KYC in Electronic Payments: What to Look Out for, How to Comply and Keep the Business Running

Setting up bank accounts, opening e-wallets, before completing any transactions users are asked to confirm their identity by undergoing KYC.

Businesses are obliged by law to verify clients before they are given access to perform monetary transactions of any amount. Some payment service providers use transaction limits and velocity checks to monitor eWallet account transactions. As an example: a shopper has to register with a provider, before they’re allowed to use the service of an eWallet.

Security & information exposure risks

One of the regulator demands is for companies to keep data/information encrypted and stored securely. When eWallet accounts are created the platform demands a username, passwords and email/mobile phone verification. Photos of a chosen documents, liveness/operator call/selfie with the document are normally produced and stored for reference during the KYC procedure. That is a lot of fraud-prone information and rich content that make APMs and particularly eWallets a frequent target.

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User-friendly from onboarding to electronic payment transactions

As the first encounter with your company the client gets is through onboarding, it is crucial to give the best client experience, swift and safe. Some of the aspects KYC in electronic payments can improve on are:

• Customised searches that adhere to businesses needs and reduce false positives more effectively;
• Ongoing customer screening of existing customers and automated onboarding of the new ones;
• Wide databases of fraudulent patterns to help in monitoring and instant disclosure of malicious users in real time, triggering alerts on unusual payments;
• Seamless compliance with all regulatory requirements that doesn’t downgrade on customer experience.

Securing the trust of partner banks

Reputation of the company dictates their acceptance on the business arene. For banks to trust the business with valuable access to funds, they have to be reassured of company’s compliance with global regulations and proper measures applied to protect both parties, including the market, that stands to prevent money laundering. Here are some of the goals for firms to reach KYC compliance for payments:

• Transaction monitoring and payments screening aligned with local and global regulations;
• Anti-Money Laundering solution, compliant to the electronic payments guidelines;
• Updated databases of sanctions, adverse media, blocklists and PEPs.

The compliance changes that MLD5 will bring to the table 

The 5th Anti-Money Laundering Directive, that EU member states will have to implement into their practice by January 10, 2020, tightens the anti-money laundering and terrorist financing regulations towards anonymous issuing of electronic money products:

• The e-money sum that will be allowed to be issued anonymously is reduced from 250 euros to 150 euros;
• The cash redemption amount will have to be limited by 50 euros;
• To process payments acquirers can only use anonymous prepaid cards from a third country with similar restrictions.

Big changes for Europe, except for Germany, where legislators have already set the limit far below the new European legal amount limits — 100 euros (max issued sum) and 20 euros (cash redemption amount).

The rules for KYC compliance for electronic payments will be greatly changed by the beginning of 2020 when more transactions will need to be properly monitored and regulated. For that, while keeping up with new rules and regulations companies have be sure that it doesn’t affect their users, providing smooth and engaging client onboarding with a sophisticated KYC procedure.