The applications of AI in KYC processes have revolutionized the efficiency and accuracy of customer verifications, reducing the risk of fraud and ensuring more rigorous compliance with regulatory standards.
The use of artificial intelligence (AI) in AML and KYC compliances enables institutions to efficiently onboard customers after verification and perform scenarios and profile-based monitoring of complex transactions, to identify suspicious activities that may involve financial crimes such as money laundering and terrorist financing.
AI in KYC may facilitate customer onboarding by applying optical character recognition (OCR). Therefore, instead of manual scanning of customer documents, institutions may adopt an OCR-based document scanning process such as:
The potential or existing customer begins the identification check by taking a snapshot of their identification card and upload on relevant data portal.
The AI based software retrieves customer uploaded data, including photos and signatures, and turns them into a computer-readable file format.
The potential customer will then see the data extracted automatically and need to validate the data.
The customer data is also processed by the AI based program, which compares it to the customer uploaded identification data or information. If data is matched, the customer onboarding process completes.
The Applications of AI in KYC
Technological developments in AI and biometric technology have revolutionized the fight against fraud and customer identity theft. There are two main scenarios that criminals or bad actors may commit fraud.
One of the most common cases of identity theft occurs when a fraudster snips an identification or ID document. Let us call this the scenario of a “stolen wallet”.
The fraudster takes the customer ID, goes onto social media platform and searches for the name of the customer or ID owner. Fraudster then downloads a photo of the owner and tries to open a fake account or access the owner’s bank account online. When the fraudster reaches the level of identity proofing, he or she shows the stolen identification document to pass the digital document authentication step, and then they present the social media downloaded photo for the selfie-to-document match process step.
However, the fraudster’s attempt may be identified and prevented. The advancement in biometric and AI technologies have taken the scrutiny and security of customer data to the next level. The AI based software may automatically detect and reject presentation attacks including photos from phone or computer screens, print-outs and photographs, masks, statues, face busts, and deep-fakes.
Not only has biometric technologies and AI elevated the detection process, but it has also made the process easier for customers. The earlier generation of facial detection technology, known as “active liveness detection”, relied on the customer’s movements in response to prompts such as blinking, smiling, or turning their head right or left. The passive liveness detection is considered as much more efficient.
Most of the vendors claim to have passive liveness, yet the end customer still has to zoom the phone in and out to prove liveness. ID liveness detection is a snap-and-go technology. The customer may not have to send the image up to a server to determine liveness. Instead, the process may be done in a split second right from the customer’s phone.
The use of AI and ML may reduce the risks that are associated with false identities. The AI enabled biometric technology enable identification of customer identity theft, using a comprehensive AI based KYC technology that automatically predict the true identity against shared customer document. AI based biometric perform analysis of four categories of biometrics that are fingerprint, iris, face, and customer or user voice that enable the prevention of onboarding criminals and reduction of money laundering and terrorist financing activities in the institution.
Final Thoughts
Artificial intelligence (AI) has profoundly transformed Anti-Money Laundering (AML) and Know Your Customer (KYC) compliance procedures. By employing AI-driven technologies like optical character recognition (OCR) for document scanning, institutions can swiftly onboard customers, ensuring the authenticity of their data. Advanced biometric technologies, in conjunction with AI, have become paramount in detecting and preventing fraud or identity theft, especially in scenarios where criminals utilize stolen identification documents.
These advancements not only optimize security measures, ensuring the prevention of presentation attacks such as deep-fakes or print-outs but also enhance user experience. From simplifying verification processes like “snap-and-go” liveness detection to comprehensive identity checks across multiple biometric categories, AI strengthens institutions’ defenses against financial crimes, ensuring a safer, more secure transaction environment for all parties involved.
