Banks are getting fined for not following KYC regulations

Why do the compliance bodies urge for KYC best practices?

Compliance bodies worldwide have several regulations for banks and NBFCs to identify a customer to prevent fraudulent financial practices. With banking operations becoming digital and physical forms of banking transactions getting substituted by digital and electronic modes, fraudsters are devising new methodologies for siphoning out precious hard-earned public money of common people every day.

KYC is the first line of defense against fraud. Efficacious KYC processes are the backbone of any thriving compliance and risk management program. Fraud enters the system through improper KYC practices. Hence regulators urge strict observation of KYC and AML norms.

Why do banks fail compliance checks?

While financial entities follow the norms laid down by regulators, several practices in KYC and record-keeping need to be revised due to the abundance of data to be processed. Improper use of technology, lack of awareness among bank employees, and poor coordination allow fraud to enter the system. With the increasing usage of e-banking and internet & mobile banking, the risk of fraud is increasing. To overcome these issues, Banks should monitor the system and review and consolidate databases that may contain fraud users. The existing practices might need to be revised, and certain KYC solutions that use AI tend to fail due to redundancies in ML models. The ever-evolving fraud methodologies add to the problem statement's expansive and complex nature of data.

Compliance fines on banks

Regulators follow comprehensive guidelines for KYC. They carry out periodic checks to ensure KYC and AML norms are strictly adhered to. Reportedly in the U.S., Europe, the Middle East, and the Asia Pacific, regulatory bodies have levied a cumulated USD 26B in fines for non-compliance with AML and KYC regulations in the past decade. The penalties though seemingly huge, might not impact banks financially, but they do cause reputational damage.  In most circumstances, pattern-based regulatory audits only sample a minor percentage of data for fraud. The undetected fraud in the rest of the system is a ticking bomb.

Jukshio’s solution.

Introducing Jukshio’s Dfraud! Irrespective of a bank's KYC solution’s effectiveness, a post-factor ID compliance solution is at fore to combat fraud. Our advanced Facial Recognition technology helps banks cull out fraudulent onboarding. Dfraud meets ever-evolving methodologies of fraud head-on with an accurate consolidation and 100% fraud-free audit of your database. Our multipronged approach uses AI-based auto modules to fish out fraud based on document and face duplication - Deduplication, Document Modification.

On top of that is a secure Manual re-verification to ensure no fraud exists in your system and compliance finds no error in your KYC process. And as a final roundup to keep fraud at bay, we help create and maintain a Blacklist of offenders. We guarantee you to make your database error-free and compliance-ready.

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November 20, 2023