How Perpetual KYC goes beyond ongoing monitoring for AML

Customer due diligence at onboarding and periodic intervals is no longer sufficient to stay compliant with Know Your Customer (KYC) and Anti-Money-Laundering (AML) regulations. Changing regulations, customer circumstances and risk are putting increasing pressure on banks to perform ongoing monitoring for AML to capture any developments and update customer profiles.

However, for those that work with manual systems, ongoing KYC monitoring can be a laborious process to manage. In this article, we’ll examine the need for enhancing ongoing monitoring, the role of perpetual KYC (pKYC) and how modern tools can streamline the process.

What is ongoing monitoring in AML?

Ongoing monitoring is the process of regularly refreshing and enriching KYC data held on customers, for AML compliance purposes, to ensure it is comprehensive and up to date, reflecting current circumstances.

The customer profiles checked will depend on their risk profile, but ongoing KYC monitoring will usually involve checking:

Sanctions

These lists change regularly as people and entities are added and removed, so having regularly checking is important for managing risk.

Politically Exposed Person (PEP) searches

Should a PEP be identified, they would need to be flagged and reviewed by a member of your risk committee and may be subject to enhanced due diligence.

Monitoring Ultimate Beneficial Ownership (UBO)

If ownership changes banks need to investigate to identify those who would pose a higher risk to the business and take appropriate action to maintain compliance. Missing changes opens firms up to unknown risk exposure.

Adverse media searches

Monitoring the public profile of customers to protect the business from reputational damage.

Why is it important to carry out ongoing KYC monitoring?

Recent trends show an increasing expectation from both global regulators and stakeholders that firms should be more aware of customer risk at all times. Given that customer circumstances can change often, banks must regularly review their due diligence to ensure data remains accurate.

Key benefits of ongoing monitoring for AML purposes

Maintaining an accurate view of a customer and understanding changing risk exposure is essential to safeguard against financial crime. Ongoing monitoring in AML offers multiple benefits for banks, including:

• A more accurate view of risk based on current data
• Full compliance with the latest AML regulations
• Complete customer information to provide relevant services

The role of automation in ongoing monitoring

Despite the crucial nature of ongoing KYC monitoring, sourcing up-to-date information on customer relationships is not straightforward. Some of the most common challenges are connected more with the process itself and include:

• Manual processes mean due diligence work has to be repeated
• Determining the frequency of updates
• Overly complicated KYC processes
• Balancing new and ongoing checks
• Limited resources

Intelligent process automation enables firms to maintain a clear view of customer profiles throughout the lifecycle of a relationship. By automating the process of gathering and updating customer data, firms can reduce costs, improve compliance and manage risk more effectively.

Going beyond ongoing monitoring to future-proof AML compliance

The increasing importance of ongoing monitoring for AML is leading financial institutions to look to pKYC, an ongoing approach to due diligence based on the dynamic refresh of customer data in response to key triggering events.

Why pKYC is the answer

In comparison to the more traditional, reactive ways of updating KYC information, pKYC focuses on building adaptive KYC processes that can evolve. This enables banks to future-proof their KYC and AML compliance systems by automating key steps in the customer lifecycle, including ongoing KYC monitoring.

Difference between pKYC and ongoing monitoring

Ongoing monitoring and perpetual KYC are not the same. PKYC comprises the end-to-end process from client onboarding through lifecycle management, as well as the tools and technologies that underpin the system.

Ongoing monitoring is a key step in the pKYC journey using clear data attribution lineage to showcase key attributes that are relevant to risk profiles. The next phase is to use that data to refresh and reconcile customer profiles with this additional information and automatically maintain up-to-date profiles.

Building future-ready compliance processes

As the financial ecosystem becomes more dynamic and data-driven, ongoing monitoring in AML will become the core of risk management. However, relying on manual processes for ongoing KYC monitoring will increase your costs, liabilities and exposure. To keep up with rapid regulatory developments, banks will need to look towards a perpetual KYC model.

Encompass’ award-winning KYC platform empowers compliance teams with unrivaled access to trusted global data sources and a range of automation tools, helping organizations to streamline time-consuming KYC processes and clearly demonstrate AML compliance to auditors.