KYC and Anti-Money-Laundering

Know Your Customer (KYC) refers to the process by which a financial institution verifies the identity, background and other characteristics of a prospective or current customer’s identity and source of wealth. KYC regulations enable commercial banks to better know and understand their clients as well as their financial operations, enabling them to manage risks more responsibly. Managing these risks avoids the penetration of money laundering schemes in Financial Institutions in a process entitled anti-money-laundering (AML). 

Challenge 

The banking industry in general, faces numerous challenges related to customer onboarding, due diligence, and regulatory compliance. In this context, a state-of-the-art KYC system is essential to meet and anticipate the specific needs and requirements of the Luxembourgish banking industry. 

In order to operate within a complex regulatory landscape that includes stringent anti-money laundering (AML) and counter-terrorism financing (CTF) regulations, a robust KYC system guaranties compliance by ensuring the thorough verification and validation of customer identities, beneficial ownership, and sources of funds. It also allows banks to stay up-to-date with evolving regulatory requirements and avoid penalties for non-compliance, all the while ensuring data integrity, confidentiality, and compliance with data protection regulations, such as the General Data Protection Regulation (GDPR).

KYC processes are designed to assess and, therefore mitigate, the risk associated with each customer, transaction, or business relationship. Enhanced due diligence processes, including screening against sanctions lists and politically exposed individuals databases, help banks make informed decisions regarding customer acceptance, ongoing monitoring, and risk-based approach.

Due to the fact that Luxembourg’s banking industry has a significant presence of international banks and cross-border transactions, which means that since the information was scattered across numerous systems and platforms, there was an increasing difficulty in accessing such information in an efficient manner.

Solution

A state-of-the-art KYC system enables seamless integration and collaboration with international jurisdictions, correspondent banks, and regulatory authorities by facilitating information sharing, standardized processes, and the exchange of due diligence documentation, ensuring smoother cross-border operations and compliance with international standards. By using technologies like machine learning (ML), document verification, data extraction, risk scoring, and anomaly detection, the time and effort required for KYC processes can be significantly reduced.

TechRivo’s solution was therefore divided into two phases:

      • Phase I: there was an extensive business analysis of our partner’s software solution and the KYC ecosystem. This phase was critical for identifying the needs and challenges specific to the Luxembourgish banking industry and translating them into requirements for the new system.
      • Phase II: Development of a Know Your Customer (KYC) system, that would match the requirements of the Luxembourgish banking industry enhancing the company with state-of-the-art Anti Money Laundering capabilities. The application backend was built in JAVA in a microservices architecture that used several cutting-edge Artificial Intelligence tools with OCR and NLP as services to provide useful information about the Banks’ customers.

    Results 

    The TechRivo team delivered a state-of-the-art KYC/AML system that safely complies with current directives, EU regulations, and needs of the international Banking industry, also allowing its integration with the Luxembourgish Banking systems.

    Currently, the system is successfully being used in monitoring customers from several jurisdictions. The system is continuously being enhanced with new jurisdictions, being deployed to amplify the company’s market coverage.

    Why TechRivo?

    The TechRivo team relied on their extensive experience in the development of KYC systems and worked closely with our partner in order to do the business analysis and the custom development of the system. This initial business relationship has evolved into a strong partnership, providing the best engineers to ensure that our partner’s software solutions are always operating at their maximum capacity and evolving at the market’s challenging needs.