All about KYC verification

What is KYC?

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Customer knowledge is one of the foundations of the commercial relationship between a company and its customer. It is based on compliance with certain regulations that make it possible to ascertain the identity of the customer, his address and the purpose of the commercial relationship in order to create a relationship of trust.

In the banking context, KYC verification - and the regulatory obligations that flow from it - is a tool to combat online fraud, money laundering and the financing of terrorism (these processes are called AML/CFT). Online verification systems that optimise many manual processes are all too often imperfect and therefore far from foolproof... 

After a brief explanation of the ins and outs of KYC verification, we will see how a solution based on Blockchain technology can address the shortcomings of compliance departments in large companies, including financial institutions.

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KYC verification primarily concerns banking and financial institutions

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While all sectors of activity are affected by potential identity fraud, it is the banking and financial sectors that are at the forefront, particularly because of the sensitive nature of the transactions they are responsible for. 

The justification of financial transactions of more than €250 (or the sum of transactions exceeding €2500 in a calendar year) relies on verification procedures that are indispensable but time-consuming. 

In France, it is the Autorité de Contrôle Prudentiel et de Résolution (ACPR) which requires banking and insurance groups to ensure that due diligence is carried out and which can issue sanctions for non-compliance with these procedures: in 2021, the ACPR carried out 25 controls and issued 9 sanctions for a total amount of €7m (compared with €10m in 2020) 

To carry out these controls, the ACPR recommends the implementation of KYC verification processes. 

While these processes are complicated and manual, solutions exist to comply with the standards without impacting on customer onboarding. But first let's take a look at what the KYC process is before we look at the different solutions on the market.

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What is a KYC check?

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KYC verification is mainly based on the identification and verification of the identity of the customer or user. If the company is legally covered by a KYC procedure, so is the customer, who ensures that he is contracting with a trusted actor.

By verifying that the customer is who they say they are, the company can then give them access to the various offers. There are several methods of verifying a person's identity as part of a KYC check: 

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• Verification of identity documents (such as identity cards, passports or driving licences)
• Verification of certified documents
• Verification by videoconference
• Biometric tests
• Security checks

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Although face-to-face verification is currently the most reliable system, remote verification technologies are becoming increasingly popular. The supervision of remote identity verification systems is ensured by the ANSSI, which has set up the PVID (Remote Identity Verification Providers) standard. 

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For their verification needs, companies will most often use the services of an external service provider to provide a KYC verification service. Some companies prefer to develop their own customer identification solution, in compliance with current legislation such as AML or eIDAS certification.

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What technological solutions are available to facilitate KYC verification?  

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Several technological solutions exist for the verification of customers' identities: fromOCR (Optical Character Recognition) to RAD-LAD (automatic document recognition and reading system), including RPA (Robotic Process Automation) and Machine Learning.

Many companies use combinations of these techniques to offer their customers turnkey solutions that allow them to leave the end-to-end management of KYC checks to their customers. 

And the benefits of these solutions are numerous. 

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• The use of these tools allows the optimisation of the whole KYC process in full compliance with the regulations in force
• Cost control
• The development of an important lever for efficiency and management of the organization's capacities
• Drastic reduction of the risk of error in the KYC process and thus of the risk in the controls

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Thus, while the automation of these KYC processes can free up considerable business time, it is essential that they are accompanied by clear and precise procedures, particularly in the area of compliance. 

Especially when the organisation in question adopts an approach of dividing the KYC work into elementary tasks carried out by specialised stakeholders (for collection, control, input, sanctions and PEP screenings...). In this approach, it is difficult to have a holistic view of the customer profile, which can lead to errors due to inconsistencies that are not picked up by the stakeholders. 

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KYC verification using blockchain technology

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In order to solve this risk of data siloing concerning a single customer profile, Archipels has developed a solution for the certification and verification of documents and data with probative value. 

How?

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With Archipels' document verification solution, the integrity and authenticity of the document is verified directly with the source issuer. 

For example, if a person wishes to open a bank account or take out a consumer loan with a bank, the supporting document that he or she provides in the onboarding process (the EDF or Engie bill or pay slip, etc.) will be checked directly with the trusted issuers, i.e. EDF, Engie or Digiposte. 

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• No falsification is possible because if the supporting document provided by the client is not authentic, genuine or does not exist, the Archipels platform returns a confirmation that the document cannot be verified (thus prompting the client advisor to carry out further verification).  
• The certification and verification process complies with the applicable standards (eiDAS, RGPD)
• KYC verification is done via an API that can be integrated directly into the customer journey or interfaced with any information system
• The verification is done in 100ms and allows to speed up the client onboarding 

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Companies such as Vialink and Itesoft use Archipels' solution to provide KYC services to their clients. The flexibility of the solution, the infallibility of the verification and the speed of the verification make it a particularly effective tool, suitable for all business layers. 

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KYC verification: a key process in customer onboarding

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Customer knowledge is a major challenge in an increasingly competitive environment. For any service that can be delivered online, the process of document verification will become more and more essential, especially in increasingly regulated contexts such as banking, insurance or the public sector. 

If you are interested in document verification, do not hesitate to contact us to study the applicability of Archipels' solution to your specific use case such as accelerating customer relations or ensuring compliance with your KYC procedures.