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KYC Technology

Recap

We are going to learn what KYC technology. The main reason we are covering this is due to the fact that I have previously coved topics related to this i.e. Blockchain and finetechchallenge  and KYC fits in well.

To recapitulate, Blockchain is a distributed ledger where information (assets) is time ordered and stored with digital signatures (information in a block is hashed and encrypted using private key).

 The primary objective of Blockchain based applications is disintermediation – doing away with entity in the middle, thereby increasing speed to deliver, enhancing trust, achieving delivery Vs payment in all transactions, reducing cost per transaction, giving better customer experience and improved bottom line.


KYC technology

To begin with KYC means Know Your Customer process. KYC policies incorporating the following four key elements:
  •   Customer Policy;   
  • Customer Identification Procedures; 
  • Monitoring of Transactions
  • Risk management.
 There are three distinct phases of customer life cycle. Client onboarding, Maintenance of Relationship and Off-boarding. The diagram below (by Rajesh Kumar) gives a glimpse of activities within these phases.

For the purposes of a KYC policy, a Customer/user may be defined as:
  •  a person or entity that maintains an account and/or has a business relationship with the bank;
  • one on whose behalf the account is maintained (i.e. the beneficial owner);
  • beneficiaries of transactions conducted by professional intermediaries such as stockbrokers, Chartered Accountants, or solicitors, as permitted under the law; or
  •  Any person or entity connected with a financial transaction which can pose significant reputational or other risks to the bank, for example, a wire transfer or issue of a high-value demand draft as a single transaction.


This three phases are key elements in banking and financial sectors. To begin with the client onboarding process is a key process as this is the first step in getting all these documentation and high level of integrity is required.

The monitoring phase involves an ongoing monitoring of a customer’s previous and current transactions , screening of personal information so as to create a pattern which can be monitored by a smart contract app (embedded in blockchain) and will raise alerts in case of irregular tractions which might be fraudulent .

KYC &blockchain

In relation to blockchain a customer uploads all info into a blochchain and gives the bank permission to view the documentation for verification. If all documentation is correct the bank sigh them on the blockchain.

If same customer wants to sigh to another bank basically bank B can view the sighed documentation by bank A and processed without redoing all the paper work.

As a side benefit this creates a permanent record of a permissions grant and will serve as a deterrent for the information leaks. This is sharp contrast with how we fill out numerous forms today and later do not have a trace of who we shared our sensitive information with.


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