Online KYC Verification: Helping Real Estate Prevent Financial Fraud

Online KYC Verification
KYC - Know Your Customer acronym, on notepad and office accessories on yellow desk

The real estate industry holds significant importance in the global horizon of the economy. As of 2021, it was worth $3.7 Trillion worldwide. However, this significant amount of capital attracts fraudsters and other fiscal criminals involved in money laundering and financial terrorism. Furthermore, with the rising popularity of this rapidly expanding industry, leniency in customer scrutiny can lead to a rise in financial scams and money laundering. 

That’s where online KYC verification comes in. In this article, we’ll explore the significance of this advanced methodology to curb money laundering in the real estate industry.

Online KYC Verification in the Real Estate Sector

Online KYC verification means the online authentication of customers during the onboarding procedures. The process involves obtaining identity documents to confirm the genuineness of clients as legitimate customers holding legal identities. However, in the context of the real estate sector, the online KYC verification method is essential due to the huge threat of money laundering and other illegal financial crimes. 

Financial criminals often hide their illegal money by investing in real estate. Whether corrupt politicians, business capitalists, or other influential characters in the world, they often launder their black money abroad and purchase expensive properties to hide the source of their income.

Furthermore, the fraudsters consider the real estate sector a perfect medium for money laundering as it is somewhat unknown. Financial criminals buy through shell firms. Hence, the actual source of illegal capital still needs to be traced.  Real estate also allows individuals to purchase property without any strict monitoring. That’s why criminals can launder millions of dollars every year. In fact, only in the US, over 2.3 billion USD were laundered via the real estate sector. Therefore, online KYC verification is crucial for real estate companies to build trust in the global market and meet the standards of AML regulations.

Document Extraction & Checks Via OCR Technology

Online Know Your Customer (KYC) verification relies on artificial intelligence-backed character recognition technology for accurate and quick document extraction. Optical character recognition (OCR) and intelligent character recognition (ICR) are technologies that can be used in the real estate market to extract information from client papers.

Scanning customer identification papers using optical character recognition and intelligence recognition technology is a common practice when doing an online KYC check. Intelligent character recognition (ICR) is also an excellent tool for scanning and double-checking documents written by hand or typed in various formats and fonts. Using ICR/OCR throughout the KYC document verification process guarantees an accurate and quick data extraction solution.

Online Know Your Customer Documentation Verification

Customers, or in this instance, potential property buyers, may undergo the online document verification procedure. To comply with Know Your Customer rules, real estate brokerage should gather only relevant and legally permissible data from its clients.

Name, date of birth, and current address are all required pieces of information to verify a customer’s identity. During online KYC verification, official forms of identification are also needed, such as a passport picture, driver’s license, or national ID card. Furthermore, utility bills are required as evidence of address throughout the KYC process.

CDD and Online KYC Solution

The real estate industry, like all others, benefits from incorporating online KYC processes into their client onboarding mechanism. These verification checks are faster, more thorough, and more accurate. Moreover, the real estate industry, with this tremendous technology, can take measures to combat money laundering. Maintaining conformity with Anti-Money Laundering (AML) regulations requires constant surveillance of potentially fraudulent financial transactions. Because CDD is concerned with the potential for loss, it involves monitoring a client’s financial behavior and assigning a risk profile to each client by the business.

Enhanced due diligence (EDD) is another severe kind of monitoring applied to clients who have raised red flags. A client like this is vetted by comparing their information to databases, including names of sanctioned, embargoed, and PEPs. Whether or not the investor is from a nation designated as a “black list” or “watch list” is checked. Real estate firms must practice rigorous due diligence with online KYC and adhere to Anti-Money Laundering (AML) and Counter-Terrorism Funding regulations. 

FATF and Online KYC Verification

The Financial Action Task Force (FATF) is the preeminent international regulatory agency concerned with combating the financing of terrorism and money laundering. A new set of rules for implementing a danger-primarily based strategy in property transactions was unveiled. Here are some of FATF’s primary regulations:

  • Create internal policy structures to put a risk-based strategy into action. 
  • Find a property’s UBO (ultimate beneficial owner) and ensure clients are who they say they are. 
  • Conduct client due diligence to see whether they are tied to money laundering or terrorism funding. 
  • To maintain compliance with AML/CFT regulations, knowing the countries’ rules from where customers or their money originate is crucial. 
  • Suppose a customer is suspected of engaging in suspicious behavior. In that case, businesses should have a policy to generate a suspicious activity report and forward it to the proper authorities for inquiry.

To Sum Up

Like any other business, the real estate market must prioritize online KYC verification. It helps real estate companies prevent financial crimes perpetrated via illegal investment and provides a secure investment environment by following AML/CFT requirements. 


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