For helping banks and financial institutions to comply with rules and regulatory environment, financial regulatory bodies and service providers are looking for the maximum cost-effective solutions.
Conventional businesses are already disrupted by blockchain, thanks to its advantages of decentralization, fast processes, improved transparency, and most of all cost-effectiveness.
Basically, solutions for current problems like Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations are faced by financial institutions provided by the blockchain. As in the blockchain system, all transactions are unchangeable which provides transparency in KYC and AML compliance.
The technology of blockchain is playing an important role in issues related to KYC and AML like monitoring transactions, screening of blacklist, onboarding screening of customers, change in customer status, improved due diligence.
The regulatory compliance system automatically monitors and screens customer’s names, data, and transactions in real-time. The Danish banking system is one example of implementing this regulatory blockchain technology to improve regular payments by using data and compliance information from KYC which are related to notable card systems.
As a part of AML and KYC compliance procedure, the customer data such as employer’s info, IDs, expected business activity are required to be collected by all the financial institutions before conducting business with them.
Conventionally, whenever the expected business activity changes, all the data which is relevant is verified by independent sources and updated on regular basis. Manually conforming to such procedures is time taking and very costly for businesses. In the cryptocurrency space, AML software is already provided by blockchain applications for KYC which is handled very efficiently and cost-effectively.
The identity management crisis is likewise another problem for all the banks which needs to be blocked to prevent fraudulent bank activities. Present KYC system regularly depends on a third party for user’s identity authentication which adds up sharing of another data layer and transaction risk.
This outdated exercise might be addressed with the technology of blockchain which allows authenticating users’ identities with security by still maintaining their data control. In addition, blockchain could also support verifying politically exposed people’s identities via biometrics and social media analytics.
