Role of kyc verification in preventing money laundering

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Assalamualaikum steemians

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How are you? Hope so everyone would be safe and sound just like me as I am also safe Alhamdulillah....

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KYC verification is not something new term for all of us but maybe it is new to know that how does playing it's role in preventing money laundering so it is a way of knowing about its importance.

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KYC is basically know your customers in it's full abbreviation and it is a process that is used in financial institution for the verification of customers or participants. During the process of knowing your customer they ask from some of the personal details and data like different documentation and some personal information about a person for ensuring legitimacy of funds that are being transferred and not involved in activities that are illegal as I am talking about as an example money laundering.

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There are multiple reasons that I can explain due to which know your customer verification is one of the most significant step in fighting against money laundering.

• KYC process first of all is a way of his establishment of Identity of individuals or different entities that are showing their participation in financial transactions so went through the process of knowing your customer the obtain the information like name address date of birth, identification documents and sometime face auth then they remains ensure that the person whom they want to deal with is real.

In this way transparency and accountability system become more strong and don't let any malicious activity to happen.

• KYC verification is also important in prevention of money laundering because it allows different Financial institutions to approach different risk that are linked with particular transaction or a particular customer so by vigilant conducting due diligence and by the analyzation of the background of customer financial institutes feel free to know about any suspicious activities that are going on and this special activities could be indication of significant money laundering activities.

Now you can understand that this is risk based approach that permits institute to allocate there resources in effective way and the focus on higher risk transactions or customers.

• KYC verification also place one of the most significant role while reporting any transaction which is looking suspicious so by law Financial institutions are required for reporting any kind of transaction in which day is any suspection of money laundering or which is suspected to be linked with money laundering.

Institute can identify any kind of suspicious transaction if there is an implementation of proper KYC process and if reporting obligations are going to fulfill.

Now this reporting is very helpful in tracking the authorities and in investigating activities which are related to money laundering so it contributes to overall effects in combating the financial crimes.

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• KYC verification is acting like a deterrent for different individuals that are involved in activities like money laundering. Now you can understand that how criminals can be discovered from any kind of attempt to use banking system for illegal activities when financial institutes conduct a proper checking balance by monitoring transactions.

In this way high level of accountability produces which reduce probabilities for money laundering to happen.

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This is very significant to understand that knowing your customer verification is not process of one time. This is because Financial institute always have a need to periodically update and review the information of customers so it gives additional layer of accuracy and relevance as well as security for customer so if there is any change in the behaviour of customer is detected then it increase suspiciousness of money laundering.

Now in conclusion I can say that how is KYC verification significant in preventing different fraudlent activities like money laundering so in this way now you can understand the establishment of individuals identity and the approach of multiple risks associated with them which permits ultimately for reporting transactions if there is any suspiciousness present in them and over all its a way of just providing transparency and accountability in financial system. By the implementation of knowing your customer procedures Financial institute contribute to collective efforts for combating with the financial crimes. So that was all about my explanation in briefly about this topic hope you guys understand it.

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Thanks

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