Maximizing the value of KYC process automation

KYC due diligence is difficult. Rapid advances in new technologies, combined with information banks utilize for due diligence now being available in digital formats, creates vast opportunity for automation.

Now, more than ever, getting KYC automation right is important – for banks and for the broader economies that they serve.

I have been fortunate to be close to many KYC automation projects at national and global banks. In the last two years more and more banks are mastering the adoption of KYC automation. Here, I share insights into how banks can set themselves up for success, and of how Encompass partners with these institutions on their transformation journeys.

Understand the current KYC process – don’t simply automate it

Within many banks, KYC Operations is responsible for customer due diligence, and the experience and expertise within this function must be gleaned as the broader institution takes the path to automation.

At Encompass, we understand that the current process provides invaluable insights. This is why, early in an engagement, we work to understand and document an institution’s existing process. This involves working alongside KYC analysts to identify the information sources they use to undertake due diligence, understanding how they access information and the techniques they use to analyze that information from multiple sources, and how they present the product of their due diligence.

From there, we mirror their process in our platform and present the results, and benefits, of automation while adhering to the requirements that their AML compliance colleagues and other stakeholders have considered when the original process was designed and approved. By mapping the current process, seeking validation and demonstrating the immediate value of technology with their existing process, we show our common understanding of how the bank operates KYC and illustrate how automation optimizes the current work to raise productivity and create efficiencies, while adhering to controls.

This bottom-up approach develops trust with KYC Operations, and the next challenge comes in engaging with a wider community within the bank to find maximum value.

Build on the foundation and create consensus for digital transformation

Across a bank, countless areas can benefit from better KYC. Creating true value means the development of a top-down view, while engaging broadly across the bank and synthesizing departments’ blue-sky thinking with established facts uncovers new opportunities.

Encompass’ banking customers are pursuing strategies for digital transformation, which already are assigned budgets, staff and other resources. Aligning the modernization of KYC with these bank-wide programs generates momentum, bringing in teams with expertise in business transformation, process automation and technology.

Transforming the current process results in increased efficiency, as unnecessary work is cut out. This can improve customer service and experience, reduce waste and save money. As an example, in some banks, when a KYC analyst lacks information they need to complete due diligence, they may request that their colleagues in the front office reach out to the customer repeatedly to ask directly for further information. Encompass offers access to a broad range of trusted information sources, providing an earlier opportunity to identify risk indicators, drastically reducing time spent on outreach and allowing for time to be spent on more business-critical tasks.

Transformation brings opportunities for teams to do new work that adds value for customers. KYC serves as an entry point to the bank for up-to-date information about customers and their businesses. By providing this information to other functions (such as customer service, product support or relationship management) in an organized digital format, our customers create new experiences that are to the benefit of their customers.

Transform and continuously improve KYC

Never a set and forget event, transforming KYC is a journey that presents continuous opportunities for improvement.

Flexible and easily changed, a well-designed digital process can be constantly improved. Many of our banking customers aim to achieve full automation of due diligence on some part of their customer book. At the beginning of 2022, one of our customers was achieving Straight-Through Processing (STP) on eleven percent of international corporate customers, seven months later their STP rate is at sixty nine percent.

By trusting in automation and its possibilities, banks can create their own process that protects from the risks of money laundering and financial crime while creating new value from KYC. Whether it is work they currently do that automation does faster and more consistently while eliminating error or high value work being made possible for the first time by automation, there are significant wins that can be found, bringing lasting benefits for customers, staff and shareholders alike.