Blockchain For Know Your Customer Process In Anti-Money Laundering Compliance: A Review In Financial Services

Nowadays, with new technologies, one of the most pressing challenges faced by financial institutions is the need to fight money laundering through formidable Anti-Money Laundering (AML) frameworks. At the core of these frameworks, there is the Know Your Customer (KYC) process. Sometimes, traditional KYC methods expose inefficiencies that impede compliance efforts. This review synthesizes existing literature to explain how blockchain technology can transform KYC by presenting a decentralized, immutable ledger that enhances transparency and security. It looks at smart contracts' principles, particularly those aligned with KYC tasks, emphasizing their capability to automate verification processes, facilitate data sharing, and allow real-time updates. These smart contracts guarantee that sensitive customer information is available only to authorized entities using cryptography techniques, thus mitigating the risk of data breaches. The review demonstrates how operational efficiencies are achieved through reduced redundancies and accelerated onboarding procedures. Findings show that blockchain-based smart contracts not only reinforce compliance with AML regulations but also foster trust among participants by providing a transparent audit trail. Finally, this review supports the strategic adoption of blockchain technology in KYC processes, suggesting that it can significantly enhance operational efficiency while preserving rigorous compliance with AML standards, thus contributing to a more secure financial ecosystem.