A lot of significant corporations around the globe were willing to pay billions of dollars in fines for failing to implement effective identity verification systems. This is one of the primary reasons why the financial sector demands customer and investor verification. So, how does the investor identification process work? And why do businesses need to know their customer’s identities? Let’s get started.
What is KYI?
KYI (Know Your Investor), which is similar to KYC (Know Your Customer), is a verification procedure that occurs when a shareholder, vendor, or investor is preparing to engage with an organization for financial purposes. KYI and KYC are components of the AML (anti-money laundering) requirement set. All Anti-money laundering (AML) standards and regulations are in place to protect clients from any kind of money laundering o identity theft. This contributes to the reduction of risk, financial fraud, and terrorist or criminal funding.
However, KYI is used for more than just preventing fraudulent actions. it is also used to manage risks and gain a better understanding of investor behavior. However, while verifying the investors’ identity may appear to be a time-consuming task, it is also an excellent opportunity to prevent fraud-related offenses. KYI is now done digitally, and the process appears to be simple, requiring only the submission of a scanned image of the user’s passport or ID card, as well as proof of address and other documents required by regulatory organizations.
Backend Process of KYI:
For investor identification, investors supply pictures and documents that prove their address, and sensitive information about themselves.
Investor Due Diligence:
Investor due diligence is the process by which the system searches for the individual in local or international blacklist databases and it does a thorough background check on the person seeking investor verification solution.
Businesses monitor their investor’s financial activities on regular basis, looking for any irrelevant or unexpected change in the investor’s financial behavior.
Significance of KYI
KYI is very important because it helps firms ensure that they do not face any illegal or unethical activity. It is a standard requirement for businesses and organizations all around the globe, and it helps businesses in reducing the risks while also preventing companies to be heavily fined for not compliant with KYI AML regulations.
Advantages of Verifying Your Investor
The ultimate benefit of this process for investors is that it ensures the security of their data. Businesses can ensure the confidentiality of investors’ personal information and defend them against identity fraud once the verification process is complete.
Investors who submit their critical data with investor verification service providers can easily recover their accounts. if a client forgets their password or has difficulty signing in his account will be recover in next to no time. All of the data is online which makes it simple and much faster to join up, and it is way faster than doing everything manually.
No Legal Issue:
Investor verification solution providers must adhere to certain requirements to operate in those jurisdictions as a financial company. By implementing KYI, these solution providers follow worldwide laws and regulations. investing the company’s cash, and delivering great benefits to their client becomes the company’s responsibility. Users do not need to be concerned about legal issues after completing the KYI process. A strong KYI verification system prevents fraud activities and allows users to relax and not worry about getting into trouble. Document verification service is also use for this purpose.
KYC AML Regulations for Peer to Peer
The European Capital Markets Union, a branch of the European Council, sets the laws for all European financial institutions that also include peer-to-peer lending channels. Anti Money Laundering(AML) laws are possibly the most important rules and regulations when it comes to identity authentication. These laws have stopped criminals around the globe from laundering money and doing illegal activities. Although AML standards are different in every country, all financial institutions in the EU are require to follow European Law. This is because the EU wants to stop terror funding and money laundering. These are refer to as AMLDs (Anti-Money Laundering Directives), and they are evaluate regularly.
The 5AMLD took effect in January 2020, requiring financial institutions to do more strict customer due diligence and gain a better understanding of their activities. 6AMLD went into effect in June 2021 with the express intention of filling all the loopholes and punishing both those who help fraudsters and the fraudsters themselves. All of these regulations are require to protect user accounts, personal information, and P2P investment opportunities.
Even though it appears uncomfortable, verifying a person’s identity is vital to save their data and reduce the number of illicit activities globally. It helps businesses and the financial industry stay away from criminal operations while also opening up new investment prospects for investors. Because they are now accredit and verified persons, businesses will be more open to the concept of working with them.