How automation addresses KYC challenges

The growth in Anti-Money Laundering (AML) legislation and awareness has continued in recent years, with financial institutions having to comply with these regulatory requirements to avoid reputational damage, sanctions, and hefty penalties.

Organizations must know their customers, the nature of their activities and the level of money laundering risk their customer is exposed to. As a result, Know Your Customer (KYC) and Customer Due Diligence (CDD) have become fundamental practices for regulated (and many non-regulated) firms.

Challenges in KYC are manifest. Firms must ensure they have an accurate view of their customer risk, remain compliant with ever-changing regulation, and, at the same time, not compromise on customer experience . Discerning customers go for the most friction-free onboarding process when it comes to joining an institution. Challenges have developed during the COVID-19 crisis, with an Encompass survey showing four in 10 businesses are planning to change their banking provider due to the slow support offered during the outbreak.

The account opening and product or service purchase must be done fast and efficiently, with quick KYC onboarding being crucial in shortening time to revenue. For these reasons, firms must invest in technology and processes that bolster both compliance and customer satisfaction.

The key to strengthening KYC compliance is not just in relevant data, but also good analysis and being able to pick up on “red flags”. Where historically technology has not? supported this process, financial firms have always relied on human intelligence to make decisions for them. Now, through new technologies, such as intelligent process automation, clients can be assessed, filtered and guided through the process that corresponds with their risk level, as well as their value to the organization. We are reaching the era of risk and value-based compliance.

AI and automation

Artificial Intelligence has emerged as a critical cornerstone of AML and KYC. Intelligent process design automates data collection, visualization, and analysis. Complex Ultimate Beneficial Ownership (UBO) structures can be collated in seconds – dramatically improving ROI by driving efficiencies and freeing analysts to focus on even more complex KYC investigations.

Automation, and specifically RegTech, has found increased usage across the industry as it can execute repetitive, manual, rule-based processes in a simple, non-invasive solution. Modern tooling can seamlessly integrate with RegTech platforms and help financial organizations achieve end-to-end automation of their KYC operations. Automation can process many high-volume manual tasks, such as extracting data from scanned documents and querying disparate internal and external systems for customer information, as well as leveraging artificial intelligence to identify patterns in customer activity.

This includes:

Data collection and customer identification program (CIP)

Automated processes can collect basic customer information from multiple sources at scale, validate accuracy and completeness of all customer data, as well as processing continuous field updates and trigger prompts

Customer due diligence and decisioning (CDD)

They can perform KYC checks, complete risk assessments, scoring, decisioning and referring high-risk flags

Ongoing monitoring

Automation can conduct periodic reviews depending on customer risk ratings, collate new data, and validate that KYC/AML covenants are being maintained

Account closure

Process account closure, executing the required workflow tasks and updating all downstream systems

Full automation of KYC compliance is unlikely to replace human expertise in the short-term. Even with advanced automation of data collection and analysis, specialist KYC analysts are essential for handling complex investigations and any cases that fall out of automated straight-through-processing. However, robotic processing, applied to both ongoing onboarding operations as well as large-scale remediation projects, alleviates firms’ compliance burden enough to allow KYC teams to focus on truly resource-heavy tasks.

By utilizing both cutting edge automation and industry expertise, organizations are able to achieve the best of both worlds: advanced, thorough, global compliance combined with a fast, efficient and friction-free customer journey.