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Reducing white noise through strategic automation

By Howard Wimpory | Thu 7 March, 2024
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As banks look to digital transformation, the key lies in recognizing that not all existing manual processes should be automated. Instead, it is an opportunity to orchestrate a strategic approach that allows for a redesign of the entire process. In this blog, we explore the art of reducing ‘white noise’. Particularly honing in on the essential elements to support effective Know Your Customer (KYC).

The challenge of white noise

Automating KYC often faces the challenge of white noise. The unnecessary clutter and complexity that arises when attempting to automate every aspect of the current manual process. The goal is not to drown in a sea of unnecessary data. But instead, to streamline the orchestration of relevant information, ensuring a clear and concise picture of the corporate entity.

The critical ingredient of data

Addressing the sheer volume of data regulated firms manage for KYC requirements is paramount at the project’s outset. Data quality becomes a crucial consideration during the implementation of any transformation, be it automation, Artificial Intelligence (AI) solutions, or the adoption of a perpetual KYC (pKYC) model.

Key dependencies

The structure of the data becomes a key dependency for effective transformation. Ingestion, normalization, and the combination of both public and private data must be meticulously considered. Specifying the primacy of trusted data sources, how it is matched and merged, diced, along with the required granularity, allows banks to identify essential elements from the outset. Therefore, reducing the transformation task’s size and eliminating the white noise of unnecessary data points.

With fewer, cleaner data points, banks can quickly gain the risk-based insights they need to accurately assess the KYC risks. Subsequently, also gaining the advantage of a holistic view of the entity.

The relevance paradigm

Understanding what is relevant is the cornerstone of reducing white noise in KYC. Banks must be laser focused on the data which directly drives KYC risk assessment and eliminate the unnecessary data where the link to KYC risk cannot be proven. This includes factors such as the nature of the business, geographical location, and the specific risks associated.

Customization to the banks risk-appetite

Banks vary in their tolerance for risk, and KYC processes should reflect this diversity. By automating elements that align with the bank’s risk appetite, financial institutions can strike a balance between efficiency and compliance.

Benefits of strategic automation

  • Efficiency: Focus on automating essential elements streamlines the KYC process, reducing time and resources.
  • Accuracy: By automating only relevant data, the risk of errors associated with manual data entry diminishes.
  • Compliance: Strategic automation ensures that the KYC process adheres to regulatory requirements.
  • Flexibility: Tailoring automation to the bank’s risk appetite provides a more adaptable process.

Gradual transformation

The transformation should be incremental, breaking down processes into categories, with a focus on data. Identifying the driving data for KYC risk identification and introducing components, such as data searching, beneficial ownership discovery, workflow systems (CLM platform), and data entity resolution, ensures efficient automation. Failure to do so means the bank will be automating white noise.

Reduce white noise and build a foundation for pKYC

While strategic automation plays a pivotal role in streamlining the KYC symphony, the importance of establishing a robust foundation of ‘clean’ processes for pKYC cannot be overstated.

In the realm of KYC for corporate entities, the mantra is clear – reduce the white noise, amplify the relevant signals. Strategic automation is not about drowning in a deluge of data but about orchestrating a seamless symphony that aligns with the bank’s risk appetite and regulatory obligations. By embracing this approach, financial institutions can create a KYC process that is not only efficient but also finely tuned to the nuances of each corporate entity, fostering a secure and compliant environment in the digital era.

Author: Howard Wimpory

Howard works with Tier 1 banks to digitally transform their KYC onboarding and refresh processes. He has held a number of executive-level operational roles with a major global bank including leading their wholesale KYC Onboarding and Refresh functions. His most recent role prior to Encompass was as Managing Director, Group Financial Crime Operations position at Barclays Bank, where amongst other functions, he was accountable for leading KYC Remediation of Corporate and Investment Bank Client records to FCA committed timeline.

LinkedIn Profile | Howard Wimpory

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