“The banks and financial institutions are spending around $1 billion on identity management solutions,” stated an industry report. These solutions are high in demand because money laundering has been a fraudulent ordeal all across the borders. Since the 1980s, BCCI has been accused of money laundering activities and the amounts involved are high.To restrict activities that involved money laundering and financing terrorism, Know Your Customer (KYC) system was introduced in the United States in the late 90s. In the year 2002, India too introduced KYC in its system, especially via Reserve Bank of India (RBI) to all the banks in the year 2002.
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“On 29th November 2004 on Know Your Customer [KYC] Standards – Anti Money Laundering [AML] Measures, all banks are required to put in place a comprehensive policy framework covering KYC Standards and AML Measures,” according to the guidelines issued by the Reserve Bank of India (RBI). The corporate affairs ministry, in the month of June 2018, decided to seek KYC for all 3.3 million active directors. However, “the government gave 2.1 million company directors; who failed to file KYC within the stipulated time another chance to complete this process,” said Arun Jaitley.
And right after the world started to believe that KYC has improved the channels of identity management for banks, financial institutions, and corporates worldwide, the Hongkong and Shanghai Banking Corporation (HSBC) scam took place. In the year 2012, it was found, the corporation was involved in money laundering activities amounting to $8 billion that sabotaged the Anti- Money Laundering Law. This was not the only problem with KYC. In fact, “12% of companies stated they have changed banks as a result of KYC issues,” stated a 2017 survey by Thomas Reuters. The same survey reported that 22% increase in the onboard time of a customer had been seen in the year 2016 to which an additional 18% was added in the year 2017.
Indeed, KYC as a system has failed in order to put a full stop to any anti-money laundering activity. Also, this system is highly time-consuming and burdening the banks with extra running cost – “15-20% of the running cost of major banks are being utilized as risk, governance, and compliance costs,” stated a study by Bain & Co.
This loophole in the KYC system can be rectified easily with the help of some latest technologies that have proven themselves to be phenomenal in securing data worldwide. Identity fraud and Data Security are not the issues that took birth a decade ago, in fact, from centuries, these frauds are poisoning the roots of the system of any country. This struggle to fight data theft and Money Laundering activities gave birth to technologies like Cryptocurrencies and Blockchain.
These systems help in maintaining the transparency and security of transactions and data. In fact, in the year 2014, Charlie Shrem was sent to prison with the accusation of money laundering. This was huge, as he was one of those hot-shot men who played a vital role in the Blockchain and Cryptocurrency domain. Hence, if were not able to get away with money laundering, how do you expect a normal person will be spared? Perhaps, this is a whole new level in the data security realm wherein banks do not have to waste their precious 24 days to complete customer KYC onboarding process.
If the world today incorporates the latest system for KYC record-keeping technology in all walks of times, surely, financial situations and identity theft issues at various levels can easily be resolved.