The rise of digital payments and fintech has transformed the global financial landscape, with Latin America at the epicenter. While digitalization offers significant benefits, it has also increased the risks of fraud and identity theft. In this context, KYC (Know Your Customer) and KYB (Know Your Business) processes are becoming essential to ensuring security, with Artificial Intelligence (AI) as a key tool to redefine identity verification and protect transactions.

According to TransUnion , financial sector fraud in the region experienced an alarming 159% increase in the last year alone. A worrying fact is that 7 out of 10 digital frauds are linked to identity theft or impersonation. This situation highlights the urgent need to modernize KYC/KYB processes, which have historically been manual, slow, and inconsistent, increasing both risk and friction for users.

AI: Driving Transformation in KYC Processes

Artificial Intelligence is not just a tool, but an essential catalyst for transforming KYC processes, providing significant advantages in accuracy, efficiency, and customer experience.

Real-time fraud and risk detection

One of the greatest benefits of AI in KYC is its ability to detect anomalies and fraud patterns in real time. Machine learning algorithms can analyze large volumes of historical and live data, identifying suspicious behavior that would escape manual review. Examples include:

Transaction analysis: AI compares each transaction with predefined rules and criteria, as well as with the user’s usual behavior patterns. If an unusual transaction is detected (for example, a high-value purchase in a country the customer has never been to), the system can block it or require additional authentication. An example of this is Iberpay , which has integrated AI into its Intelligence tool to identify mule accounts and potential money laundering cases, reporting nearly 2,000 bank accounts with anomalous transactions since 2022.

Identification of synthetic and stolen identities: AI is capable of detecting inconsistencies in identity verification and credit history, identifying profiles created with partial or fraudulent data. In terms of transaction monitoring, banks like Citi have managed to reduce phishing attacks by 70% through AI-powered analysis. Walmart, for its part, has reduced thefts by 25% thanks to AI-based video analysis.

Document tampering detection: Computer vision solutions, a branch of AI, allow for the analysis of identity documents with pinpoint accuracy, identifying alterations, photocopies, deepfakes, or the projection of photos onto screens.

Streamlining and automating Digital Onboarding

AI significantly optimizes and accelerates the onboarding process for new customers, providing a streamlined experience and significantly reducing response times:

Document recognition and validation: Using advanced neural networks, AI can automatically recognize, read, and verify thousands of identity documents, extracting both structured and unstructured data. This reduces human error and improves the efficiency of the verification process. Examples include solutions like Google Cloud .

Biometric Matching: AI-powered biometrics, such as facial recognition, fingerprint, or iris scan, ensure that the person in the selfie or video matches the ID presented. Additionally, liveness detection prevents the use of photos, videos, or masks to impersonate someone. An example of this implementation is CaixaBank , which uses facial recognition at its ATMs to detect unauthorized access, ensuring fast and secure withdrawals.

Improved accuracy and reduced false positives

Manual KYC systems often generate a high number of alerts about legitimate activity, requiring intensive human review and consuming time and resources. Artificial Intelligence, through advanced algorithms, can:

• More accurately differentiate legitimate from fraudulent activities, reducing false positives and allowing compliance teams to focus on high-risk cases.

• Retrain with new data to identify emerging patterns, ensuring effective detection over time.

A safer and more efficient future with AI in KYC

The adoption of Artificial Intelligence (AI) is redefining the financial landscape, with its use growing by 72% globally according to McKinsey & Company. In Latin America, although challenges remain, financial institutions are investing in AI to improve security, user experience, and operational efficiency.

AI is transforming KYC and KYB processes, making them fast, accurate, and completely secure. Institutions that implement AI into their KYC and KYB strategies will not only better protect themselves against fraud but will also position themselves as leaders in the new era of financial security and digital innovation. AI is the key tool for building a more efficient, secure, and customer-centric financial ecosystem.