5 effective ways to prevent KYC fraud and other financial crimes

The Financial sector is and will continue to be a hub for fraud, money laundering and other financial crimes.Although not all fraud cases are bold enough to generate much media attention, they rather are subtle and inconspicuous. However, the devil is in the details.


The actual challenge is actually not all that complicated and is legally regulated by the due diligence requirements of the money laundering actKnow your customer (KYC) provides clear guidelines in this respect. If used correctly, it gives banks a framework to eliminate much of the risk during onboarding, prevent fraud and combat money laundering. The intention of Anti-Money Laundering (AML) is to help financial institutions determine their vulnerability for use in money laundering and terrorist financing. With millions of transactions performed daily, banks and financial institutions take an active role in combating financial crimes.


Ways to prevent KYC frauds and financial crimes to some extent:


  1. KYC tests:

The Basis of KYC principle, also known as Anti-Money Laundering (AML), is the money laundering act, which requires adequate identification and legitimate checks of all customers and account holders. When identifying a genuine person in accordance with the money laundering act, you must document and verify the following information:

·       Validate KYC document auto verifications with regulatory APIs

·       Validate mobile numbers by dropping as SMS

·       Check public records when dealing with business or individuals ( Address for example)

·       Check the AI based name match, face match, face liveliness and more

·       Validate Geo-tagged location

·       Validate date of birth

          Effective KYC can prevent risks before they arise.


2.             Background Checks:

Employment background checks and more like any history for theft or fraud that the person is charged for in the past allows financial institutions to assess a potential customer’s risk classification as well as an individual’s status on any government watchlists. This eliminates the organisation’s risk of becoming unintentionally involved in financial crime.


3.             Ensure Payment Methods are secure:

Whether your business accepts PayPal, UPIs, credit cards for transferring the fees you need to be aware of any relevant policies and compliances that could potentially impact your business. Make sure the transactions done via Debit or Credit cards have a secured payment gateway.


4.             Use a third party software provider to verify identities:

Security expectations and requirements vary greatly from business to business. As does the level of risk. If you want to decrease the likelihood of your company being targeted while also complying with current regulations, there are a number of ways in which this can be achieved.

Some companies offer manual services, while others use AI software programmes such as face match, biometric verification, retina scans. Real-time identity verification process is also becoming popular with businesses such as video-KYC platforms since its efficient and secure verification and onboarding process allows customers to complete their KYC verification from anywhere, anytime and in a more secure manner!


5.             Monitoring of Transactions:

Regular transaction monitoring and compliance checks are an essential part of risk management. Tracking and reporting potentially suspicious customer transactions is important. This includes unusual spending or transactions over a certain value, domestic or international transfers over a certain limit, liquidating large amounts of money or depositing it in cash, transfers of large sums of money can deter terrorist financing or money laundering.



What investments are you making to manage your risk of fraud in compliance with KYC and similar regulations?

If you’re among the businesses who recognise their need to improve in this area then the above mentioned fraud prevention and KYC tips should help to make you aware of the key areas that you need to address.

Make sure you provide a seamless way to KYC verification without making the process complicated for the customer. One such way is Video-KYC platforms, they ensure maximum security, no contact and quick to finish.