Integration issues, the absence of sufficient aspects, and the way KYC (Know your customer) is manage are some of the main problems that the financial sector is facing these days. To manage these issues, new services are rising in the RegTech field. KYT verification measures are developed to help banks and other financial institutions in customer onboarding, practicing due diligence, and screening the entities against sanctions and watch lists.
A Bit on Know Your Transaction
In financial institutions, it is imperative to know how the transactions contain the bits of data with them which is sometimes become difficult to record. This financial information contains invoices, clearances, and legal documentation also. Such records are require to be monitor completely with their respective documentation which is deploy in stages later for examining or investigating or anti-money laundering purposes.
The regulatory methods are most of the time long, hectic and complicated. Because of the emerging difficulties in information retrieval and inappropriate measures in due diligence and weak methods of monitoring the transactions, banks experience adverse circumstances. Considering these issues, industry experts launched the idea of KYT verification which is solely about financial institutions dealing with more accurate, complete, and granular information-set specific to transactions.
How KYT verification is Important?
A KYT solution provider is carry out to identify and record the transactions performed by customers. Some significant financial transactions linked with consumer accounts contain money (cash) and card transactions, inward and outward payments, cross border transactions.
All financial institutions are require to carry out KYT verification to know the specific details of these processes, especially in the case when any third parties are involve. This information offers sufficient insights into the aim and nature of the financial transaction to identify doubtful behaviors and carry out further analysis. To accomplish this aim swiftly, many financial institutions are developing numerous information models for KYT verification on various aspects like name of the consumer, pattern of transaction, country origin, type of transaction, bank, etc.
Know your customer transaction service is a kind of service that helps banks and other financial institutions in recording and detailed analysis to figure out the doubtful or illegal transactions as a part of the examining method. This examination is carried out on the banks to detect fraudulent transactions. The consequences of the method act as solid evidence, therefore, helping the banks to save themselves from scams and non-compliance fines.
Just KYC is not Enough
Know your customer is the process where businesses perform verification checks in order to figure out the real identity of the customers. KYC is perform at the time of onboarding when companies confirm the identity of consumers and check if they can be a potential threat to the business. Firms of different countries have made up regulations for the businesses to abide by and made laws to ensure organizations do not dodge this verification system. KYC verification does not work to regularly monitor the transactions of the customer, therefore, financial institutions perform KYT verification.
Most institutions still depend on manual processes for KYC which is causing problems in the sector. Traditional KYC means that once the identification is perform, there is no follow-up or regular monitoring of the customer information. This creates a challenge for financial institutions to perform regular transaction monitoring using KYT verification without compromising the consumer experience.
With advanced technology becoming a normal thing in the market, monetary scam regulations have grown into a deliberate area that needs more focus. Considering the market recent trends and how the partners are becoming translucent, compliance professionals are turning more strict and detail-focused in the years to come. Regulators are coming up with new laws to let the investors experience security and help financial institutions in fighting crimes such as money laundering and terrorist financing.
Therefore, just “know your customer” is not helpful for businesses to minimize monetary fraud rather monitoring each transaction is a mandatory part of future laws and companies need to practice it.
The real-time transaction reporting system in KYT verification helps the banks to keep records of the transactions performed by customers. It helps them to avoid any mishappening that can happen if they do not monitor it.
In case of any suspicious or doubtful transactional activity by customers, the systems in KYT verification create an alert that stops the transaction for a moment, and the officials behind the process check the process and after clearing the process, they confirm it to proceed. However, in the case of any fraudulent activity, the process would be stop and consequently saves the banks and financial institutions from facing any adverse consequence in case of fraudulent transactions.
Summing it up
KYT verification involves the monitoring of financial transactions to save the banks and other financial institutions from facing any monetary fraud. Practicing KYC is not enough that is why transaction monitoring software is an important verification measure to catch criminals before they can become a potential threat to businesses.