The value of automation to a bank’s CRO and risk function

After more than a decade of increasing compliance costs, executive teams are pushing compliance functions to find cost savings so resources can be redirected to growth initiatives.

However, the work of Know Your Customer (KYC) operations remains challenging, with particular issues being faced including:

• difficulty in accessing the data required to unwrap complex corporate structures
• deadlines for urgent and large-scale KYC remediation projects being missed

Today’s processes – underpinned by manual labour and a reliance on people who have to meet expectations far beyond those they have been used to – also bring an increasing need for experienced KYC analysts and services, making the task all the more important to execute effectively and efficiently.

We know that, in recent years, the increasing emergence of new technologies has transformed the industry and what customers require, and demand, from providers.

KYC in banks – the issues

Traditionally, KYC operations within financial institutions have been frequently plagued by problems, such as high costs, slow rates of completion and high rates of error. Shortcomings in operations can spill over to create problems in other functional areas of banks.

Where these have the most impact will differ by area and the remit and priorities of those concerned.

The Chief Risk Officer (CRO), as the executive accountable for enabling the efficient and effective governance of significant risks, and related opportunities, to a business, must ensure that it takes an integrated approach to tackling risk that evolves as the company, and wider industry, does.

In terms of KYC activity and the processes their organization follows, there are various topics that will be top of mind for the CRO, including:

• concerns that errors in KYC could cause the bank to reject customers they should onboard, while enabling the possibility of onboarding customers they should reject
• uncertainty that controls established to manage risk are consistently observed and enforced creating weaknesses in the bank’s defences, which can be exploited by those intent on committing financial crime
• a heightened focus of strategic importance related to the data and risk functions

The power of automation

Maintaining the quality of KYC in order to avoid regulatory and reputational risk is critical, and this is where the value of technology can be found, in a way that improves business output while addressing these key concerns of the CRO.

Encompass automates KYC discovery, reducing costs while enhancing compliance with global Anti-Money Laundering (AML) and anti-bribery and corruption regulation.

Automation ensures the CRO exercises continuous control over KYC operations. Without this, it is difficult for a CRO to know with certainty that every KYC analyst in every location is consistently adhering to KYC policy. By translating policies from natural language into software instructions that drive automation, Encompass ensures KYC consistently follows the intent of the risk and compliance functions.

Unlike human experts, software excels at searching and analyzing large volumes of digital data without introducing errors. Automation gets it right the first time, every time, giving CROs confidence that onboarding decisions remain consistent with the bank’s risk appetite.

Additionally, intelligent process automation ensures that every search, action and decision is dynamically recorded in a comprehensive audit trail for demonstrable compliance.

Many banks are in the process of selecting or implementing Client Lifecycle Management (CLM) platforms. Information about new or existing customers discovered in due diligence finds value beyond the compliance function when it is shared with customer-facing business teams to inform their conversations with customers.

Through integration with the leading CLM platforms, Encompass ensures that information flows to wherever it can be put to work within a bank and challenges misplaced notions of the role of compliance in a modern digitized bank.

Using a bank’s established data sources, policies and procedures, and integrating with existing KYC or customer onboarding platforms, Encompass offers a seamless transition from manual to automated processes.