Blockchain Must be Applied to KYC and Anti-Money Laundering

Every organization loves to know who their customers are and how they can improve their services to provide them with better functionalities.

Traditional KYC practices are rigorous and time-consuming. The use of blockchain in the KYC process holds the potential to change the way banks and fintechs undertake their background check.

Knowing who they are trading with is one of the most critical jobs for financial organizations nowadays. Banks and other financial institutions emphasize on KYC process as this process provides a sense of security that their business is safe from fraud and illicit financial transactions. Organizations often take numerous days when it comes to completing their KYC process. This process is not only time consuming but also costs the company a hefty sum. The blockchain is technology that was introduced in the financial sector along with the cryptocurrency bitcoin. Blockchain is a technology that focuses on decentralizing the central authority and increasing trust among people who need to make a transaction of any sort with each other. Blockchain’s security feature is one of the reasons why it has been renowned for a while now. With blockchain’s increasing popularity, banks and other financial sectors are finding reasons to implement blockchain within their operating systems and improve the organization’s performance. KYC on blockchain seems to be just the application that businesses require to get rid of the rigorous process of on-boarding a customer and avoiding money laundering.

How Does KYC on Blockchain Work?

As blockchain technology consists of distributed blockchain ledgers, KYC processes can benefit a lot from the same. With distributed ledgers, a person’s KYC process can be paced up as everyone existing on the blockchain network can affirm the new entrant’s identity. Digital identities are applicable in such situations where users can use their digital identities which can drastically reduce the time consumed by companies in their KYC process and start making benefits for the organization to grow. Blockchain technology’s security is a reason blockchain is renowned globally. Customers can be ensured that their information is secured on an organization’s ledger that uses cryptography to provide enhanced security. Every new user on-boarding the blockchain network becomes visible on the network for everyone else to view.

How Can AML be Done Using KYC on Blockchain?

Money laundering is one of the primary problems faced by the banking institutions and other fintech companies. With the KYC process being enormously time consuming at times, businesses wanted to find ways that can help them in keeping up with the AML regulations. One of the other reasons that money laundering needed to stop was to curb terrorism and drug trafficking that is fuelling with the help of money transferred from unethical transactions.

On completing the KYC process on blockchain, financial organizations can rest assured as the information entered on the ledgers cannot be edited but only updated. This information that has been submitted by the user is available for everyone on the network to view because of blockchain’s feature of transparency.

By using this technology, companies can rest assured that their KYC processes are completing as soon as possible and their AML regulations remain up to the mark. After knowing about why blockchain should be used in KYC and anti-money laundering, companies and authorities should now try to know about how they can leverage the same in their organizations and prevent money laundering and fastening their KYC process.