Elevating Trust: The Crucial Role of Document Verification in KYC Processes

After the evolution of digitization in the last decades, businesses started shifting towards online transactions. COVID-19 pandemic during 2020 and 2023 accelerated this process of transformation. People started preferring online transactions to avoid any kind of physical contacts or visits. Businesses found the opportunity to access their customers globally while reducing their costs and expenses. This brought a boom in remote or online transactions. Here, imposters used technology advancements and found sophisticated ways to deceive. They  performed Identity theft, forgeries, document falsification and other fraudulent activities and caused financial and reputational damages to organizations. 

According to a record published by Statista Research Institute, a survey for adults within the United States determined that forty five% of respondents encountered scam texts, e-mails, or calls daily. This blog will explain how document verification can play a vital position within the removal of those crook activities and boom the believe and self belief of clients.

KYC Process: A Quick Preview

Know Your Customer (KYC) is a system that allows companies for the identification and verification of  the identities in their clients in the course of onboarding or periodically for ongoing monitoring. The KYC method is crucial for all businesses for the powerful compliance of regulatory responsibilities of anti-money laundering (AML) and countering terrorism financing (CTF). This system is mandatory for banks, economic institutions, and different businesses running with excessive-price transactions. It allows companies inside the prevention of fraud and different monetary crimes and complements their onboarding revel in by means of building their self belief.

KYC Solution

A KYC solution is an automatic system that comprises a series of KYC checks. These KYC checks identify the customers and then verify their identities by authenticating their identity documents. The whole process is composed of three basic elements.

• Customer Identification Program (CIP)

A customer identification program (CIP) is designed to verify the identity of every customer accurately. CIP helps organizations to combat terrorism financing, corruption, money laundering and other illegal activities by ensuring effective compliance with the recommendations of the Financial Action Task Force (FATF). The customer profile is analyzed for risk assessment and to confirm that the source of money is legal and approved. The procedures performed in this element include:

Information Collection 

Basic Information about the customer is collected at the time of account opening or signing up. Customers provide necessary details like their name, address, date of birth or their identity card number.

Document Collection

After collecting the information about customers, the organization needs to verify this information. This verification of their identities is carried out by collecting some documents as proof of their identities. Identity documents, such as passport, identity card, driver’s license or social security card are commonly used for this purpose. Other types of documents like educational certificates, employment papers, or legal agreements can also be used depending on the requirements of the organization. The customers are requested to upload their documents through a video call along with their selfie.

Verification Of Documents

The identity of customers is verified by validating the authenticity of provided documents and this procedure is called verification of documents. This process confirms that the document provided by the customer is real, genuine, and free of falsification. The traditional way for document verification was in-person submission by visiting organizations physically. In this digital era, online document verification is carried out to verify documents automatically within a few minutes. This helps to perform customer onboarding processes quickly, efficiently, and securely. The authenticity and legitimacy of the documents is verified by applying different document checks. These checks use Artificial intelligence(AI)and check following features of documents to detect any kind of fraud or forgery.

General Information: Information provided in the document is checked if it is complete and accurate. 

Security Factors: Special security marks in the documents, such as holograms, watermarks, MRZ codes and stamps are examined.

Alteration and cropping: Colors, lighting and shadow and edges of the documents are checked to detect signs of alteration or cropping.

After confirming the authenticity of the document, the information contained in the document is accessed through optical character recognition (OCR) technology. This data is compared with the information provided by the user, and the selfie is compared with the photograph extracted from the identity document. If both match, the process declares documents verified.

• Customer Due Diligence

After verification of customer identity, trustworthiness of the prospective customer is assessed  to manage the potential risks and protect organizations against identity theft and other criminal activities. Customer profiles are checked against sanction lists and politically exposed persons (PEP).  An analysis of customers’ financial activities is carried out depending upon the risk level of their profiles. This is called enhanced due diligence that is done for high risk customers.

• Ongoing Monitoring

Ongoing monitoring needs continuous monitoring of the customers’ accounts and their financial transactions to find any suspicious activity. 

Key Takeaway

Document verification is a vital procedure for the effective implementation of the KYC process in the organizations. It secures the privacy of customer data by ensuring the legitimacy and reliability of the customers who access the transactions. It safeguards the businesses against fraud, forgery, and other illegal activities. Document verification plays a significant role for better customer experience and elevated satisfaction and trust.