Customer Due Diligence for Banks: A Smooth Journey From KYC to KYB

A banking profile has to have some features that protect it from fraud and hacking attempts from all over the world. If customers look at fraud and regulations related to it, they will notice that it is a complicated matter. But the financial institutions have to spend a lot of money on protecting their systems and safeguarding the financial property of all the clients all over the world. 

Moreover, the factors that boost the risk in the sector are money laundering, terrorism associated with money, hacking, and other scamming attempts. There are regulatory powers that want to work on this problem and discourage scammers from future attempts. For this purpose, the US regulatory body passed a banking act. When businesses look at the purpose behind the law, they will notice that it wants to discourage the use of money laundering and illegal transactions of drugs that can ruin the image of the organization if found out. 

The law will hinder the illicit activities of money launderers, money terrorists, and other kinds of criminals. It is the best effort to stop their missions from wreaking havoc in the world. 

How is Customer Due Diligence-CDD and Know Your Customer-KYC related? 

When financial institutions further analyze the banking act, it will become obvious that it was a sign of patriotism after the horrific incident of 9/11. CDD was an encouraging step for financial institutions. In this way, CDD and KYC are interlinked with each other. 

A bigger objective behind AML KYC regulations was to stop the overflow of huge amounts of money to terrorist organizations. The inspection is important because it highlights in the results that the customers are who they say they are. It means that they have the practice to walk their talk. Therefore, the rules and regulations are critical for complying with the Customer due diligence in banking (CDD) and know your customer (KYC) laws. Whenever there is a change in USA regulations, the change impacts other financial institutions all over the world. 

For protecting the identity of financial departments, they used different measures and controls. Some of the major controls are in the following. 

  • Creating a Customer Identification Program (CIP) that is deep and thorough.
  • Authenticating clients in comparison with the given Law departments.
  • Using the statistical information for predicting the behavior of clients and perpetrators both. 
  • Continuous monitoring of exchange behaviors of suspicious clients. 

In reality, the above points are the critical protection mechanism against financial terrorism and other related criminal activities. Nevertheless, in the June of 2016, a flaw was found in KYC due diligence rules and regulations. 

Initially, the banking institutions worked differently. It means that the clients weren’t asked to certify their identities. Historically, a huge scandal revealed that even the certified businesses were involved in protecting the identity of their bad customers and they were executing illicit actions for them. Therefore, the higher authorities took a step further and introduced KYB. 

What Is The Significance of KYC Due diligence Verifications?

For financial institutes to work efficiently, the KYC checks have CDD regulations. Due to this new step, financial organizations now employ highly critical authentication processes. According to KYB regulations, businesses are required to expose money laundering activities and other illegal behaviors. 

Organizations should check the identity of their client with a due diligence process and verify what kind of trade they are involved in to see whether it is legal or illegal. Apart from that, they also need to see if it complies with the local and international standards that they claim to be working on. There were some changes made in AMLD5 and AMLD6.

How Can The Latest Technology Help With Figuring Out The Latest Solution?

In 2008, there was a financial crisis, and the latest rules and regulations helped in decreasing the burden by decreasing the cost of operations and tackling the risk associated with financial fraud. When businesses analyze the core of the technology, they will notice the application of identity authentication and KYC verification. It is necessary for financial organizations to screen, and regulate the clients’ information. 

In today’s world, all organizations and businesses must move faster ad stay ahead of hackers and fraudsters. They should design a thorough approach that is in accordance with global risk mitigation standards. So that firms can protect themselves from hacking and scam attempts from all over the world. 


Therefore, the future is bright and it is expected that the financial companies will adopt. The fresh technology (enhanced due diligence AML) for upgrading their routine functions. According to the updates in rules and regulations, the simultaneous execution of KYC and KYB will facilitate the CDD process that will require organizations to be compliant with them.