In today’s data-driven landscape, businesses need to involve AI in KYC verification to smoothly collect and process vast swathes of customer information accurately.
With several businesses completely digitizing their operations and the forever rising ubiquity of the internet, Know Your Customer (KYC) compliance has become increasingly challenging today for organizations. KYC involves the background verification of clients to ensure that businesses meet their regulatory compliance requirements. Today, KYC has become extremely data-heavy for businesses as they expand their customer base. The usage of AI in KYC compliance and verification allows businesses to process massive amounts of data with zero error. Here are some qualities that AI brings to the KYC table:
1) AI in KYC: Improving Transaction Monitoring
As the number of customers increases, so does the number of transactions. Major organizations need to control millions of such transactions by using AI in transaction monitoring. Active transaction monitoring is a necessity for businesses under Anti Money Laundering (AML) regulations. One of the main problems in transaction monitoring is the number of false-positive alerts generated by standard systems. False-positive alerts incorrectly flag normal transactions as fraudulent. Involving AI in KYC-based transaction verification reduces such false alerts through behavioral tracking of payers as well as past transactions.
2) AI in KYC: Managing Regulatory Compliance
AI and NLP tools can detect patterns and anomalies in large stretches of text. This attribute allows such systems, and, by extension, the businesses implementing them, to understand and comply with circulars or massive swathes of text related to KYC and AML regulations in official documents made by governing authorities. Additionally, NLP can inform clients and businesses about regulatory changes made by such authorities and the implications of such changes on all the stakeholders.
3) AI in KYC: Facilitating Enhanced Due Diligence
AI-enabled enhanced due diligence allows businesses to know about potential business partnerships and business risks associated with certain customers much more accurately compared to standard customer due diligence. Enhanced due diligence enables businesses to evaluate the risk category, business relationships and financial activities of clients with greater clarity. This gives businesses the opportunity to make better choices regarding their business partnerships.
As implied earlier, businesses need to get KYC right in order to not suffer huge losses by doing business with high-risk customers. The involvement of AI in KYC verification allows businesses to do just that by performing big data analytics of customer records, transactions and other behavioral data.
