COVID-19 has brought a whirlwind of changes along with it in all aspects of life. With discouraged interpersonal interactions and imposed restrictions, we were left with no choice but to resort to the virtual way of living. This imposition meant doing the simplest things online, from groceries to classes; everything has now been made available in a digital mode. In such unprecedented times, the intensification of rules and regulations was of the essence. Therefore, ever since the pandemic started, there has been a heightened tightening of regulations regarding KYC. As a result of more people using digital methods to conduct transactions and purchases, a higher chance of financial cybercrimes is more than predictable.
Artificial Intelligence-powered tools and technologies facilitate the facial recognition of customers. Features such as biometric technologies and facial recognition help enhance the quality of video KYC verification. Process areas such as video KYC verification aim to assess gaps in a customer’s profile. After procedures such as video KYC verification are completed, the results are verified using documents submitted by the customer.
Video Know Your Customer and the Indian Regulatory Framework
Due to the significant shifts in the way online transactions were taking place, the Indian Regulatory infrastructure had to be updated to cater to the need of the hour. As a result, banks, financial institutions, and FinTechs had to revamp their rules and regulations pertaining to customer verifications. Since everything has turned into a digital alternative, KYC processes have replaced paper-based documentation. The alternative for this was video call verification systems. These amendments in the KYC regulations were proposed and imposed by the Reserve Bank of India, popularly known as the RBI, since India’s regulatory banking authority. All businesses and customers are expected to comply with these regulations to safeguard themselves and others from the threats of financial crimes.
The Prevention of money laundering rule, as set up in 2005, makes for an integral part of the KYC process when the digital onboarding of customers takes place. This regulation makes it compulsory for customers to complete the video verification to enable the digitisation and automation of KYC norms, as stated by the Reserve Bank of India.
Amendments Made by the RBI
To further elaborate on the kinds of changes made to the KYC system, the following are amendments that the Reserve Bank of India implemented –
- Building relationships with the customer wherein it is account-based. Furthermore, live video-based identification processes must be ensured for a successful Reporting Entity.
- Customers must submit their Permanent Account Number (PAN Card) to capture a clear picture for further verification.
- The customer’s live location must be captured to ensure that they are physically present in India and aligned with the documents furnished.
- Reporting Entities must take responsibility for recording the timestamps and dates of videos and securely storing the video itself.
- Protection of activity logs used during the verification process is integral.
- Banks must adequately maintain the details of BCs helping out customers to ensure responsibility and accountability.
- Reporting Entities must use the latest and most high-tech equipment to carry out these processes. They include Artificial Intelligence, facial recognition, and other technologies to safeguard integrity and identity theft issues.
Although regulatory changes made to the KYC process resulted from the pandemic, they are proving to be highly beneficial. It makes the digital onboarding process much smoother and makes the procedure safer in the long run.