Cybersecurity fraud is something that many businesses need to worry about right now but this was not taken seriously until penalties and fees for deficiencies and violations became really high. Ever since the year 2009, over $350 billion were paid in fines due to money laundering offenses. Because of this, it is very important that you choose a very good KYC service provider. This is possible only after a proper evaluation, which should always include a few vital elements.
Process Documentation And Risk Assessment
When looking at terrorist financing and money laundering, it is vital that you go through a really thorough assessment for the entire business. You basically need to be sure that you fully understand the risks that you are exposed to. The provider has to help you with this.
Remember that you are completely responsible for the KYC service provider that you choose. If something goes wrong, you are the one that pays the bill.
Always evaluate providers by asking questions about:
- Data Sources
FinTech startups are naturally global companies. This automatically means that KYC and AML processes have to be very complex since they need to follow legislation in different countries. The selected providers need direct access to all the relevant local business registers. This is particularly important when verification and disclosure of beneficial owners are necessary.
- Supported Languages
This is something that is oftentimes overlooked but can turn out to be pretty difficult to deal with as you serve customers coming from different countries. The smaller vendors, as an example, just cover the documents that use the Latin alphabet. This might not be enough and you might need to also deal with documents in Chinese, Arabic, or Cyrillic.
- Third-Party Data Sources
Many vendors now use third party data software and they offer programs to clients. This is important because it enhances the list of solutions offered. The problem is that when the used database is incomplete, you can be faced with potential errors. Always evaluate data quality for all sources used. Simply ask for a list of all utilized databases. When the KYC provider created its own database, ask about data sources used.
- Data Security
Data privacy and security concerns appear together with personal data accumulation. In order to execute KYC checks, vendors have to access personal data and GDPR might apply. Always ask questions about where data is stored and for how long this process happens. Then, see who has access to the data and fully understand why this is the case.
- Vendor Liability
Last but not least, there are KYC providers that focus on due diligence, authentication, and verification. Other providers do more and they offer professional advice or suggestions. This can be something that is important when you do not have knowledge about the law and about your responsibilities.
Ask if the provider covers losses in the event it makes a mistake. Many providers reduce liability but there are usually some guarantees offered. Always be aware of them.
On the whole, KYC requirements will not disappear and you need to choose a provider that can help you.