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Insight driven KYC process automation

By Jay Patel | Thu 25 May, 2023
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Conducting know your customer (KYC) due diligence and anti-money laundering (AML) compliance are mandatory for global banks as they conduct their business across jurisdictions.

Regulation is often a driver for the process, but the ‘fuel for the engine’ is the insight driven from data. Banks must look beyond manual searches when fulfilling KYC and take advantage of the opportunity derived from improved data-driven working. Data is critical to achieving improved insight driven KYC. Banks that do not find all the information they need expose themselves to regulatory and reputational risk as well as excessive case re-work. By automating the process, the bank can draw deeper insight from data available in near to real-time.

Turning data into insights

Enriching the customer record using a bank’s choice of data sources is made possible with automation. It performs the complex sourcing, retrieval and collation required to achieve KYC due diligence, without the need for human intervention. Technology can pull on different data sources to acquire the pre-defined attributes and documents needed for effective KYC. Therefore solving the challenge of duplicated data, lack of configurability, match and merge constraints as well as undetected risks.

In a data-driven era it is vital for banks to understand the value of data and the potential it has. Because when used correctly, it can inform decisions far quicker and at scale.

By implementing the right technology and drawing on the vast amounts of data needed to inform decisions, banks can build a digital profile of each client. Which is where the magic occurs and brings global banks tangible results.

Poor data enrichment impacts the view of the customer

Out-of-date, incomplete, or unavailable data will hinder effective KYC with a knock-on effect to the bottom line. Data-quality problems within 12 of the top global banks account for up to 26 percent of operational costs. These are driven by non-standardized data formats, duplicate and incomplete data. Beyond operational costs, additional challenges are faced:

  • Manual interventions
  • Undetected risk
  • False positives
  • Siloed data
  • Poor customer experience
  • Extended time to trade

With improvements to the collection methods of publicly available data, and the ability to analyze said data, banks can benefit on many levels:

  • Delivering a better customer experience
  • Improved risk management
  • Increased productivity
  • Ability to scale quickly and cost effectively
  • and most importantly maintain a digital profile of the customer for future KYC needs and auditing

KYC data sources

Delivering effective KYC can be hampered with the increasing number of structured and unstructured premium and public data sources. Many data sources are subject to levels of complexity and rate of change and come in different formats as well as via multiple channels. The amount of information any bank requires per policy can be overwhelming. Banks should now take a more considered approach and evaluate how data quality can be improved. All the while maintaining the necessary attributes and delivering better coverage.

The burden of maintaining access to siloed systems and integrating multiple data sources and connections is manually intensive. It leaves the bank without a central place to comprehensively understand its customer and perform continued due diligence.

Complex corporate KYC

It is not uncommon for corporate banks to manually research public and premium data source. This enables them to unravel complex corporate structures – an approach endorsed by the Financial Action Task Force (FATF) Recommendation 24. FATF agreed that tougher global beneficial ownership standards are required. Their view is to ensure that competent authorities have access to adequate, accurate and up-to-date information on the true owners of companies. FATF’s evaluations demonstrated that countries using a multi-pronged approach were more effective. Particularly in preventing the misuse of legal persons for criminal purpose.  Or for ensuring transparency of beneficial ownership than countries using a single approach.

A multi-pronged approach

A multi-pronged approach comes with its own challenges. Financial institutions can find themselves with multiple file types with different naming conventions. The data can often be stored inconsistently and be subject to data recency and accessibility challenges.

Achieving accurate and complete customer profiles is far from a simple task for any corporate bank. It can consume resources that are not readily available. And its certainly not conducive to a great customer experience at onboarding, refresh, or remediation.

Onboarding

The entirety of entity data required to perform KYC can easily run to hundreds of data points. These need to be sourced, validated and stored within the customer profile. Which sits in direct conflict with the need to offer customers a friction free onboarding experience.

Updates

Customer data can change – it rarely remains the same. Corporate customers can change their directors, ownership structure, move offices, merge or be acquired. It is therefore vital to access the most up to date data available via all required sources in real time to update the customer record when required and minimize risk exposure.

Simply put, the vast array of data is far too complex for manual analysis and management. To do so via disparate systems, spreadsheets and emails will inevitably lead to critical information being overlooked.

Digitally transforming data-management

There is a need to look for consolidation and to adopt a holistic stance to the challenge. Global banks should adopt a robust approach that allows for dynamic data feeds from a blend of public and premium data sources.

Unlike a data aggregation approach and utilizing data stored in databases, process automation enables the relevant data attributes to be fed from a range of sources in real-time. The data attributes can be joined together, deduplicated and merged into a customer record. The record can be further enriched by sourcing missing attributes from other data sources.

Depending on the bank’s policy and risk appetite this record can be reviewed by an analyst or straight through processed (STP). On a positive this reduces the volume of manual work and time spent waiting for documents to be returned and reviewed. In turn this allows analysts to focus on more complex cases. Operational efficiency is increased, and client outreach reduced, which has a significant impact on the client experience.

Building a digital profile to enrich customer experience

Using digital technology to consolidate data via a single platform, banks can create a digital KYC profile for each entity. The dynamic profile allows the visualization and streamlined unwrapping of a comprehensive corporate ownership structure to identify ultimate beneficial owners (UBOs). Data and documents are matched and merged and stored within the profile complete with full audit trail and data attribute lineage for future reviews.

With improved data and document collection and overlaying a higher level of intelligence from automation to the KYC process, financial institutions can benefit from a deeper understanding and level of customer insight driven KYC.

Reducing KYC frustrations

Creating automated digital KYC profiles means banks can use sophisticated processes to collect and analyze relevant data.  This helps inform decision making and achieve better outcomes throughout the KYC lifecycle. Shortening lengthy onboarding times, from weeks down to hours, can transform KYC processes.

Banks can reduce the KYC frustration of cases that return ‘multiple versions of the truth’. Establishing a ‘single source of truth’ overcomes incomplete or out of date datasets, multiple entries for the same client or lack of current data governance.

The way forward for insight driven KYC process automation

Technology enables organizations to be more effective and do more with fewer resources. By allowing insight driven KYC process automation to deliver higher levels of STP, analysts can allocate their time and resources to the more complex profiles and entities that require further investigation. Put in place for KYC, it leverages automatic and dynamic data feeds from external sources with the added benefits of efficient indexing, storage and retrieval of documents when required. Entity resolution is made easier to reduce the analyst workload as well as false positives in both the onboarding and continuous due diligence process.

With improved insight, banks can conduct an advanced KYC program to gain competitive advantage and reduce over reliance on manual processes. When an institution has a maze of documents, spreadsheets, emails, and file shares, it is easy for risks to be overlooked amidst the extensive volume of data. In addition, when things go wrong, these manual processes neither support agility nor a robust feedback loop to improve processes going forward.

 
Author: Jay Patel

Jay Patel is Head of Product Management, responsible for the product roadmap, strategy and delivery. Jay has had an extensive career developing and launching products through senior roles at Thomson Reuters and Bloomberg covering trading systems, corporate treasury, real-time data and KYC managed services/utilities. Jay also has a global perspective having living and worked in Germany, Canada and Singapore, and is now in the UK.

LinkedIn Profile | Jay Patel

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