If you are looking for the best solution to validate the identity of your customers, employees and partners, you may KYC technology requires a delicate balance between effort and teamwork, if you want to prevent fraud while allowing legitimate users easy access to your service, here we tell you how to achieve it.
Now, what is KYC (Know Your Customer)? It is an important element in the fight against financial crimes and money laundering, through the identification of the client as the main axis, since it is the first step for better performance in the other stages of the process. In fact, international regulations influenced by standards such as the Financial Action Task Force (FATF) now implement national laws encompassing strict directives such as AML 4 and 5 and preventative measures like this for customer id.
The KYC policy is a mandatory framework for banks and financial institutions used for the identity validation process of their clients.. Its origin derives from Title III of the Patriot Act of 2001 to provide various tools to prevent terrorist activities. To comply with international anti-money laundering and anti-terrorist financing regulations, enhanced Know Your Customer procedures must be implemented at the first stage of any business relationship when enrolling a new customer.
In November 2018, US agencies, including the Federal Reserve, issued a joint statement that encourages banks to join forces and have increasingly sophisticated methods to identify suspicious activity and experiment with artificial intelligence and digital identity technologies. But, they were not the only ones to do so. The European Supervisory Authorities promoted new solutions to address specific compliance challenges earlier in the year. They suggest maintaining a common approach for consistent standards across the EU.
What is KYC (Know Your Customer) and how can Amazon Web Services help you?
What KYC (Know Your Customer) is depends a lot on the policy of each company, but in general, it can be defined in the following steps:
- customer policy
- Customer Identification Procedures (Data Collection, Identification, Verification, Politically Exposed Persons/Sanctions List Verification) aka Customer Identification Program (CIP)
- Risk assessment and management
- Continuous monitoring and record keeping
- This involves verifying a customer's identity through documents, including a national identity card with a document reader and advanced document verification software.
When a business onboards a new customer, or when a current customer purchases a regulated product, standard KYC (Know Your Customer) procedures generally apply. The regulations are relevant to almost all institutions that handle money (i.e. virtually any business), especially banks and financial service providers, as criminal activity in this sector can affect not only the financial institution involved, but also other clients and markets.
However, identity validation based on KYC (Know Your Customer) is not only required for companies in the financial sector, but also for organizations in all industries. Even for Persons who have relationships with politicians or government agencies, Customer Due Diligence (CDD) should be carried out as part of the security process due to the increased risk of corruption and bribery to which they may be a victim.
Operation of identity validation tools
Identity validation based on KYC (Know Your Customer) is carried out through different methods or technologies (eg, NFC, AI), security features (eg, hologram), and various security controls (eg, biometrics, life). It may comprise the following stages or processes:
- Document Verification: The person's government-issued identification document is checked for forgery or any other issues.
- Face Verification / Live Verification: In order to identify any false attacks in time, face verification checks are performed to ensure the live presence of the client.
- Address Verification: A proof of address (POA) is obtained that verifies the address on government-issued identity documents against POA.
Now, why is it important to implement this type of technology in your company? According to Forbes, the increase in digitization in the financial institutions sector and the security they can offer makes them an important area of opportunity, the success of some cases has made the desire to change banks even less likely. Although it is believed that millennials are the ones who prefer to conduct financial transactions virtually, the black swan event of 2020 (an unexpected tragedy that changes the environment), the global pandemic that forced many people to transition to online transactions and jobs remote, encouraged all age groups to bank online.
A great ally to be able to take advantage of this is Amazon Web Services (AWS), for example, Infostretch provided a substantial advance to incorporate customers digitally. This is a unique digital engineering services firm and AWS full spectrum integrator with deep cloud computing experience and improved its KYC (Know Your Customer) identity validation system with this technology.
Customer onboarding remains a challenging and time-consuming process for most banks. Both digital and traditional processes are often overly complex, resulting in lower conversion rates and higher acquisition cost. Additionally, onboarding processes can be lengthy and encompass multiple steps. All of this contributes to delays and inconvenience for the customer.
Amazon Web Services (AWS), your ally in identity validation
To overcome these challenges, many financial institutions have started online customer onboarding. Digital onboarding of customers on a banking platform has its own set of challenges ranging from seemingly mundane items like identity verification to compliance and security issues.
But, AWS can be your perfect ally to achieve it. For example, in the case of Infostretch, the client-facing application (web and mobile interface) fetches static content from Amazon Simple Storage Service (Amazon S3) buckets through the Amazon CloudFront content delivery network. This content includes web pages, images, and static documents. From here, end users will start the registration process from the frontend applications, providing your email address and phone number.
Identity validation through KYC (Know Your Customer) and the upload of documents, images and videos are processed through AWS technology in two different ways:
- User details such as email and phone number will reach the API through the Application Load Balancer and Amazon API Gateway.
- The electronic identification documents (eID) loaded will reach the respective ones in the same way. In case of live streaming video, you will use Amazon Kinesis.
- The user's phone number and email address, which are entered using the frontend application, are verified. AWS Lambda then activates Amazon Simple Email Service (SES) for email verification and Amazon Simple Notification Service (SNS) for mobile number verification.
Once the user is successfully identified, another Lambda function will be triggered to process the uploaded documents. The user then uploads the documents via the frontend application, which will again use Application Load Balancer and Amazon API Gateway.
These uploaded documents are pre-processed to ensure the image has a minimum amount of noise. The clean image will be passed to Amazon Textract to extract the vital information from the eID in key-value format. To confirm the retrieved data, Lambda is triggered to call third-party APIs for verification purposes. Once the textual details are verified, the Live Photo is captured using the interface application. This is checked against the document photo. The entire process is handled by AWS Lambda, which leverages Amazon Rekognition to compare faces.
It should be noted that by setting appropriate thresholds for identification, the desired results can be quickly achieved. Also, successful verification of the user's document and photo will trigger further steps to verify the user. By using video analytics, the system avoids the risk of morphing (which can be easily done by holding the photo). It also protects the system against identity theft, such as when a person uses another person's electronic ID to bypass security protocols, since video analysis requires live video of the person.
Amazon Kinesis Video Stream data will be stored in S3 using Kinesis Data Firehose. As soon as the video arrives in S3, it posts the message to Amazon Simple Queue Service (SQS), which then triggers the video analytics microservice. Here, the microservice extracts facial and gesture information. Once extracted, this information is compared to the system configurations along with the timestamp.
The benefits of KYC (Know Your Customer) identity validation
The digital onboarding supported by identity validation technology that is KYC (Know Your Customer) has its own definite benefits for both customers and banks. For their part, customers can take advantage of the ease of entry and the flexibility to join at their convenience. In turn, banks benefit by transforming a long and tediously complex process into an immediate and fluid process.
Additionally, video identification powered by artificial intelligence (AI) and machine learning (ML) provides real-time verification, exponentially increasing conversion rates due to the integration of digital onboarding processes. In fact, this kind of sophisticated digital onboarding of customers also helps in fraud prevention, as the technologies used to verify that a person is who they say they are will comply with video identification security standards.
Speed is another advantage digital onboarding has over the more traditional format. Digital onboarding provided by tools like Amazon Web Services (AWS) only takes a few minutes, while traditional onboarding can often take weeks. Thanks to the internal (and confidential) feedback loop that has taken place, customer acquisition has increased by more than 84% after the introduction of the digital onboarding solution.
To offer such a complex solution, Infostretch uses AWS Managed Services and a custom implementation to create a solution that can work at scale with close to 90% automation. With that in mind, we believe that this same built-in formula could also be used for the following use cases:
- Successful implementation of PII verification for Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT).
- Reduce the need for physical and/or manual verification in general. In turn, this streamlines the onboarding cycle and improves the end user experience.
- The increased use of eIDs leads to the adoption of automated PII systems to meet customer identification and verification (CIV) obligations.
- Automated PII verification systems can dramatically reduce the cost of identifying and accepting new customers.
These solutions based on identity validation that is KYC (Know Your Customer) supported by Amazon Web Services (AWS), could also solve the following problems:
- Increased friction with the client; Banks reportedly take longer to onboard individual customers.
- Delay in the verification of documents and identity validation that is KYC (Know Your Customer) due to the unavailability of the consumer or service provider to help in the process.
- Verification and document types vary from one financial institution to another; therefore, a uniform process can be adopted across the board.
This is not the only case. For example, Dan Phelps, Chief Architect of Travelex, mentions the following: "We have decades of experience in complying with financial regulations in all amounts, but this time we are seeking approval of a workload in the cloud for the first time," says Phelps. “Leveraging AWS made the process simpler and faster. There was no need to deal with third-party cloud providers, and an AWS security architect worked closely with us, shared his industry insights and ultimately helped us deliver our most secure system yet, which will be inherited by all future Travelex products and services.”
Travelex is now even more responsive to its customers' needs and can onboard new ones faster, with microservices dedicated to Anti-Money Laundering (AML) checks and the identity validation technology that is KYC (Know Your Customer). ) that allow compliance to be maintained. “We can sit in a room with a client, bring them in there, and then run the tests. and define the path for your experience with Travelex, as well as implement the feedback in any product or service, faster than we have achieved so far”, says Phelps.
AWS has been helpful in deploying their products and empowering their IT teams to find more time to test, fail, learn, and create closed environments for testing. Engineers test Lambda@Edge, which runs compute functions in response to events at Amazon CloudFront edge locations to accelerate performance for global users. The company is also using AWS Lambda as part of its new data platform, which will hold all data and events coming from its Amazon ECS clusters.
This allows developers to run code without provisioning or managing servers. Phelps states: “Now, whenever we have to design an environment, we can go for microservices or serverless technology. In the long term, we will use serverless technology where possible because there will be less of a technology stack to manage so our engineers can focus on our customers.”
Before making a decision about adopting identity validation processes through KYC (Know Your Customer) supported by Amazon Web Services technology, it is necessary to analyze in detail the benefits and advantages that it can offer, as well as the challenges What would it represent for your team? If you are interested learn more about this, discover the solutions it offers and will offer Codster through a consultancy that can help solve all your doubts.