Rapid industrialization and digitization are unveiling new challenges for business owners. The newly escalating fraudulent activities are imperiling the entire financial sector. Digitally powered methods like identity manipulation, forged documents, false credit/debit transactions, etc., use of IoT in minor and significant criminal offenses. With every passing day, financial systems are converting to digital platforms. The rampant surge in online transactions is a potential threat led by financial scammers. Criminals continue to search for new ways to commit crimes, but a lack of authentic regulations halt bringing fraudsters to justice. The dilemma continues to prevail unless Know Your Customer Transaction (KYT) compliance is not ensured on every level.
Innovation is mandatory in already deployed digital mechanisms for real-time transaction monitoring, and it remains incomplete without knowing your customer (KYC) and the business record (KYB). The complete knowledge about each and every transaction of customers can better check money laundering and other criminal frauds.
Role of Know Your Customer Transaction in the Banking Sector
The significance of the banking sector regarding major credit card and other financial frauds cannot be overruled. Customer transactions are closely linked with the banking system. Thus, banks are more prone to various kinds of financial scams. Bloomberg discloses a financial fraud committed by The Federal Reserve Bank and Bank of America Corp.’s wealth management unit employees. The expelled employees were guilty of obtaining loans through fraudulent means. This incident sufficiently highlights the need for strict bank transaction monitoring guidelines to thwart illicit activities within and outside the borders.
All Major Attributes of Know Your Customer Transaction
Banks and other financial institutions must monitor all the transactions effectively. The financial industry is mostly on the hit list of fraudsters because ill-gotten money is utilized to implement criminal schemes including money laundering, terror financing, cyber-attacks, cross-border funding, and drug trafficking etc. Without adequate finances, major crimes remain unattempted. Thus, KYC transaction is requisite to counter illegal activities. The major attributes of financial transactions are as followed:
1. Cash & Card Transactions
Cash & credit cards are widely used methods to execute financial scams. Customers open their financial accounts on the behalf of business organizations or for personal loans. A strong and well-integrated transaction monitoring process can undermine criminal plans to impact financial setup. Every bank account holder should be passed through tight scrutiny to better know your customer transaction KYT compliance mechanism. CNBC reveals that during the pandemic, card payment scam loss reached a record high, $28.65 billion worldwide. These are undoubtedly worrisome statistics.
2. Cross Border Multi-Transactions
A huge scale of the amount is transfer to different other countries without inquiring about the purpose of the transaction. There is a great risk for money laundering, financing terrorism or any other illicit activity across the border in form of unmonitored digital or cash transactions. Financial businesses are looking for strong know-your-customer transaction laws and programs. Criminals use weak financing channels for transactions to avoid compliance with regulations. UNODC reveals that illicit money is launder to cross-border states for the smuggling of migrants and larger profits are earned in this way. To obstruct illegal money transfers, transaction monitoring in money laundering is a mandatory procedure.
3. Transactions in Form of Remittances
Another attribute is measure in form of remittances. Criminals transact black money through remittance channels. It makes the profile of genuine customers also suspicious in this way. Hawala and Hundi are the most used channels for prohibited remittances. FATF reveals that almost 25-50% better exchange rates are provided by informal transfer channels like Hawala or Hundi etc. This attracts the criminals to escape from fraud transaction monitoring and weak regulatory authorities are held responsible for it to some certain. It strengthens the argument that there is a dire need to know your customer transaction using machine learning algorithms without further delay.
KYB compliance to meet KYT requirements
Privatization is at its high rate. The corporate sector is excelling day by day and the need to know your customer business is also increasing in this way. It is highly monitor to check your business entities. Whether genuine or not valid. The partnerships and data security list are also require to be regularize without leaving space for criminal activities. Know your business KYT is requisite to meet know your customer transaction KYT compliance procedures for data security and protection of the financial system. Relevant authorities and top management can check customer transactions, and proofing business documents using a digital program. If anti-money laundering regulations are implement properly, the risk of financial theft can be effectively reduce.
Benefits of Know Your Customer Transaction
There are the following benefits of effective monitoring of customer transactions.
- Reduction in cash/card-base fraud
- Secure and uninterrupted financial growth
- Cross-border illegal money transfers can be reduce
- Fair remittances are promise by valid financial channels
Final Thoughts
The unexpect climb in the cashless payments graph is worth noticing. Global financial bodies are now operating in a digital world where online businesses and financing are exercised. The rising financial frauds indicate the fragility of the system where know your customer transaction is either not properly intact or not install yet. Customer satisfactory experience with mobile banking is becoming very common nowadays. Consistency in the business world with digital financing requires diligent monitoring of know your customer transaction to combat digitally executed financial crimes.
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