Want to understand how KYC is changing in the Middle East, and what that means for your organization? This article outlines key changes shaping KYC compliance in the Middle East, and what you can do now to stay ahead.
KYC and compliance in the Middle East are evolving quickly and many businesses in the region are racing to keep up with the pace of change. The increasing digitalization of financial and business transactions means eKYC is now the norm. Those who aren’t transitioning risk falling foul of evolving fraud tactics and stricter compliance demands. They’re also offering their customers a less satisfying experience.
Acting sooner rather than later is important. As capabilities evolve, those who aren’t adopting eKYC technologies may fall behind their competition.
Biometric verification: the new standard for digital security
Biometric verification (the use of unique personal data such as facial recognition, fingerprint scanning, and voice authentication) is becoming increasingly common and a central component of digital security. This largely stems from the rise of cloud computing and the need to move away from focusing on traditional network and endpoint security protocols.
The decentralized nature of the cloud environment means securing your digital perimeter is almost impossible. Instead, the emphasis is now on implementing Zero Trust Architecture (ZTA) and building identity-based security systems. As passwords and user names are relatively easy for attackers to compromise, multi-factor authentication and new biometric authentication tokens facilitate a ZTA approach.
Benefits associated with biometrics
Biometrics offers two key advantages over other types of authentication tokens.
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Improved security
Biometrics are what is known as immutable identification. Unlike passwords, they cannot be easily guessed or stolen and are unique to an individual. This significantly improves security. Security is further enhanced by liveness detection, which accurately identifies the use of masks, deepfakes, and photos to prevent spoofing.
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Faster user journeys
Biometrics speed up the login and verification process and eliminate the need for users to remember or store long and complex passwords. In eKYC, it allows for speedier onboarding. Identities can be quickly verified without the need for slow manual processing. This results in an improved user experience for customers.
Challenges associated with biometrics
At the same time, there are several challenges associated with using biometric data. Most relate to data storage and security that organizations can tackle with intelligent security protocols and well-designed and secure digital technologies.
The single biggest concern is that storing biometric data makes it an attractive target for malicious actors. Security breaches could result in identity theft on an enormous scale. To complicate this, biometric data is irreversible. Unlike passwords, you cannot change a fingerprint. Similarly, compliance with local data protection laws can be complex. Here, the solution is to work with a technology provider that understands local regulations and builds them into solutions.
Regulatory shifts - what’s changing in GCC compliance
In recent years, GCC countries have introduced extensive reforms to strengthen data protection and KYC standards in an attempt to create a safe and attractive foreign investment environment. Historically, regulations across the region were fragmented and country-specific, but recently, there has been a move to standardize them in line with other international frameworks, such as GDPR. This makes it easier and cheaper for businesses to operate in the region. Enforcement has also become stronger, suggesting that compliance will become a more pressing concern in the future.
The GCC’s commitment to the Financial Action Task Force (FATF) and its alignment of regulations with its recommendations is central to this process. It means KYC and anti-money laundering regulations are updated and upgraded to ensure standardization across the region and internationally.
Today, the trend is toward more stringent KYC standards, tougher punishments for non-compliance, and stricter enforcement. This demonstrates a focus on delivering a safe financial environment to encourage investment. It also reflects the changing nature of digital fraud and the need for an ever-evolving response to security threats. Any organization looking to prosper in the region will need to monitor updates to regulations and ensure KYC compliance is built into its processes and technologies.
Preparing for the future - key steps for IT & business leaders
For IT and business leaders looking to prepare for the future, knowing where to start with compliance is a challenge. We recommend considering the following three action points.
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Invest in tech-driven, biometric-enabled eKYC solutions
An important step business leaders can take is investing in technology that uses the latest technology to improve fraud detection and secure services. eKYC technologies like EDC’s Digital Identity Identification & Authentication solution are a good example of this, as they enable organizations to improve security while delivering a better customer experience.
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Strengthen internal compliance frameworks to align with new regulations
Internally, your organization’s compliance frameworks and processes must reflect the expectations placed on you by national and international requirements. This often involves conducting comprehensive regular compliance audits and updating frameworks to reflect regulatory changes in all relevant territories.
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Educate teams and clients on secure digital identity verification
Business leaders also need to educate their teams and customers on the importance and value of digital identity verification. Uptake of new technology often depends on customers understanding its value and employees’ ability to communicate its benefits. Educating individuals and teams about what constitutes good security and how to identify and avoid security threats also helps your organization manage risk.
The road ahead for KYC in the Middle East
As the Middle East economy grows and GCC nations seek to attract greater foreign investment, KYC compliance will become ever more important, and eKYC technologies will grow their reach. These solutions offer companies a competitive advantage by minimizing risk, improving process efficiency, and delivering a better customer experience. As new regulations introduce stricter standards, they are becoming vital tools in the financial sector. Companies that fail to act now and adapt to the shifting regulatory environment will quickly lose ground to those that do.
Learn more about EDC’s Digital Identity Identification & Authentication (eKYC) solution and how it can help you prepare for the future of KYC and compliance in the Middle East.
