Financial Crime World

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Cryptocurrency Trading Apps Embracing Video KYC for Enhanced Customer Onboarding

In an effort to adapt to customer preferences and comply with regulatory requirements, financial institutions are increasingly leveraging digital onboarding solutions, including video KYC (video identification), biometrics, and online channels.

The Need for Change

The cryptocurrency trading industry is facing growing scrutiny over anti-money laundering (AML) and know-your-customer (KYC) regulations. With the rise of decentralized finance (DeFi) platforms, regulators are urging financial institutions to implement robust KYC processes to prevent money laundering and terrorist financing.

European Anti-Money Laundering Directive

In Europe, the fourth AML directive (AMLD4) entered into force in June 2017, requiring financial entities to improve customer understanding, conduct stricter Customer Due Diligence (CDD), and control customer identity. The enhanced fifth AML directive (AMLD5) took effect on January 10, 2020, introducing new challenges for financial institutions.

KYC Process Flow

The KYC policy is a mandatory framework for banks and financial institutions to ensure customer identification. It involves verifying a customer’s identity through documents, including national ID documents, and advanced document verification software.

From Paper-Based Checks to Digital Verification

While some financial institutions still rely on paper-based checks with KYC forms, others are adopting digital processes that involve verifying identity documents and biometric checks such as facial or fingerprint recognition. This enables banks to streamline the customer onboarding process, conduct due diligence, and review for Politically Exposed Persons (PEPs).

Innovative Approaches Welcome

Regulatory bodies, including the Federal Reserve in the US, are encouraging financial institutions to experiment with artificial intelligence and digital identity technologies. The European Supervisory Authorities have also promoted new solutions to address specific compliance challenges.

Gemalto’s ID Verification Solution

Gemalto, a leading provider of ID verification solutions, offers a system that helps banks comply with KYC regulations while minimizing fraud risk. The solution provides:

  • Digital capture of customer information for instant auto-fill in enterprise data systems
  • Multichannel identity document verification with adaptable security levels
  • Biometric authentication options
  • Risk assessment through review of PEPs, sanctions, or watchlists

Conclusion

As the cryptocurrency trading industry continues to evolve, financial institutions must adapt to changing regulatory requirements and customer preferences. By embracing digital onboarding solutions, including video KYC and biometrics, they can ensure a smooth customer experience while minimizing fraud risk.