Technology enhances the financial industries also known as fintech. Businesses are leveraging technology and boosting their growth. The accessible data for hackers makes it easy for them to commit identity fraud. To reduce these scams and improve the integrity of the worldwide financial ecosystem, regulatory authorities are taking rigorous steps against identity fraud crimes. They constantly upgrade the regulations and raise the verification bar for scammers. To comply with these business verification regulations, the fintech industry needs to leverage its identity verification process by utilizing machine learning and advanced technology.
The traditional verification process to comply with know your business (KYB) and anti money laundering (AML) laws is lengthy. This process includes the entire know your customer (KYC) verification of the business, including the ultimate beneficiary owners (UBOs). For that, fintech must verify the business’s authentic documents and then verify these via third-party watchdog lists. The problem with manual business verification is it’s a slow operation, it’s highly expensive and has a high frequency of human errors, which is insufficient to reduce fraud.
KYC/AML For Businesses Verification
It is necessary to protect the fintech industry from scammers. Money launderers are always searching for weak-security financial institutes so they can use their services to clean their cash. It disrupts the finance sector, and the main issue is identity verification before onboarding. The Know-your-customer (KYC) and know your business (KYB) are the critical steps to comply with the anti-money laundering (AML) regulations.
The Know your business services providers attest to the provided documents and verify against various watchlists. It also checks the history of the business, including the financial statements and shareholders’ activities. This ensures the fintech company works legally and that no criminal is involved in the board.
Following these checks is costly for the companies, but neglecting these can be worse. Not complying with these regulations can cause financial fraud and penalties. For example, in Wachavio, part of Wells Fargo took a shot from the money laundering regulation authorities in 2010 because of poor AML and KYC regulations. It was fined $150M when the Mexican cartels used Wachavio’s most extensive bank services to withdraw $360 billion through their US accounts.
Effective Know Your Business (KYB) Verification
There are many KYB solution providers that can protect the fintech industry from money laundering and other scams. This ensures businesses comply with the regulations and work in a secure environment. To take advantage of this proactive business verification setup, financial institutes should eliminate the traditional inadequate KYB process. Implementing the digital know-your-business system will offer fintech benefits given below:
Unlined Onboarding Process
The online KYB process allows customers to fill out a form and submit documents remotely wherever and whenever. It eliminates the hectic routine of business owners to first gather all documents, attest them from the government office, and submit original verification papers at the financial institutes. Most financial institutes, such as banks, take 1 or 2 months for this verification procedure, which influences customers badly and increases the company’s bounce rate. To seamlessly simplify this process and make it easy for fintech businesses to verify various companies, IT sectors utilize the latest innovations and advanced technology.
Seamless Complying
The fintech industry must comply with regulations to perform according to the system. These obligations save companies from scams and fines. Verifying businesses using the KYB procedure enhances compliance with rigorous regulations. Anti-money laundering (AML) is compulsory for fintech to follow and onboard all business compliance. Digital know your business is a solution to a seamless onboarding procedure with updated regulations. It enhances the process by extracting the document data with Optical Character Recognition (OCR). Verifying businesses online utilizes AI technology to cross-check extracted data against the government and other watchlists.
Bolster Security
Financial institutes are always at the top of the scam lists. After the advanced technology, fake businesses rely on the fintech industry. They use these to pure illicit funds and convert their black money into legal cash flow. Verifying businesses with powerful tools protects the fintech industry from imposter business owners. It helps them in onboarding business’s ultimate beneficiary owners (UOBs). KYC of all shareholders enhances the confidence of the fintech. All financial institutes need to conduct KYB checks, including verifying business owners. Online verifying business portals provide all this in one platform. Business verification services are an ideal tool for the fintech to comply with all AML regulations to enhance security.
Key Takeaways From Verifying Businesses
Verifying businesses during onboarding is compulsory for all financial industries. Fintech companies are vulnerable to various scams. These scams not only damage the economic ecosystems of the company, but it also has a substantial impact on the company’s reputation. Fintech companies should adopt the latest verifying businesses innovations to ensure they work in a safe and secure environment. It protects companies from fraud, including customer satisfaction, and accelerates compliance.