When it comes to knowing your customer’s law, the government is holding financial institutions to the highest standards. Now the financial institutions have a huge list of Anti-Money Laundering compliance requirements Iza (2016). They have to deal with several risks associated with every large transaction of money. Know your customers is a critical process especially when it comes to the business organizations. Now the banks have to ask for the following information.
- Certified articles related to organization
- Business license issued by government
- Agreement of partnership
- Trust instrument for a business that will help in further verification and the information should include financial reference
- In order to assure that the person or business is real, banks require the financial statement of the company (Innovations in identity (2015))
These are not the only issues that financial institutes have to deal with. Here we have other reasons that make KYCs a strenuous process.
Database is inadequate
The regulatory authorities of several countries are penalizing financial institutes and banks to maintain millions of dollars. It is done when the banks are unable to follow the rules and regulations of the authorities. From the identity verification to the financial statement banks have to assure that they check and test everything. If they fail even at a single step, they will not only lose their business but also have to pay a huge penalty for breaking the law.
Bankers say that it often happens because of the inadequate database. However, there are several banks that are taking the help of blockchain technology to get rid of this issue. There have been the complications in the past because there was no database accessible for registries.
Technology is not appropriate for the system
One of the biggest issues that banks have to deal with is that they do not have the required technology to meet the requirements of KYCs law. This is the reason that most of the financial institutes are trying but they have not been able to succeed.
- There are several customers that have more than one account in several banks and that is why it creates some serious security issues for the company
- Banks to do have required innovational technology that can provide the customers with the privacy they want
- Transactions and transfer of money lead to time consumption only because banks do not have the latest system that can detect if the money is about to be utilized for an illegal process.
- Monetary Costs of the accounts are increasing due to this situation and customers are not satisfied with services (Innovations in identity (2015)
Unique identification is now accessible
There are only a few developed countries that have the accessibility of providing unique identification documents for the accounts of business organizations for security reasons. Several documents are issued by different authorities but the banks are unable to consolidate them into a single verifiable document. The biggest challenge for the banks is to identify the unique identity of the customers at the level if database. At present, the only help they are getting is from the digital identity of blockchain platforms.
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