism and has given out recommendations to countries on how to take measures to enhance their financial integrity. Those who do not take the recommendations seriously can end up on a grey list by the authority. 


What is Terrorism Financing 


This includes gathering the funds that are intended for the financial support of the terrorist organization and their extremist activities. These funds are mostly gained through illegal sources. The organizations that are involved in the funding of terrorism activities need to conceal the source of the money so they do not get in trouble if the funds are traced back to them. This is why they use different methods to conceal the source of money. 


Significance of KYC/AML 


KYC, also known as Know Your Customer, is the regulatory requirement under the Bank Secrecy Act of the 1970s that requires business organizations, especially the banking industry, to verify the identity of all their clients. This is done to record their identity document and to ensure that they are not fraudsters taking part in any criminal activity. AML (Anti-money laundering) also the legislative measure that came into existence under the Bank Secrecy Act and further made more stringent under the US Patriot Act of 2001. This law was passed to monitor the financial flow in the system and to ensure that no criminal proceeds are occurring. The laws were made strict after the 9/11 incident to curb the funding of terrorist activities. Under the law, the banks and financial institutions are to record the identity of all their customers and if they see any unusual activity. 


Online Identity Verification to Implement the KYC/AML


In order to comply with the regulations, identity authentication is necessary for each and every customer. This is what online identity verification offers but through digital means. The online identity verification solution can perform the verify the identity through:


  • Face Verification
  • Document Verification
  • Biometric Verification
  • Address Verification
  • Consent Verification


Through AI-based verification of identity, the customer just has to provide their identity document and a selfie. The solution can analyze the face and document type to authenticate the identity. It is the best identity theft protection as any spoof attack, stolen or forged document can be detected through this solution. The solution is robust and more accurate than the manual method and has not only simplified but also secure customer onboarding. The banks and financial institutions can use the online identity verification solution to meet their AML and KYC regulatory requirements more seamlessly and help their governments to catch the bad actors and achieve financial integrity.

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