How Are The KYC/AML Issues Being Solved By Blockchain?

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What Is KYC?

• Business practices known as the “way toward knowing your customer” (KYC) are done with the intention of verifying the legitimacy of their clients either before or while conducting business with them.

• The KYC initiative has gained a lot of support from banks and businesses of all sizes. KYC policies have been around for a while and are now considered to be necessary everywhere. With issues involving corruption, financing of terrorism, and illegal tax avoidance becoming so prevalent.

• Even though KYC protects those who might be harmed in some way by financial crime, it also helps organizations secure themselves by ensuring that they are cooperating lawfully.

What is AML?

• Remaining for “Anti Money Laundering”, it is an arrangement of methods, laws or directions designed to stop the act of producing income through illegal activities. It is obvious that the growing volume and complexity of financial transactions that need to be scrutinized for potential money laundering activities can’t be handled by conventional AML solutions.

• While the institutions work to catch up with these undeniably sophisticated criminals, tax evaders continue to develop new, inventive ways to conduct illicit financial transactions.

How can blockchain technology be applied to KYC and AML?

• Despite the fact that Blockchain is very effective at assisting cryptocurrencies in operating efficiently, that isn’t the only application that it can be used for.

• Currently, blockchain technology is being used for a variety of use cases that span numerous industries. Any significant value can be exchanged in a secure and reliable manner online. AML and KYC are two examples of such cases.

• Blockchain could therefore theoretically serve as an impossibly precise and secure way to store personal data that is used for KYC and AML compliance.

• Along these, if Blockchain somehow be utilized for KYC and AML compliance, a client could make one “block” by entering the majority of his or her own data, which is required for Compliant KYC and AML.

• This data would then be encoded and kept on the Blockchain. The person will be given a password, commonly known as a pass phrase or private key, which must be entered carefully in order to view the data.

What advantages does blockchain technology have for KYC and AML?

• The use of Blockchain technology for KYC and AML has a number of benefits. The first is the possibility of creating a standard KYC and AML Blockchain registry that a variety of banks and financial institutions could use.

• This could speed up the onboarding process and significantly lower the costs associated with KYC compliance. Instead of having to walk each new client through the majority of their KYC information each time, a bank representative could be given a password to access their information each time a new client signs up with them.

• An additional significant benefit is the possibility of creating a KYC and AML registry for use within banks. This means that the bank could rely on the Blockchain registry to complete the KYC and AML compliance when customers are using different services that the bank offers.

• Instead of having to deal with the majority of compliances repeatedly every time the client needs to use another administration or buy another banking product. For banks, it would be extremely beneficial if this could significantly speed up and reduce the costs associated with KYC and AML compliance.

Blockchain has not only successfully been applied in the cryptocurrency industry but also in other fields like supply chain finance, trade finance, the insurance industry, etc. The banking industry spends a significant amount of money each year on KYC costs, which could be greatly decreased, allowing banks to better focus on their main objectives and provide easier client onboarding as a result.

If banks and other financial institutions do start using Blockchain technology for KYC and AML purposes, that could quickly lead to change, and it might soon become the industry standard. Please stay connected with us in case you need to revisit the ideas or want to read the most recent news regarding Blockchain Services or Cryptocurrency Development Service.