What is it about?

Financial institutions must verify who their customers are and monitor financial relationships to comply with anti-money laundering regulations. Traditional Know Your Customer (KYC) processes can be repetitive, slow, costly, and dependent on duplicated checks across institutions. This review examines how blockchain technology can improve KYC processes in financial services. In particular, it looks at how decentralized and tamper-resistant records, together with smart contracts, can support identity verification, controlled information sharing, automated compliance steps, and real-time updates. The reviewed evidence suggests that blockchain-based KYC can reduce duplicated work, accelerate customer onboarding, improve transparency, and strengthen auditability. At the same time, successful adoption depends on secure implementation, regulatory compliance, interoperability, and appropriate governance.

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Why is it important?

KYC is a core part of anti-money laundering compliance, but traditional processes are often costly and inefficient because different institutions repeatedly collect and verify similar customer information. Blockchain offers a way to create trusted, auditable records that can be shared securely among authorized participants. Smart contracts can also automate parts of the verification process and help keep customer information up to date. This can potentially shorten onboarding times, reduce operational duplication, improve traceability, and strengthen compliance processes. The review therefore provides useful guidance for banks and other financial institutions considering blockchain-based KYC as part of their AML strategy.

Perspectives

Blockchain should not be seen simply as a replacement for existing KYC databases. Its value lies in enabling trusted coordination between institutions while preserving a transparent audit trail and controlling access to sensitive customer information. Smart contracts are particularly promising because they can automate predefined verification and compliance steps, reducing manual intervention and allowing information to be updated more efficiently. However, technological capability alone is not enough. Blockchain-based KYC must also address privacy, interoperability, governance, implementation cost, and regulatory requirements. The most successful applications are therefore likely to combine technical automation with strong institutional and compliance frameworks.

Prof. Afshin Ashofteh
Universidade Nova de Lisboa

Read the Original

This page is a summary of: Blockchain for Know Your Customer Process in Anti-money Laundering Compliance: A Review in Financial Services, January 2026, Springer Science + Business Media,
DOI: 10.1007/978-3-032-10721-3_10.
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