Blog Posts

July 10, 2023

Understanding and Overcoming the Challenges of Cross-Border KYC Compliance

Raj Singireddy

Fintech companies are expanding globally, offering various financial services to customers worldwide. This presents opportunities and challenges in verifying customers' identities across various countries and regions to ensure users are who they say they are and that we comply with Know Your Customer (KYC) regulations for the U.S. and any new user’s country of residence. Synapse directly builds KYC and other compliance mechanisms into its platform, changing the game for those who build embedded financial applications and experiences.

Suppose a company in Brazil wants to provide access to U.S. account and card services to people in their local country — Synapse’s user onboarding process conducts KYC verifications specific to that country to ensure regional compliance. We’ve built advanced machine learning models to verify and validate identification documents appropriate to the user’s location, spanning 35+ countries, with options ranging from government-issued passports to taxpayer ID numbers to ID cards to utility bills.

How to navigate diverse identity systems

In some countries, the government provides clear information about an individual through a tax ID number or driver’s license, but this is not the case everywhere. People in India, for example, may not have these documents, but instead have an Aadhaar, PAN, or voter ID card. This card is issued by the Indian government and is linked to biometric and demographic data, and can be printed in 13 different languages!

That’s why fintech companies must identify suitable alternatives for complying with global KYC regulations. Traditional KYC processes used in verifying documents like passports, ID cards, and utility bills involve manual reviews and are very time-consuming. This introduces barriers and bottlenecks associated with new user onboarding for emergent fintechs and neobanks.

Synapse has developed proprietary intelligence tools, like ID Score and Fraud Risk Score, using advanced machine learning and deep learning techniques to authenticate real users and detect fraudulent users who onboard using stolen identities. ID Score is the first level of authentication, taking identity data from user-submitted documentation and leveraging enriched data gathered from multiple real-world sources.

We do further due diligence by auto-verifying physical documents using Optical Character Recognition (OCR) and advanced image processing models, along with a video authentication (“liveliness check”) to ensure the user is who they claim to be. By partnering with regional data providers in different countries around the world, Synapse’s KYC features can verify most global users within a couple of seconds while still achieving high precision and verification rates.

Navigating global KYC successfully

Without an experienced partner like Synapse, smaller fintech companies face real challenges managing the complexity of global KYC and compliance requirements alone. It’s essential that they work closely with local regulators and stay up-to-date with regulatory changes to ensure they’re compliant and effectively managing risks associated with their customers’ identities.

But it’s not just about following the regulations — fintechs also need to understand what kinds of products and services their banking partners are likely to approve with respect to compliance and risk appetite. Synapse has walked down that path with multiple sponsor banks through its Modular Banking partnerships across an array of unique use cases and implementations. Our cumulative experience lets our customers launch financial products with the confidence of knowing those products can be supported by multiple sponsor banks, even with resilience and portability if necessary so that they can get to market with predictability and scale.

Streamlined Global KYC Compliance: Empowering Fintechs

Fintechs who work with Synapse can be confident in their adherence to identity regulations because Synapse does that groundwork for them. Our compliance team and advanced technology give us a deep understanding of the identity requirements in every region where we operate so that we can build compliance as a core element of our platform. Prioritizing KYC compliance means we can make our system truly global and ensure that our partners can focus on what they do best without worrying about how to navigate complex regulatory environments.

Synapse’s KYC system has been well-received by its customers and bank partners, but we acknowledge that this is a continuing journey and there’s more good work to be done. Just as we’re using technology to unlock new opportunities in solving and optimizing global KYC, bad actors continue to look for new weaknesses to exploit. Threats emerge every day, and even legitimate user behavior can vary just as often. This requires continuous improvement. Behavioral monitoring is an effective way to identify new threats. User behavior can vary from day to day, which means our models need to constantly adapt to keep up with these challenges. Our ultimate goal is to achieve a balanced onboarding process that is simultaneously adaptive and compliant with regulations.

Synapse is revolutionizing the way fintechs approach global KYC regulations. We provide services and technology that streamline the identity verification process for customers around the world. We ensure our customers adhere to regulations and guidelines in each region they operate. While the threat of fraudulent activities is ever-present, we continue to enhance our systems to meet the evolving challenges of global KYC.

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Understanding and Overcoming the Challenges of Cross-Border KYC Compliance

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Raj Singireddy
July 10, 2023

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