Category: KYC & KYB

Welcome to our meticulously curated KYC/KYB category, a comprehensive repository dedicated entirely to the multifaceted dimensions of Know Your Customer (KYC) and Know Your Business (KYB). As we stride deeper into the digital era, the procedures around KYC/KYB have emerged as a fundamental pillar, ensuring secure and compliant operations within the financial landscape.

The articles housed in this category plunge into the complexities of KYC/KYB, discussing its inherent challenges, potential solutions, and its indispensable role in the realm of identity verification. Our articles traverse a wide array of topics, ranging from the application of artificial intelligence in customer due diligence processes to the impact of regulatory shifts on KYC methodologies. These writings cover a broad spectrum of subjects, offering relevance to businesses and professionals operating within the financial industry.

As a leading industry player in the domain of digital identity verification, Signzy stands at the helm of innovation in KYC/KYB. Our cutting-edge solutions are engineered to simplify KYC, making these procedures faster, more efficient, and notably secure.

Regardless of whether you’re a compliance officer diligently maintaining regulatory standards, a fintech entrepreneur navigating the challenging waters of the financial industry, or simply an individual interested in gaining a deeper understanding of the evolving world of KYC/KYB, our category offers a treasure trove of information and insights.

We invite you to join us on this journey of exploration as we dive into the future of KYC in the rapidly evolving digital age. Our articles aim to enlighten, inform, and provide a well-rounded perspective on the significant role that KYC processes play in today’s digital financial landscape. Welcome to a world where knowledge becomes power, and compliance becomes simplified.

The Saga Of KYC In US Banking Regulations — BSA To Patriot Act And The Road Ahead In The Digital Age

Posted on | by Signzian

KYC regulations have critical implications for consumers in the financial space. Banks need to comply with KYC to limit fraud. However, KYC requirements for banks are often passed down to those with whom the banks do business.

KYC In Banking — The Base At The Banking Secrecy Act”?

KYC requirements for banks help them verify the identities of their clients. It is also a way to assess any potential risks of forming a business relationship with them. The goal of KYC is to prevent banks from being used, intentionally or not, for money laundering and other illegal activities.

In 1950, the Federal Deposit Insurance Act was passed to monitor the Federal Deposit Insurance Corporation (FDIC). The bill included a list of regulations that banks must comply with in order to remain insured by the FDIC. This event was crucial to forming the foundation of modern KYC laws.

In 1970, the U.S. Congress introduced the Bank Secrecy Act. The BSA is an amendment to the Federal Deposit Insurance Act. It requires banks to produce 5 types of reports to FinCEN and the Treasury Department:

 

  • Currency Transaction Reports (CTR): This contains any cash transaction that exceeds $10,000 in one business day. It can include multiple transactions.
  • Suspicious Activity Reports (SAR): This report shows any cash transaction where a customer violates BSA reporting requirements.
  • Foreign Bank Account Report (FBAR): Any U.S. citizen/resident with a foreign bank account of at least $10,000 is required to file an FBAR report each year.
  • Monetary Instrument Log (MIL): Banks must keep a record of all cash purchases of monetary instruments. This includes money orders, cashier’s checks, traveler’s checks, etc.
  • Currency and Monetary Instrument Report (CMIR): Anytime a person or institution physically transfers monetary instruments in excess of $10,000 into/outside of the United States must file a CMIR.

The ABCs of KYC — The Major Focus Of Patriot Act

KYC laws were launched in 2001 as part of the US Patriot Act. The law was passed after 9/11 to provide a means to hamper terrorist behavior.

The particular section of the Act that pertained specifically to financial transactions added requirements and enforcement policies to the Bank Secrecy Act of 1970 that had thus far regulated banks and other institutions. These changes had been in the works for years before 9/11. The terrorist attacks finally provided the thrust needed to enforce them.

Thus, Title III of the Patriot Act requires that financial institutions deliver on two requirements for stricter KYC. These two are the Customer Identification Program (CIP) and Customer Due Diligence (CDD).

 

CIP — The First Pillar Of The Patriot Act

CIP is the more straightforward of the two components, and likely more familiar.

To comply with CIP, a bank asks the customer for identifying information. Each bank conducts its own CIP process, so a customer may be asked for different information depending on the institution. An individual is generally asked for a driver’s license or a passport.

Information requested for a company might include:

  • Certified articles of incorporation
  • Government-issued business license
  • Partnership agreement
  • Trust instrument

For either a business or an individual, further verifying information might include:

  • Financial references
  • Information from a consumer reporting agency or public database
  • A financial statement

Nonetheless, every bank is required to verify their customers’ identity and make sure a person or business is real.

CDD — The Second Pillar of The Patriot Act

The second component, CDD, is more nuanced.

In conducting due diligence, banks aim to predict the types of transactions a customer will make.

This is done in order to be able to detect anomalous (or suspicious) behavior.

This also helps assign the customer a risk rating that will determine how much and how often the account is monitored.

Finally, it also helps identify customers whose risk is too great to do business with.

Banks may ask the customer for a lot more information. This can include the source of funds, the purpose of the account, occupation, financial statements, banking references, description of business operations, and others. There’s no standard procedure for conducting due diligence. This means banks are often left up to their own devices.

In fact, the Patriot Act doesn’t even directly highlight a CDD requirement. On the contrary, it denotes that a bank is required to file a suspicious activity report if it suspects or has reason to suspect such activity. But without knowing about its clients, a bank won’t be able to meet this requirement — hence the CDD.

The Financial Crimes Enforcement Network (FinCEN) regulates and strictly enforces KYC. FinCEN also manages other regulators for banks. It also manages the Fed’s Board of Governors, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency of the U.S. Treasury. Other financial institutions can be regulated by the SEC, the U.S. Treasury, the IRS, or the National Credit Union Administration, among others.

As a result of due diligence, a bank might flag certain risk factors. These are like frequent wire transfers, international transactions, and interactions with off-shore financial centers. A “high-risk” account is then monitored more frequently. In such cases, the customer might be asked more often to explain his transactions or provide other information periodically.

KYC requirements for banks in the Digital Age

Today, banks and their fintech counterparts can go to great lengths to assure compliance with KYC standards. As a result, more money is poured into new KYC technologies constantly. This was found as a study of the CEB TowerGroup. Currently, KYC solutions rank amongst the most valuable banking technologies. More than 62 percent of executives are certain, KYC investments will grow even more in the future.

In the modern context of digital, border-free and contactless payments, AML and KYC cannot deny their beginnings. Many KYC procedures still derive from a time when financial services were stationary. Back then, the client had to be physically present in a banking branch to access them. Identity verification was a simple matter of seeing the client physically. This was usually followed with collating the paper documents and ID with official records. The client databases had to be updated manually.

Users supply bank account data, social security numbers, etc to fulfil the KYC requirements for banks. They may also provide hard physical proofs of identity like a valid passport and utility bills (water or electricity bills). Should the customer deliberately hand over false information, the reviewing company will have the case investigated. This may ultimately lead to legal action. Modern technologies help alleviate the human factor. AML procedures today are more about lines of code on a server than types of seals on paper documents.

Yet, in many cases, banks and fintech businesses don’t settle for the state-of-the-art in regulatory tech. A KYC Market Report by CEB states that the systems by which banks identify their customers are often outdated. With general anti-money laundering technology, the situation gets even worse.

This is why banks and financial institutions are invited to rethink the KYC requirements for banks in light of modern software solutions and technologies like:

 

  • Blockchain: Sharing of KYC related data without intermediaries
  • Artificial intelligence: Approvement of documents via self-learning algorithms
  • Biometrics: Identification through biometrical features
  • CDD and EDD by evaluation of social media activity
  • Streaming: Voice and face identification via video chat

Regulatory technology (or RegTech) like this has the potential to make processes a lot faster, more accurate and transparent with digital kyc.

Conclusion

In our current time of digital disruption, KYC and AML are in a constant state of change. The online market for financial services and products is growing and so are the risks for customers engaging with them. The international banking and fintech scene keeps changes this will keep regulators occupied. Innovative technologies and flexible software give businesses an edge, allowing them to stay compliant and to adapt to new forms of cybercrime.

But within this period of change, one thing remains firm:

There will always be customers. And knowing what they are up to, will always be a key factor for corporate success.

About Signzy

Signzy is a market-leading platform redefining the speed, accuracy, and experience of how financial institutions are onboarding customers and businesses – using the digital medium. The company’s award-winning no-code GO platform delivers seamless, end-to-end, and multi-channel onboarding journeys while offering customizable workflows. In addition, it gives these players access to an aggregated marketplace of 240+ bespoke APIs that can be easily added to any workflow with simple widgets.

Signzy is enabling ten million+ end customer and business onboarding every month at a success rate of 99% while reducing the speed to market from 6 months to 3-4 weeks. It works with over 240+ FIs globally, including the 4 largest banks in India, a Top 3 acquiring Bank in the US, and has a robust global partnership with Mastercard and Microsoft. The company’s product team is based out of Bengaluru and has a strong presence in Mumbai, New York, and Dubai.

Visit www.signzy.com for more information about us.

You can reach out to our team at reachout@signzy.com

Written By:

Signzy

Written by an insightful Signzian intent on learning and sharing knowledge.

 

KYC in the USA- The Origin, Evolution, and Future of America’s Frontier Against Financial Fraud

Posted on | by Signzian

Introduction

In 2017 a survey from FDCI revealed that 25% of all US households were unbanked or underbanked. This meant that more than 30 million households did not have a bank or credit card account. In 2019 the numbers fell to less than 5.4% of the households being unbanked. That was an estimated 7 million households. This indicates the untapped potential in the banking industry.

More customers than ever will start a bank account in the coming years. This pace at which citizens are starting a relationship with a bank is impressive. But how much can we ensure that all the applicants are legit? How can we make sure that no fraudsters are aided? To put things into perspective 2019 alone saw 650,572 cases of identity theft and 271,823 cases of credit card fraud in the US. To prevent this, KYC comes into play.

KYC process in banks is used to obtain information about the customer with their consent. The obtained information includes their identity details and addresses. It ensures that there is no misuse of the bank’s services. This stops fraudsters who try to imitate or forge identities for financial crimes.

We must also notice that fraudsters have found newer ways to evade KYC through the ages. These include digital synthetic ID frauds and scraping for ATOs(Account Takeovers). In 2021, we have enough resources and methods to maneuver the issues with traditional KYC processes. An upgrade is inevitable. The introduction of Digital KYC is set to change the whole process of onboarding. Let’s have a detailed look at the KYC process in banks in the US and what its future holds.

Does KYC Require The Attention It Demands?

Before the introduction of the KYC process in banks, fraudsters conducted crimes without much resistance. The lack of regulation coupled with unverified customer identifications caused easy manipulation of the financial system. Combatting this was inevitable. With the introduction of KYC financial crime has reduced, but new challenges await the sector.

According to a report from Atlas VPN, Q1 2020 saw a 116% increase in loan/lease fraud, alone. Credit Card frauds were at an all-time high of 435.8% during the same quarter. To add flame to the fire, overall fraud reports compared to Q1 2015 were over 435%. We can not attribute this to solely human errors or insufficient data collected.

The real culprit( other than the fraudsters, of course) is the inefficient handling of KYC. It might come as a shock that all this fraud occurred even after concerned institutions implemented the KYC process in banks. One can only imagine the outrageous leaps these numbers might have taken if such a regulatory process didn’t even exist.

KYC acts as the firewall against these fraudsters, but with advancing technology and global connectivity the fraudsters have an edge. The era of traditional KYC is nearing dusk. It is only a matter of time before the government brings regulations and advises for digitized KYC process in banks.

The primary objective of KYC is not fraud prevention, even though it does filter out the fraudsters for the better. The Patriot Act intended CIP or KYC to prevent Terrorist Funding and Money Laundering. To an extent, it has been effective. But as all things go, it can be better. This is where banks should upgrade their processes..’ A system devoid of human errors and manual processing will be the next step for this.

How KYC process in banks Came Into Being In The US

 

The need for KYC came with an increase in financial crimes in the Country. Every decade fraudsters find ways to commit crimes avoiding the regulatory oversight. To eliminate the problem at the source, the government and experts came up with KYC. Proper verification of the customer helps identify fake and fraudulent activities if any.

Though KYC was introduced under The USA Patriot Act, its history spans several decades before. Here is an overview:

  • In 1950, Congress passed the Federal Deposit Insurance Act to govern FDIC( Federal Deposit Insurance Corporation). It had regulations for banks to comply with to be insured by the FDIC. This was the first primitive step towards modern KYC.
  • In 1970, Congress passed the FDI Act Amendments also known as the Bank Secrecy Acts(BSA). It was a modified take on the FDI Act adding five types of reports for banks to file with the Treasury Department and FinCEN.
  • On October 26, 2001, Congress passed the USA Patriot Act. This act contained all the ingredients for modern manual KYC.
  • On October 26, 2002, The Secretary of Treasury finalized regulations defining KYC mandatory for all financial institutions. All associated processes conformed to CIP(Customer Identification Program) under this act.
  • In 2016, FinCEN made it necessary for banks to collect the name, address, social security number, and date of birth of persons owning more than 25% of an equity interest in any legal entity.

KYC was met with mixed reception during the two decades that have passed since it became mandatory in the US. Nonetheless, none of its criticism countered that KYC helps ensure safety and prevent fraudulent activities. Rather most of it was associated with the difficulty in implementing such a procedure and the privacy concerns.

What Does KYC Mean In The US?

KYC refers to the process implemented by a financial institution or business to:

  • Establish verified customer identity.
  • Understand the exact nature of the customer’s activities. This is to confirm that the source of associated funds is legitimate.
  • Assess money laundering risks.

 

It has 3 aspects:

1. CIP- Customer Identification Program

Any individual associated with a financial transaction requires identity verification in the US. CIP ensures this. This is under the recommendation of the FATF( Financial Action Task Force). FATF is a pan-government anti-money laundering organization.

A pivotal element to proper CIP is risk assessment. This has to be at the institutional level as well as at the level of procedures for individual accounts. Most of the exact implementation decisions are left to the institution, but CIP provides a guideline to follow.

The minimum requirements for opening a financial account in the US are:

  • Name of the customer
  • Address of the customer
  • Date of birth
  • Identification Number/ Social Security Number(SSN)

The documents verified for KYC include social security card, passport, driving license, and credit/debit cards. It is up to the institutions to install the necessary protocols for the specific documents.

The institution is to verify this information within a reasonable time. This includes comparing provided information with information from public databases, consumer reporting agencies, among other diligence measures.

2. CDD- Customer Due Diligence

CDD ensures if you can trust a particular client. It assesses the risks and protects the institution against criminals, PEP(Politically Exposed Persons) presenting a high risk or even terrorists.

It has 3 levels:

  • SDD(Simplified Due Diligence)- it is a simplified procedure. The risk of money laundering is low.
  • CDD(Basic or Standard CDD)- standard procedure for average or moderate levels of risk. Performed for most clients.
  • EDD(Enhanced Due Diligence)- Additional information is obtained. It has a clearer understanding to mitigate associated risks. Mostly done in high-risk circumstances.

Some of the important measures taken during CDD are:

  • Confirm the identity and location of the client including a proper understanding of their business venture. This might be a simple act of verifying the name and address of the potential customer.
  • Categorize clients based on their risk profiling. This must be done prior to any digital storing of information and documentation
  • In areas that require EDD, ensure that the entire process is performed. This is an ongoing process as any low-risk client can become high-risk. Thus, periodic CDD is necessary.
  • The necessity of EDD depends on certain factors. These include the location of the person, occupation of the person, types of transactions, and pattern of activity.

3. Ongoing Monitoring

It refers to the program monitoring the customers on an ongoing basis. This includes oversight over accounts and financial transactions. This includes accounts with spikes of activity, adverse media mentions, or any other concerning occurrences. Periodical reviews of accounts and risk factors are done.

What Are The Types Of KYC?

 

Standard KYC

Includes the KYC performed for individual customers and clients. It is most widely done. The process has slight variations depending on the jurisdiction the banks fall under.

KYB- Know Your Business

It is an extension of KYC for anti-money laundering. It verifies a business including the registration credentials, UBO(Ultimate Beneficial Owners), location, and other factors. The institution screens the business against the grey and blacklists that include entities involved in fraudulent activities. It identifies fake businesses and shell companies.

It is also known as Corporate KYC.

KYCC- Know Your Customer’s Customer

It identifies the activities and nature of the customer’s customer of a financial institution. It includes identifying the people involved, assessing the risk levels and major activities of all entities.

eKYC- Electronic KYC

eKYC, also known as Digital KYC is the remote and digital transposition of the KYC process. Authentication is done through electronic and digital methods with verification performed digitally without the requirement of physical documents. It uses the aid of technology like OCR and live-video access.

The Not-Too-Distant Future Of KYC

KYC is criticized for the increase in dropout rates during onboarding as it makes the process more complex. This overwhelms the customers trying to onboard who become reluctant to do business with the banks.

This is worth notice as newer fintech startups are increasing their customer onboarding every year. Since 2018, Venmo has performed KYC on more than 30 million customers before onboarding them. They do this through technology and digitization. eKYC or digital KYC was the key factor that gave such impressive results.

Another concern regarding KYC is the amount of machinery and expenditure associated with the traditional modes. In 2016, regulatory compliance cost banks over $100 billion. This cost was expected to rise by 4% to 10% by the end of 2021 by Forbes. The expenses banks have to bear for KYC compliance is high.

This can be reduced to fascinating degrees with proper digitization of the entire KYC process. The perks of adopting such revolutionary technology will drive companies to success. It is time we understand this and proceed further into the future. For the future is not too distant!

About Signzy

Signzy is a market-leading platform redefining the speed, accuracy, and experience of how financial institutions are onboarding customers and businesses – using the digital medium. The company’s award-winning no-code GO platform delivers seamless, end-to-end, and multi-channel onboarding journeys while offering customizable workflows. In addition, it gives these players access to an aggregated marketplace of 240+ bespoke APIs that can be easily added to any workflow with simple widgets.

Signzy is enabling ten million+ end customer and business onboarding every month at a success rate of 99% while reducing the speed to market from 6 months to 3-4 weeks. It works with over 240+ FIs globally, including the 4 largest banks in India, a Top 3 acquiring Bank in the US, and has a robust global partnership with Mastercard and Microsoft. The company’s product team is based out of Bengaluru and has a strong presence in Mumbai, New York, and Dubai.

Visit www.signzy.com for more information about us.

You can reach out to our team at reachout@signzy.com

Written By:

Signzy

Written by an insightful Signzian intent on learning and sharing knowledge.

Importance of KYC For Rental Economy In India

Posted on | by Signzian

In India, there are many instances in which people choose to rent goods or services for mostly two reasons. Youngsters do not know which city they might have to live in when they relocate for work purposes. Second, many items ranging from clothing to furniture may have a price tag that may not be suitable with one’s income. People who need formal wear for a special occasion may not wish to wait a year to purchase it.

There are other instances as well. There are people who might have transferable jobs and require frequent travel or need to relocate on a yearly basis. Buying a house may not be as prudent a solution as renting it. It is due to these instances that the rental/shared spaces

Rental/Shared Workspace

Starting your own company, or simply relocating to another city for your new job, rental is the way to go. In the last few years, India has seen the rise of startup companies that offer co-working and co-living spaces. They are near each other. Most working professionals or students prefer staying near colleges/schools/workplace.

Some popular co-working companies include WeWork, InstaOffice, GoWork, and Innov8. These offer premium working spaces for developing businesses with a smaller workforce. These office spaces provide premium amenities at pocket-friendly rates like:

1.High-speed Wi-Fi

2. Unique common areas

3. Business-class printers

4. Wellness room

5. Phone booths

6. Meeting rooms

7. Event space

8. Cleaning services

9. Professional & social events

10. Complimentary refreshments

11. Outdoor space

12. Parking

However, the current Covid-19 crisis has changed this equation to a great extent. Most organizations have shifted their employees to the work from home model. In a recent survey conducted by Knight Frank India, reports indicate over 70% of companies sampled for a poll are willing to extend the work for home policy by another six months. A similar trend is emerging globally. Companies worldwide have announced remote working for employees to contain the virus spread. This has triggered a debate if work from home could replace office spaces in the future.

Office utilization rates will fall as remote working increases. Landlords with exposure to short-term leases are the most vulnerable. This is mainly due to the delay to investment activity and softer rental growth than previously forecast with respect to 2020 overall performance, These findings are per JJL’s report titled COVID-19 Global Real Estate Implications.

In 2019, flexible workspaces with 11.2 million sq ft were responsible for 18% share in total leasing. This was according to Colliers International India. Experts suggest that corporates are unwilling to invest in commercial space currently. This will have an adverse effect on shared space providers. With the overall economy in the doldrums and companies/employees getting into the habit of the ‘work from home’ concept, office space is being considered as an additional overhead cost. Many are not willing to invest, at least for the coming two-three quarters.

Rental Accommodation

In 2019, rental living companies have expanded to providing a wide range of services. Living spaces by Zolostay, Nestaway or NoBroker are perfect if you are looking for a place to rent/share.

Some key facts about rental accommodation:

  • A December 2018 survey by Knight Frank India shows that 72% of millennials gave co-living spaces a thumbs-up. Over 55% of respondents were in the age bracket of 18–35 years. They were more than willing to rent co-living spaces.
  • In a short span, Oyo Living has opened 150 properties with 10,000 beds. Their properties include studio apartments and 1/2/3 bedroom apartments on a shared/private basis. They offer living spaces in Bengaluru, Noida, Pune, and Gurugram. The company is set to expand to the top 10 metropolitan cities with over 50,000 beds.
  • In the last four years, NestAway has raised around $94.2 million from marquee investors. The company has over 55,000 tenants living in 25,000 plus homes across 12 cities. It hopes in the next five years, at least a million tenants will call NestAway spaces their homes. The company is set to enter 10 more cities, including Chennai, Kota and Mysore.
  • Delhi-based student housing startup Stanza Living manages 2,000 beds mostly in Delhi-NCR. The company plans to have another 10,000 beds that will be launched across cities in the coming months. Stanza is backed by Matrix Partners, Accel Partners and Sequoia Capital,

With the Covid-19 scare hovering above our world, most Indian shared accommodation businesses have come to a standstill. In India, millennials account for 47%, approximately share in the country’’s working-age population, they are an integral target group for coliving spaces.

  • With 60% of the students being outstation students, the demand at present stands approximately 100,000 beds across the country for student accommodation.
  • Coliving space in India enjoys a worth of 85 Cr INR, approximately. This is responsible for about 2.5% of the entire rental market. This is based on the industry expectation and the forecast which stands at 2X growth in three years.

Before the coronavirus outbreak, government policies were not in place. Shared accommodation, mostly paying guest (PG) facilities were running without definitions. Once the news of Covid-19 took everyone by surprise, the landlords who run PG owners, without giving further notice, asked their tenants to vacate the space with immediate effect.

The reflex from these landlords was a knee-jerk reaction and unfortunate. During such time, people are supposed to be united, but sadly the reality is far distant. However, this could be a boon to the coliving industry. This is because working millennials and students opt for professionally managed accommodation. The co-living operators will see a surge in demand post the Covid-19 days for two reasons. They have firm policies towards safety and hygiene, and hands out a contract to live by — something that was missing in the paying guest format. Safety and hygiene environment will be the critical outlook for the renting of shared accommodations.

Some of the organized players continue to run the space with the booking of 85% of accommodation of total beds, though there is 20%-30% of physical presence. Rest have left to their hometown before the lockdown announcement to be with their family. Experts suggest that the situation will revive post-Covid-19 days.

Need For KYC In Rental Workspace/Accommodation

In modern times, technology is overtaking every sphere of life. Rental companies today are offering remote services for renting office workspace or homes. As such, remote verification for the identity of customers is a must. Digital KYC presents itself as an ideal solution to reduce risks and maximize profitability. Imagine a business environment for PG accommodation. The identities of potential clients are actually ensured before handing them the living space — the true asset of the company. All the risks are properly assessed and background checks are performed to rid the company of any potential legal proceedings.

Rental/Shared Vehicle Industry

  • In 2010, with the onset of Ola Cabs in India, hailing a cab became much easier for us. The event marked the onset of a new industry — the vehicle rental industry. In 2013, Uber launched operations in India & the app cabs became quite famous across the nation. and people easily adopted it.
  • However as the years have passed, the vehicle rental industry has taken a new turn. With companies like Zoomcar, Revv, Drivezy, Bounce etc, a new chapter began in this sector. Instead of renting cabs at higher prices, people can now rent vehicles like cars or bikes directly without any driver. In a report, Avis mentions that the car rental industry in India is growing at the rate of 35%. It is expected to accelerate further to reach INR 1000 billion by 2022.
  • The present COVID-19 crisis has not spared the rental vehicle industry in India. With the lockdown procedures, the rental vehicle economy came to a virtual standstill. Cab-hailing companies such as Uber and Ola have resumed services in certain cities under green and orange zones amid the Covid-19 outbreak. They are likely to have their operations hit significantly even after the lockdown.
  • The Covid-19 crisis has created an aversion to public transport amidst people. As such, self-drive and rental car companies have seen a steep rise in subscriptions and inquiries. Car rental companies like Eco-Rent-a-Car and Revv have seen a sudden spike in demand. Other companies like Zoomcar have witnessed a 4x increase in rentals while some like Drivezy are launching new services to ride the wave. Work from home, fear of infection in public transport, and schools being shut are some of the factors that are contributing to greater demand for car rental companies.
  • Currently, the individual cab business for Eco-Rent-a-Car is up to 350 cars a day. However, travel and tourism which used to be 200 cars a day is now down to almost zero.
  • Revv have seen a 30%-40% increase in subscription
  • Drivezy has slashed the price of the monthly bike subscription to Rs 6,000-Rs 7,000 per month for a duration of 3-months.
  • The demand spurt is also leading to markup in the tariff. Self-drive rental Zoom Car has nearly quadrupled its tariffs on self-drive cars in multiple select cities.

So why is KYC necessary?

Rental companies like those in the car rental space can benefit greatly from Digital KYC. It will assist them to authenticate the credentials of their users, before renting out expensive vehicles. This will not only lead to greater transparency but also would reduce the risk of auto theft for car rentals. The danger of Identity thefts and use of fake IDs can be minimised with KYC advantages like fraud management, background checks would lead to streamlined business operations..

Rental Consumer Goods

Moving to a new place but cannot afford new furniture? Companies like Rentomojo, Furlenco and Quickr will help you get rental furniture at affordable prices. Anything you can imagine you need but can’t buy, you can find on rent today.

  • According to a report by PricewaterhouseCoopers, the sharing economy is set to generate potential revenue of $335 billion by 2025 globally.
  • In 2019, the rental industry has made a huge market in India with estimates that the market stands at about $1.5 billion.
  • In an article by Livemint, a rough estimate shows that the market for rental of furniture is seen at around $800–850 million. Rentals of electronic appliances are approximately a market of $500 million while that of bikes is $300 million.

KYC As A Benefit

The need for KYC in the rental goods market is just like all the examples mentioned above. In fact, there are many companies like Furlenco, GrabOnRent which have already started to adopt the online KYC process. Most rental goods companies operate via the Internet and the business model is set up in such a way that the tenant never has to meet the seller. Other than security issues, knowing the customer is important considering most users pay online for their rentals. Rental/shared economy operates on a large customer base. To maintain customer data, KYC collection and verification is required.

DigitalKYC By Signzy For The Rental Market

Digital KYC has been a huge success in the banking industry. In recent years, most Indian regulators have also accepted the use of VideoKYC to secure banking and financial services in terms of onboarding new customers. With social distancing and remote digital services becoming the norms for all businesses, it is only a matter of time before digital KYC collection becomes the standard for all business sectors

With the new government regulations and the current Covid-19 crisis, , electronic KYC collection is now an easy option for rental companies. At Signzy, we offer a unique e-KYC solution known as RealKYC. The solution offers KYC collection as well as background verification and checks.

Signzy provides 2 unique digital KYC solutions with its proprietary AI technology — RealKYC & VideoKYC. Here are some benefits of using Digital KYC for rental businesses:

Advantages of RealKYC & VideoKYC

  • Secure System: A customer’s account information during rental onboarding are secure because the entire process is online. Identity theft, fraud, etc. are all minimized with RealKYC.
  • Pre-Filled Forms: Real-time data pre-population from uploaded ID proof eliminates the need for manual form filling for the customer during signup on the rental platform.
  • Real-Time Document Verification: This can be used to effectively verify KYC documents without the need to wait for an indefinite period. This may be crucial to services like rental accommodation where the customer may need to avail the service on an immediate basis.
  • Faster processing: The VideoKYC service is completely automated online. This means that KYC data can be processed in real-time without any manual intervention. The paper-based KYC process can take days up to weeks to get verified, but the VideoKYC process takes just a few minutes to verify and issue.
  • Efficient Maintenance For Records: The VideoKYC service by Signzy features collecting time-stamps and keeping an audit trail. This can help businesses maintain track on customers in terms of when the rent/subscription period starts.

Conclusion

The future looks bright for the rental companies looking to expand across India. But the need for effective management of their customer base is also a burning need. Like banks, KYC is the best way to, as the term suggests, ‘Know Your Customer”. These companies will soon have to look towards a more digital approach towards KYC collection and verification

With rental/economy growing at such a fast pace, the companies that operate rental goods/services may need to reconsider their current approach and go for a more structured business model that can effectively manage a large consumer base.

About Signzy

Signzy is a market-leading platform redefining the speed, accuracy, and experience of how financial institutions are onboarding customers and businesses – using the digital medium. The company’s award-winning no-code GO platform delivers seamless, end-to-end, and multi-channel onboarding journeys while offering customizable workflows. In addition, it gives these players access to an aggregated marketplace of 240+ bespoke APIs that can be easily added to any workflow with simple widgets.

Signzy is enabling ten million+ end customer and business onboarding every month at a success rate of 99% while reducing the speed to market from 6 months to 3-4 weeks. It works with over 240+ FIs globally, including the 4 largest banks in India, a Top 3 acquiring Bank in the US, and has a robust global partnership with Mastercard and Microsoft. The company’s product team is based out of Bengaluru and has a strong presence in Mumbai, New York, and Dubai.

Visit www.signzy.com for more information about us.

You can reach out to our team at reachout@signzy.com

Written By:

Signzy

Written by an insightful Signzian intent on learning and sharing knowledge.

 

Regulations & Revenue- How Digital KYC For CASA Can Be A Relief For US Banks

Posted on | by Signzian

Introduction

KYC (Know Your Customer) has become a crucial part of the financial framework in America. Banks in the US are required to have a proper understanding of the identity of their customers. This requirement with advancing technology creates challenges for the banks in conducting KYC. The cumbersome methods of traditional KYC are becoming outdated. It is time for Digital KYC.

The solution to these problems is similar to solutions to most problems in banking. Digitizing the entire process with technology does the trick. Unfortunately, most banks overlook this and stick with more clumsy routes from tradition. More than 64% of account opening applications in 2020 Q3 were either online or through a mobile device. This was a huge jump from the previous year’s 53% during Q2-Q4. The evidence is clear on how customers are changing their preferences.

One area in banking that can benefit from digitization is CASA (Checking/Current Account Savings Account). It’s a very beneficial option for the bank as the revenue from CASA and checking accounts is high. This is because of the low interests that they offer while providing other attractive options for the customer. Unfortunately, the regulations are strict in this area and conducting effective KYC is a tedious process.

Digital KYC is useful for CASA customers and banks. With efficient implementation it will save time and effort for both parties, rendering less attrition and more benefits. A detailed look at how the machinations will reveal a better picture.

Role of CASA In The US Banking Sector

Before understanding CASA we must know the exact difference between savings and checking/current accounts:

  • A savings account is a deposit account that bears interest at a bank or any financial institution. Even though they provide modest rates of interest, they are often set against growing inflation. Nonetheless, they are safe and reliable with good liquidity. They are not very profitable for the financial institutions as they would have to provide interest to the customer.
  • A current account/checking account on the other hand has no or low-interest rates. They have safety and liquidity too. But what makes them stand out is their option for unlimited deposits and numerous withdrawals. They are also called demand accounts or transactional accounts. They are far more profitable for the banks since they can hold the money while paying no or low interests.

 

CASA combines the features of both these accounts. This will have an appealing effect on the customers to keep the money in the bank. This is beneficial for the bank as they pay no or low returns on the checking/current account while maintaining decent interest on the savings portion. It doesn’t have a specific maturity date. Thus, it is valid as long as the account holder needs it to be open. Banks always prefer customers to have a CASA or checking account than a savings account.

Even though CASA is usually a combined type of account, the term is often used to refer to both Checking and Savings Accounts together. In most parts of the world, they are used separately, but West and Southeast Asia predominantly have CASA along with the other types of accounts. Such bank accounts are located in markets with saturation and cutthroat competition. The US banking sector is headed towards such a scenario.

During the COVID-19 pandemic, the USA has seen a fall in new checking accounts in regional and community banks. The major reason was the unease of the physical process of account opening. It is noteworthy that digital banks and Large banks (like JP Morgan Chase and Bank of America) who had digital KYC and onboarding options accounted for nearly 55% of all accounts in 2019 and increased it to 69% by Q2 2020

 

Source- CORNERSTONE ADVISORS

What Happens When Banks Don’t Know Their CASA Customers?

Even though KYC helps build better relations with the customer and smoothens transactions in the long run, it’s primary objective is to prevent fraud. Several frauds may lead to money laundering and even terrorist funding. In Q1 2020 alone saw a 104% rise in financial fraud reports compared to Q1 2019. This amounted to more than 430% increase from Q1 2015.

This is where KYC comes into play. An established data on the credibility of the customer helps banks determine the risk involved in dealings with each individual. Government bodies like FinCEN(Financial Crimes Enforcement Network) and international entities like FATF play a role in ensuring AML/CFT(Anti-Money Laundering/Combating the Financing of Terrorism). But financial institutions have their responsibilities.

The Federal Government has taken certain steps to ensure this. In 2016, a rule which mandates financial institutions to verify the identities of customers was established. This was especially for legal entity clients and their beneficial owners including corporations, partnerships, LLCs and others.

Banks and financial other institutions are advised to secure from the customer:

  • The customer’s full name
  • Residential address
  • SSN(Social Security Number)
  • Date of birth.

CASA is a lucrative option for the banks. They are sometimes given lenient customer onboarding directives. This might lead to inefficient KYC procedures. Unfortunately, money laundering and other illegal activities are mostly done through checking accounts. CASA will also be subject to this as it has similar accessibility. Thus KYC for CASA is of the utmost necessity.

Digital KYC Is The Next Step…Here’s Why!

Another major factor that comes into play is the digitization of bank functions. Customers prefer remote and digital KYC and onboarding procedures to physical and traditional ones. Some of the important reasons for this are:

  • Ease of access as they can do it from their homes
  • The time required is extremely low relative to traditional methods
  • Health concerns amidst the COVID-19 scenario

In 2020 most of the US citizens preferred to access their old and new accounts through an online portal. Some of them went as far as to change their primary accounts from a traditional bank to a bank that provides uber digital access.

The biggest surge was from mobile users who found it much easier to access their bank accounts from anywhere in the world at any time they wanted to. They were literally carrying the snippet of a bank in their pockets.

From the data on fraud alone, it makes it necessary for banks to switch to digital KYC for onboarding process, combine this with the fall of new secondary checking account opening from 63% in 2017 to 24% in 2020 at traditional banks, digital KYC becomes essential

Source- CORNERSTONE ADVISORS

Source- CORNERSTONE ADVISORS

Digital KYC For CASA Operations Comes With A Plethora Of Benefits

Digital KYC is an idea that even governments are entertaining. With proper regulatory guidelines, they will be stringent and secure. It is the most efficient way to conduct KYC for CASA. As a matter of fact, it would be the most efficient method to conduct KYC for any aspect of the banking sector. The reasons for these include:

  • As the numbers of in-person account openings have fallen it is clear that customers prefer other modes.
  • As the entire populace has access to smartphones, it is only sensible to provide them with the option to create a CASA account from their mobile devices, if they wish to
  • Long Queues and formal delays will be avoided due to the virtual onboarding process
  • TAT can be reduced to a matter of hours or even minutes.
  • Health concerns amidst the pandemic are nullified as no human contact is nil.
  • Once implemented the procedure will be cheaper than traditional KYC.
  • If regulatory guidelines for Digital KYC are strictly followed, fraud risk can be reduced to a minimum.
  • With efficient and experienced third parties’ oversight, the platform can be user experience-driven.
  • Overall customer experience and satisfaction is met.

Even without any push for digitization customers are preferring all their banking processes online. KYC usually is a one time process, if enough activation enthusiasm can be generated from the customers, permanent customers can be ensured by the institutions.

Conclusion

The facts are in front of us. The citizens of the world’s largest economy prefer to go digital due to the convenience, security and safety it brings. Digital KYC for CASA in US banks is gaining importance and is becoming the need of the hour in the banking industry. It’s becoming inevitable. Perhaps, in a decade or more the entire industry would go online rendering any physical interventions either useless or extremely unavoidable.

CASA is a symbiotic option for both the customers and the financial institutions. Welcoming more customers into using it would benefit all. It is the responsibility of Such institutions to ensure that customers are attracted and easily integrated into their user-base. Digital KYC is the next step for all entities in the banking sector. Without further adieu, that is where they should head their wheels at.

 

About Signzy

Signzy is a market-leading platform redefining the speed, accuracy, and experience of how financial institutions are onboarding customers and businesses – using the digital medium. The company’s award-winning no-code GO platform delivers seamless, end-to-end, and multi-channel onboarding journeys while offering customizable workflows. In addition, it gives these players access to an aggregated marketplace of 240+ bespoke APIs that can be easily added to any workflow with simple widgets.

Signzy is enabling ten million+ end customer and business onboarding every month at a success rate of 99% while reducing the speed to market from 6 months to 3-4 weeks. It works with over 240+ FIs globally, including the 4 largest banks in India, a Top 3 acquiring Bank in the US, and has a robust global partnership with Mastercard and Microsoft. The company’s product team is based out of Bengaluru and has a strong presence in Mumbai, New York, and Dubai.

Visit www.signzy.com for more information about us.

You can reach out to our team at reachout@signzy.com

Written By:

Signzy

Written by an insightful Signzian intent on learning and sharing knowledge.

How Digital KYC Can Prevent Ponzi Schemes In The US

Posted on | by Signzian

Introduction

In the early 1920s, Charles Ponzi created one of the first Ponzi Schemes depriving people of their hard-earned money. After a century, similar scams are on a decade high in 2020. Over 60 alleged Ponzi Schemes with a total of more than $3 billion investor funds were uncovered last year alone. Few reasons for this hike were unsatisfactory KYC check, the pandemic and its aftermath.

The COVID-19 outbreak was a tragic and fearsome event. Unfortunately, many fraudsters thought this a good time to make some unethical profit. The vulnerability of people and their desperate financial state has enabled them to fool the people and take their money. Most of this occurred due to the insufficient and improper KYC checks on such fraudsters by regulatory bodies and financial institutions.

Numerous people fell prey to claims of low-risk high returns schemes and programs. This will not stop unless the authorities make strict regulations for the verification of individuals and enterprises. The fist of justice, though stern is not swift enough. Thus the responsibility falls on the entire financial sector’s shoulders. It is up to banks and financial institutions to have advanced modes of KYC checks for proper verification and affirmation of security.

If nothing is done to ensure better verification of customers with advancing technology, this new decade will be bleak from here on. Let us have a look at how the coming years can fight such fraudsters and how we could have done it before too.

Why Do People Confuse Ponzi Schemes With Pyramids Schemes And MLMs?

 

In the US, Ponzi Schemes and Pyramid Schemes are illegal while most Multi-Level Marketing(MLM) Schemes are considered legal and people are tricked into investing in the former illegal opportunities. One of the reasons for this is people misunderstanding Ponzi Schemes and Pyramid Schemes for MLM. MLM is a metamorphosed step in direct selling. In MLM, existing distributors recruit new distributors for a capital fee. They primarily sell products directly to consumers without moderators. If the major source of revenue is from selling products and not distributorship, it is legal.

If the business model enables major profit from selling distributorship and minimal product sale revenue, then it is classified as a Pyramid Scheme. This is illegal because, as the recruiting multiplies, it becomes incredibly difficult for new recruitments. This causes sufficient returns for early investors but the later ones are sure to experience monetary loss.

Prima facie, Ponzi schemes resemble Pyramid schemes since both promise high returns with no or low risk. But the mechanics are where the similarities end.

Ponzi Schemes center around fraudulent management services for investments. People invest in funds for ‘portfolio managers’ promising multiplied returns. When the investors demand their money back, incoming funds from new investors are used to pay them off. The early investors mistakenly believe that they have increased profits, while the later investors are outright scammed. The individual who sets this system up controls the entire operation. They exclude any real investments while transferring funds from client to client.

Bernie Madoff’s Bernard L. Madoff Investment Securities LLC is considered the most successful fraud company to pull off a Ponzi Scheme. It still holds up with $65 billion deceived from over 5000 clients. With advancing technology, Ponzi schemes and frauds are expected to rise in the coming decade with at least one to surpass the Madoff ceiling.

 

The Necessity For Automated/ Digital KYC check

Digital/Automated KYC verification procedures leverage AI, ML, and other advanced technology to ensure clients meet regulatory standards with minimal dependency on internal resources.

This doesn’t imply that high-level decisions are automated, but the majority of legwork is automated primarily through Intelligent Process Automation(IPA). IPA combines collections of technologies that combine, manage, and automate digital processes. It is mainly constituted of Robotic Process Automation (RPA), Intelligent Document Processing (IDP), Artificial Intelligence (AI). Read more about Automation in Banking and Digital KYC.

These technologies are used for automated workflow, identification, verification times, extract data from documents, and to reduce screening. Collecting and analyzing data with IPA and ML provides financial institutions with a more sturdy and instantaneous picture of the client. This is the crucial element in preventing frauds like Ponzi Schemes. The constant surveillance for illegal activities always renders the fraudsters less volatile.

Some aspects of Digital KYC that prevent Ponzi Schemes and other financial fraud include:

  1. Strict identification and verification procedures ensure any malpractice or fraudulence in customers.
  2. More precise execution of processes reducing vulnerability to risk.
  3. Reduced Human errors as the majority of work is automated in a workflow.
  4. Reduced Time required renders responses swift denying time for fraudsters for their schemes.

Recent Ponzi Schemes That Could Have Been Prevented With Automated KYC check

 

1. Jeff and Paulette Carpoff- 2020

What Happened?- The SEC in January 2020 filed a case against Jeff and Paulette Carpoff, charging them for helming a $910 million Ponzi scheme. The money was obtained from 17 investors in California between 2011 and 2018. They used their solar generator companies to attract investors. But they did not manufacture even half of what was promised. The lease payments committed to early investors were obtained from later investors. The additional money was used for their lavish lifestyle. This included a sponsorship deal with Chip Ganassi Racing for a NASCAR Xfinity Series. Later the couple pled guilty.

How Could It Have Been Prevented?- The financial institutions involved did not conduct proper KYC check and other verification processes with this company in the beginning and when it added new investors. If they had, better transparency could have been maintained and the investors could have seen the scam from afar. The reason cited by the banks for the lack of this diligence was the impracticality of manually attending each investor and company for verification. A digital approach would have created a faster and reliable verification procedure. In essence, a scam like this could have been prevented to an extent with methods like Digital KYC.

2. Woodbridge Group of Companies- 2017

What Happened?- In the winter of 2017, The U.S. Securities and Exchange Commission (SEC) charged Woodbridge Group of Companies with a US$1.2 billion Ponzi scheme. It was helmed by Robert H. Shapiro. Woodbridge and 236 related LLCs filed for bankruptcy on December 4, 2017, in the Delaware Federal Court. This occurred amidst the absconding of relevant position holders and an ongoing investigation. More than 8400 investors fell prey to Shapiro’s scam. Due to the Bankruptcy declaration, these investors received zero returns as opposed to the 5 to 10 percent promised in the beginning.

How Could It Have Been Prevented?-The lack of sufficient financial checks on the individuals involved in the Woodbridge case is evident. Verifications on financial data could have prevented this. Even after the Government setting up federal portals, financial institutions are not using them to their maximum potential. With Digital KYC verification this could be changed and a more diligent form of verification could be introduced. It is high time banks and organizations accept this.

 

3. Burton Greenberg and Bruce Kane- 2015

What Happened?- A relatively smaller scam by Burton Greenberg and Bruce Kane in the state of Florida is worthy of notice. The fraudulent scheme ran for nearly a decade but came to a halt after the FBI arrested them on October 7, 2015. The scam operated with the name “Global Financial Fund 8, LLP”. They obtained millions of dollars from investors. It was used for personal expenses while they were assured safety of investment. Much of the money was found in institutions overseas including Turkey, Switzerland, and Italy. The two were sentenced to prison in 2016 after more than 9 years of scamming people.

How Could It Have Been Prevented?-Such individual and nuclear cases of Ponzi schemes mostly go unnoticed due to their lesser magnitude. But in time multiple of these add up to a great extent and can cause major crises- let us all not forget 2008. With diligent inspection on entry, such fraudsters, especially ones with previous records could easily be identified. Soon enough in the next decade, these fraudsters are going to use advanced technology to trick institutions and individuals. It is only sensible to upgrade the existing systems KYC check to meet such demands.

Conclusion

Ponzi Schemes are no new ideas. Fraudsters infuse technology to this brilliantly vice idea and seem to have no intent to stop it anytime soon. But we can’t let the public be the victims. Necessary measures need to be taken for safety. As always, nipping the problem in the bud is the most advisable solution. This requires authenticating the customers and the organizations. For this, using technology is not just a brilliant strategy, but an unavoidable one.

The financial sector has always adapted to technology swiftly. Even government bodies in this sector are keen on upgrading their security and processing. Since Ponzi Schemes and other financial frauds are projected to increase, necessary steps need to be taken. Digital KYC is one step towards this.

It is time the individual institutions in the sector acknowledge this and adapt. This will keep them stay ahead of the curve. The reluctance expressed by banks and financial organizations are understandable but rebounding. An early adaptation to technology like Digital KYC will only benefit them.

About Signzy

Signzy is a market-leading platform redefining the speed, accuracy, and experience of how financial institutions are onboarding customers and businesses – using the digital medium. The company’s award-winning no-code GO platform delivers seamless, end-to-end, and multi-channel onboarding journeys while offering customizable workflows. In addition, it gives these players access to an aggregated marketplace of 240+ bespoke APIs that can be easily added to any workflow with simple widgets.

Signzy is enabling ten million+ end customer and business onboarding every month at a success rate of 99% while reducing the speed to market from 6 months to 3-4 weeks. It works with over 240+ FIs globally, including the 4 largest banks in India, a Top 3 acquiring Bank in the US, and has a robust global partnership with Mastercard and Microsoft. The company’s product team is based out of Bengaluru and has a strong presence in Mumbai, New York, and Dubai.

Visit www.signzy.com for more information about us.

You can reach out to our team at reachout@signzy.com

Written By:

Signzy

Written by an insightful Signzian intent on learning and sharing knowledge.

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