Anti-Money Laundering (AML) and terrorism prevention are key questions in modern finance. Most such policies are determined on a governmental or even international level. A company’s failure to comply with AML regulations may result in hefty fines and loss of credibility. In order to prevent such incidents the banks form their customer relationship policies based on Know Your Customer (KYC) principles.
KYC is based on client personal data collection and it allows to:
- Confirm the identity of the client
- Perform customer due diligence
- Identify a fraudster or a politically exposed person
- Predict patterns of customer operations
- Monitor client activities
The implementation of KYC policies is not easy. The tasks include protecting client personal data, constant monitoring and emergency predicting. Such duties require financial, logical and, primarily, human resources.
It used to be that in order for the bank to confirm the identity of a client, the client would need to physically come to the branch. As the number of bank customers grows and the AML policies get tougher, the bank departments get more crowded. To redistribute the stream of customers banks find alternatives for distanced client authentication.
METHODS OF CUSTOMER IDENTIFICATION
The most precise method to confirm a person’s identity is biometrics. Fingerprint, face or eye retina recognition are among more common means of biometric identification.
For financial institutions, the most convenient way of biometric authentication is face recognition – introducing the technology doesn’t require additional technical means. ATMs, mobile devices and bank offices are equipped with digital cameras. Installing facial recognition software simply leads to enabling a pre-established system.
FACIAL RECOGNITION USED IN PRACTICE
The possibilities of personal identification technology application vary significantly. Two factor authentication allows conducting more everyday bank operations remotely, personalize the approach to customers and prevent fraud.
EVERYDAY OPERATIONS ON SELF-SERVICE TERMINALS
Cash withdrawal using an ATM is a casual thing in the eyes of a modern consumer. Yet to withdraw significant amounts of money the bank client should still undergo a number of security checks. The AML regulations directly affect the amount of cash that can be withdrawn without additional personal identification. Two factor authentication helps to confirm the identity of the client remotely, thus allowing for large financial operations to be processed using self-service.
On the other hand, biometric identification solves the issue of illegitimate use of bank cards. According to law, only the card owner or an authorized representative may use the card. ATM user authentication using both a PIN code and facial recognition will prevent illegitimate operations from happening. Should it be detected that multiple people are trying to use the same card, the bank account may be frozen until the circumstances are confirmed.
Anti-money laundering policies have affected currency exchange as well. AML restricts the client in exchanging large amounts of currency. An exchange terminal equipped with face recognition will not process currency exchange requests from the same person once the limit is reached. As a result, the client will have to visit a bank branch and present supportive documents.
PERSONALIZED APPROACH TO SECURITY
The aim of AML policy is to gradually develop a universal infrastructure to exchange information about certain individuals. The two groups of interest being blacklisted people and politically exposed persons.
The reasoning behind someone being put on a blacklist may vary. As consequence, response strategies may also vary depending on the status of the person. Detecting a convicted criminal would lead to immediate notification of security services. Then again, an indebted client may face a scenario where, for example, a terminal would not process their request to take out a new loan.
A special approach is also needed when dealing with the so-called Politically Exposed People (PEP). In the context of AML, people who take up significant political positions require additional supervision to prevent corruption. The bank’s biometric solution integrated with the customer database can confirm that the PEP is operating their personal assets that were acquired legally. An in-depth approach to servicing such customers guarantees that appropriate measures be immediately taken should atypical account behavior be noticed.
Thus, biometrics is a reliable way for financial institutions to ensure AML and KYC compliance. Face recognition technologies are the simplest to adapt into an already-established infrastructure of a bank.
Daniel Fukson
Head of Business Support of BS/2, part of Penki Kontinentai Group
