With a recent rise in identity fraud, correctly verifying the identity of an individual is critical to increasing security and reducing crimes. Biometrics are seen as new weapons against such crimes. With the use of biometric technologies, organizations such as banks and financial institutions are making KYC (Know Your Customer) procedures for customers even more efficient and easy to use. Thanks to the spread of smartphones and the incorporation of working finger and iris scanners on today’s gadgets, customers can now use their faces and voice to open bank accounts and finger scan to purchase goods and services online.
What Is KYC or Know Your Customer? It is the process of collecting, verifying, and confirming the identity of any individual who transacts with Banks or Financial Institution.
Let’s Look at Five Importance of Biometric KYC
1.To Check Identity Theft
Biometric eKYC allows banks and financial institutions access the highest level of identification and authentication security and customer onboarding process leveraging trust. The bank cannot open Benami or fictitious accounts on behalf of other persons whose identity has not been verified. They can quickly enroll, authenticate and verify customers’ identity before allowing access or transactions to occur Over-the-Counter (OTC). Also, banks will not allow you to open an account until and unless you present valid documents that establish your identity.
2. To Prevent Money Laundering
When illegally obtained money is made to appear as though it has originated from legitimate sources, it is called money laundering. This is a serious threat to any economy as it shelters and breeds criminal activities such as tax evasion, smuggling, and financial fraud. Biometric KYC helps banks and financial institutions track entities involved in unscrupulous activities.
3.To Manage Risk
Biometric KYC also helps banks in managing risk quite prudently. By creating risk profiles and assigning risk categories to customers, banks can monitor any possible financial frauds and loan defaults. This is done by analyzing a customer’s profile through Customer Identification Procedure and by considering their financial background, nature of the account, the purpose behind their account opening, and nature of transactions, etc.
4.To Combat Finance of Terrorism
As stated above, one of the major objectives of Biometric KYC is to enable the banks to know and understand their customers as well as their financial dealings. Biometric KYC is a deliberate effort taken by banks to check suspicious monetary transaction by any of their customers which may involve financing the activities related to terrorism.
In conclusion, implementing biometrics for KYC management will be beneficial for customers and banks alike because of increases in convenience and security. Providing accurate identity management through biometrics will help the banking and financial institutions to maintain accurate customer identities and maintain an efficient Know Your Customer (KYC) management process to prevent money laundering, identity theft, banking fraud, and as well as to comply with government regulations.
By Carolyne Rabut
Content Marketing – CompuLynx