"Know Your Customer" is an integral part of any customer onboarding for availing Government, Banking, Telecom and other regulated services.
Typically a KYC process consists of an individual or organization having to establish proof of identity, address and existence at the time of onboarding as well as repetitively.
KYC processes are generally duplicated, repetitive and rely on a lot of paper which results in:
- Potential for forgery and fraud
- Huge administrative and cost overheads
- Multiple agencies storing KYC data individually
This has also led to the advent of Central KYC registries/repositories which store KYC information collected from multiple agencies in a single central database. This poses security risks as information is stored in a single repository.
A Blockchain based KYC system can be a "single source of truth" which can store KYC information securely thereby eliminating the need for multiple individual databases holding such KYC information.
KYC processes today also result in other challenges
Currently, several software solution providers and data extraction companies offer multiple tools to extract data from customer documents. Agencies find it difficult to integrate this data to get a consolidated view of customers resulting in compliance failures
Agencies such as Banks need to digitize, archive customer KYC records and build/acquire expensive, proprietary technology to feed into repositories
Evolving Regulatory Landscape
KYC landscape is constantly evolving with new regulations (Dodd-Frank Act, FATCA etc) which results in increased data collection and investments into compliance
Anti Money Laundering checklists are maintained in silos which require huge information sharing infrastructure to ensure all agencies have access to a single AML list