The Benefits of Biometrics in KYC and AML Compliance

Did you know more than $800 billion – $2 trillion is laundered annually? As one of the most prevalent and malicious criminal schemes in the globe, money laundering is a financial crime where the criminal disguises the origin of money acquired from illegal means. To avoid suspicion, criminals transfer and process their ill-gotten funds through multiple accounts, making it appear that the money was derived from a legitimate source. When accomplished, money laundering can deteriorate social and moral integrity since it is a means to fund illegal ventures.

Examples of activities related to money laundering include drug trafficking and smuggling. Due to these threats, financial institutions must stay alert and aware of money laundering methods and how to avoid them. If you want to boost your company’s anti-money laundering (AML) and know your customer (KYC) processes, using biometric authentication is one of the best ways to do so.

The Benefits of Biometrics in KYC and AML Compliance

1. It reduces friction during client onboarding

When banks take on new clients, they must go through certain processes to ensure that the new client is legitimate. Since biometrics can fast-track the process of verification, firms can better manage compliance needs and business priorities. Not to mention that biometrics in banking bind individuals to their digital identity, deterring identity theft and other forms of fraud.

Successful implementation means that there is less worry about identity fraud and cyberattacks. AML and KYC processes help strengthen cybersecurity and help ease the onboarding process by eliminating physical proof of identity (PoID), benefitting both the firm and client.

By acquiring the right information, firms can verify client identities, and by integrating KYC and AML compliance, verification can be completed in a scan or a tap.

2. Accurate ongoing verification

The use of online banking to manage one’s bank account continues to grow. Wells Fargo, America’s third-largest bank by assets, reported seeing an increase of 35% in remote check deposits and 50% in online wire transfers.

Unfortunately, cybercriminals use increasingly complex methods to get through standard security measures such as passwords, pin codes, and SMS authentications. Fortunately, this is where biometric authentication shines.

Once clients are successfully verified, they must authenticate themselves whenever they attempt to access their accounts. Since biological data is used as an authentication factor, this ensures that the account holder is the only one that can access their account. Ultimately, this provides secure ongoing verification. 

3. Protection against money mules

A money mule is an individual who receives illegal funds from a third party and then transfers them to another account on their behalf. When accomplished, this criminal activity benefits both parties since the criminals can stay undetected, and the money mules acquire a commission.  

Financial institutions can protect themselves from such money laundering schemes by implementing a solid KYC or CDD (customer due diligence) process. Financial corporations must ensure that their customer identification programs detect clients that money launderers use to acquire wealth.

A key component of risk-based AML is identifying and validating a customer’s identity and the nature of their business. The detection of money mules who open accounts on behalf of third parties require a robust CDD. Supplementing your due diligence process with biometric authentication will make it harder for money mules to pull off a transaction.

4. It promotes social inclusion and reduces the digital divide

Banks and other financial institutions are the organizations with some of the most diverse clientele—especially in age and background. However, banks need identity verification regardless of technological knowledge. This requirement can be daunting for those who aren’t tech-savvy.

 The use of biometrics makes it easy for institutions and clients to securely push through with their transactions. Identities can simply be verified with a tap on the screen, a voice verification, or a facial scan.

5. Enables quick and seamless transactions

One of the key benefits of digital identity verification is that it allows institutions to offer their customers the convenience and security of conducting various online transactions. The only requirement is to ensure that the person doing the transaction is the account holder.

Through cloud-based biometrics, your clients may complete verification and authentication from anywhere as long as they have their mobile devices. All you have to do is do what is asked, for example, providing a photo ID, shooting a brief video, placing your finger on your scanner, or speaking for a brief moment. Paired with proper implementation, these processes can accurately authenticate the person’s identity in seconds.

KYC Compliance Through Biometrics

Preventing money laundering should be a primary security focus of financial institutions. Considering the societal and economic consequences that it can bring, the federal government has placed varying degrees of punishments for banks who fail to stay compliant. But apart from avoiding costly fines, banks should also have a moral obligation to prevent money laundering.

As you manage and screen clients for your services, supplementing your KYC and AML processes with biometric authentication is one of the best methods to prevent fraud. If you’re looking for professionals that can help you improve your security infrastructure, know that Q5id offers full-suite identity and access management services.

Contact us today for robust verification solutions.