Definition
Video KYC, or Video-based Know Your Customer, refers to a real-time video interaction process where customers verify their identity with financial institutions or agents. In the AML context, it combines biometric facial recognition, document authentication, and liveness detection to confirm customer details against illicit activity risks. This method ensures institutions meet CDD requirements by capturing visual, audio, and behavioral data for robust identity assurance.
Purpose and Regulatory Basis
Video KYC plays a pivotal role in AML by enabling risk-based customer onboarding, preventing money laundering, terrorist financing, and fraud through enhanced due diligence. It matters because traditional in-person verification is inefficient for digital banking, yet regulators demand verifiable identities to trace illicit funds.
Key regulations include FATF Recommendations, which mandate reliable CDD methods like video identification for higher-risk scenarios. The USA PATRIOT Act (Section 326) requires financial institutions to verify identities using documented evidence, supporting video KYC as a compliant alternative. EU AML Directives (AMLD5 and AMLD6) explicitly endorse video ID for remote onboarding, aligning with eIDAS for electronic identification.
When and How it Applies
Video KYC applies during high-risk onboarding, such as for PEPs, high-value transactions, or remote account openings where physical presence is impractical. Triggers include customer risk scores above thresholds, virtual asset services, or jurisdictions with strict remote ID rules.
Real-world use cases: A neobank uses Video KYC for instant loan approvals by verifying passports via video in under 5 minutes. In cross-border remittances, it flags sanctions matches during live sessions, halting suspicious flows. For example, Indian banks mandate Video KYC for accounts over certain limits post-2020 RBI guidelines, integrating AML screening seamlessly.
Types or Variants
Video KYC variants cater to risk levels and tech capabilities.
Agent-Led Video KYC
A human agent conducts a live video call, reviewing documents in real-time and asking questions. Common in banks for high-risk clients, it includes manual biometric checks and PEP screening.
Automated Video KYC
AI-driven with no human intervention; customers self-scan IDs and perform liveness tests like head turns. Suited for low-risk retail banking, faster but requires robust AI for false positives.
Hybrid Video KYC
Combines automation with agent escalation for ambiguities, balancing speed and accuracy. Examples include fintechs like Revolut using AI first, then video chat for verification fails.
Procedures and Implementation
Institutions implement Video KYC through integrated systems ensuring AML compliance.
Key steps:
- Pre-Session Prep: Customer uploads ID; system performs initial OCR and forgery checks.
- Live Video Session: Agent/AI verifies face match, liveness (e.g., smile on command), address proof, and business purpose.
- AML Screening: Real-time checks against sanctions, PEP, and watchlists.
- Recording and Storage: Full session recorded with consent, retained per jurisdiction (e.g., 5 years).
Controls include encrypted platforms, multi-factor consent, and audit trails. Integrate with core banking for seamless CDD.
Impact on Customers/Clients
Customers benefit from faster onboarding without branch visits, but face session requirements like stable internet and valid IDs. Rights include data privacy under GDPR/CCPA, consent revocation, and appeal processes for rejections.
Restrictions: Failed verifications may block services until resolved; high-risk clients endure longer scrutiny. Interactions are professional, with clear instructions—e.g., “Hold ID steady to camera”—enhancing trust while enforcing compliance.
Duration, Review, and Resolution
Sessions last 3-10 minutes, varying by complexity. Approval is near-instant for automated; agent-led takes 1-2 hours post-review.
Review processes involve quality checks within 24 hours, with escalations to compliance teams. Ongoing obligations: Periodic re-Verification (e.g., annually for high-risk) via Video KYC updates. Resolution for fails includes reattempts or alternative proofs, with timelines mandated (e.g., 48 hours in EU).
Reporting and Compliance Duties
Institutions must document full sessions, linking to customer files for audits. Report suspicious patterns (e.g., evasion attempts) via SARs to FIUs.
Penalties for non-compliance: Fines up to millions (e.g., €5M under AMLD4), license revocation, or criminal charges. Duties include annual training, independent audits, and tech validation per FATF standards.
Related AML Terms
Video KYC interconnects with core AML concepts:
- CDD/EDD: Forms the verification backbone for risk assessment.
- Biometric Authentication: Powers liveness detection against spoofing.
- Sanctions Screening: Embedded during sessions.
- Ongoing Monitoring: Supplements with transaction surveillance.
It enhances KYC within broader AML programs, bridging onboarding and continuous compliance.
Challenges and Best Practices
Challenges: Poor internet in regions like Pakistan causes drop-offs; deepfake risks demand advanced AI. Privacy concerns and agent training gaps persist.
Best practices:
- Use multi-modal biometrics (face + voice).
- Partner with certified providers (e.g., Sumsub, Shufti Pro).
- Pilot hybrid models for inclusivity.
- Conduct regular penetration testing and staff drills.
Recent Developments
As of 2026, AI advancements like 3D liveness and emotion analysis counter deepfakes, per FATF 2025 guidance. EU’s AMLR (2024) mandates video for all remote high-risk onboardings. In Asia, RBI expanded Video KYC to UPI wallets. Blockchain integration for tamper-proof records emerges, with US firms piloting post-PATRIOT Act updates.