What is KYC Document Verification and What are Some Major Issues in it?

What is KYC Document Verification?

It is defined as the process of verifying and validating the identity and necessary information of an individual or an entity by the submission of identification documents. It is also known as KYC verification or KYC ID Document Verification.

During this process, government-issued documents are mostly used for validating identity such as passports, driving licenses, ID cards, and utility bills. Initially, they are checked for any mismatches at a basic level. But as the sensitivity of information and level of verification increases, KYC Document Verification also becomes more complicated and stringent. The sole purpose of KYC verification is to safeguard the financial system from any unauthorized access that poses a threat.
KYC (Know Your Customer) builds a foundation on which an organization claims a level of trust, becomes compliant, and mitigates the risks of Money Laundering and Terrorist Funding.

What are some Major Issues in KYC Document Verification?

Following are the 5 major issues faced while carrying out a KYC ID Document Verification. These are the challenges faced by the banks and regulatory authorities but they also affect the authentic customer and build are fence or suspicion against them. Here’s how these issues can affect us all.

Un-Authentic Documents

The most common challenge faced in KYC ID Verification is to ensure that the documents submitted are authentic and genuine. Fraudsters and Criminals often use fake documents or forged documents to bypass KYC Verification which can increase the efforts for compliance and compromise the trust in the financial institution’s integrity or safety. Also, customers will face difficulty or might be wrongly accused due to suspicion due to a few dirty fishes in the pond.

Solution:

Customers, Regulators, and firms must ensure to provide, and verify that documents submitted for KYC are unaltered and Authentic. Also, these documents can be protected from alteration by using watermarks, unique identifiers, and holograms.

Poor Document Quality

The quality of the documents is a crucial factor in Failed Identity Verification via KYC. Poor-quality documents can have the following issues in them:

• Blurred or faded images
• Faded Ink or distorted writing
• Low-resolution Scans

Solution:

Ensuring clear and high-resolution documents can help a lot. Moreover, the use of legible and clear documents including high-quality images without distortion will help streamline KYC Document Verification.

Expired Documents

Mostly, KYC Regulations require a specific validation in the time period for document submission. Up-to-date and valid i.e. the expiry date of the document shall not have passed is necessary. When customers submit invalid, expired, or outdated documents for KYC in automated systems, it will give error messages like:

1 verification failed cannot find this person

[Image Source: Apple ID issue ]

2 bank card has failed the verification

[Source Image: Understanding Credit Card Failure and Decline Codes ]

Eventually, the system will not verify the document and the KYC process will automatically flag this person or entity as suspicious or reject the termination of the KYC Onboarding process.

Solution:

Ensuring the validity period of the documents before submission will save time and effort for everyone. For example, an expired ID card must be renewed before submission. Also, there can be a technical error in validating the document. For this reason, you might need to contact your service provider for verification.

Mismatched Information:

It is mostly seen in but not limited to the address verification failure. Inaccurate information in documents leads to issues in KYC Document Verification. Mismatch always comes when the provided information such as name or address is not present in the KYC database and document verification fails.

Also Read: Common Mistakes to Avoid in the KYC Document Verification Process

Solution:

Always cross-verify and check for the information provided in the documents during document filling. Update for any incorrect information timely to avoid KYC Verification Failure.

International Document Verification

Currently, KYC service providers need to know about the issue in International Document Verification. In addition to the above-mentioned issues, this challenge can create big-time trouble for customers as well as the regulators in different countries. For example, variations in document formats, languages, and authentication systems across different geo-locations and countries can be problematic. One country might have a KYC process that requires different documentation for customer onboarding and vice versa.

Also Read: KYC Document Verification Requirements in the UAE

Lack of access to international databases, directories, and registries can complicate the KYC Document Verification even more.

Solution:

Resolving the International Document Verification issue can be challenging itself. For this purpose, one might need a KYC AML Service Provider with proper knowledge. Different countries have different sets of guidelines and regulations for compliance. So, the KYC vendors provide services according to their target market in that specific country. Any mismatch or choosing the inappropriate KYC vendor will create more fuss.
You must ensure that the KYC ID Documents are fulfilling the international requirements for verification. Providing additional documentation and translated documents [in the target country language] might help too.

Also Read: What are some major KYC Document Verification Requirements in the UK

Most importantly, Choosing the right KYC Vendor will reduce the efforts on both ends. KYC Vendors will minimize the hassle for customers, firms, and regulatory authorities through their KYC and AML services suite. They have the technologies and expertise to facilitate KYC Document Verification.

How KYC AML Guide can help you Improve KYC Verification?

KYC AML Guide is a resourceful knowledge hub for guiding customers, compliance professionals, and everyone requiring help in compliance. Basically, we provide three main services under regulatory compliance:

• KYC Technology Buying Consultancy
• KYC Vendor Analysis to help you match the perfect vendor for your KYC needs.
• CaaS Marketplace to connect the KYC service providers with the potential market.

The above services empower you to make informed decisions in choosing the right KYC partner and save your business from hefty compliance costs and penalties for non-compliance.