When complying with AML/CTF legislation proves challenging, many regulated companies turn to Managed Services Providers (MSPs) for help.
Global labour arbitrage is proven as a lever to reset the economic basis when outsourcing business processes, but audits commonly expose elements of ineffectiveness within Know Your Customer (KYC) operations.
While digital transformation initiatives carry risks, partnering with best-of-breed technology vendors offers MSPs and their clients a means to mitigate these.
How do you identify these vendors, and the opportunities that lie in risk and compliance for MSPs were just two of the topics discussed in our dedicated webinar, which you can watch in full here, as Encompass‘ Mike Kearney, Senior Product Marketing Manager, and Nick Ford, VP Distribution & Alliances, delved into key issues to consider.
To understand the place of MSPs in the space, it is important to first reflect on the difficulties associated with manual KYC, especially for analysts. Starting the discussion, Mike focused on this, and why traditional approaches are prone to error.
As he said, “the work of a KYC analyst can be gruelling.” Digging into why, he looked at the detail of their work, telling of a “fundamental mismatch” in job design when it comes to the volume of the information they are asked to process and the efficiency and ability of people to do the tasks at hand.
According to Mike, KYC teams typically operate at an error rate of around 10%, meaning customers are either onboarded or rejected based on incomplete or inaccurate risk assessments.
Looking at the expectations surrounding evidencing work, Mike told us why these manual processes may expose MSPs to a degree of operational risk, before moving to the regulations that organisations must follow, driven by the Financial Action Task Force (FATF), and the issues that their evolving nature brings.
The fact that there are many differences across jurisdictions means, for MSPs, as Mike pointed out, this “increases complexity of work” because they must train analysts to follow policies that are in a constant state of evolution.
We know that, after years of compliance budget expansion following the 2008 financial crisis, many institutions are now focused on growth opportunities. While they direct new investments to Client Lifecycle Management (CLM) technologies and encourage business units to launch innovative new products and services, executive teams are setting cost reduction targets for compliance.
This rebalancing creates opportunities for MSPs capable of demonstrating how investments in digital operating models reduce the cost of KYC operations while accelerating risk evaluations and onboarding, and repay themselves in downstream activities.
As Mike highlighted, MSPs can differentiate themselves in a busy market and find they see positive responses when they show the benefits of technologies capable of collating information gathered in due diligence as digital customer profiles which, when consumed by CLM, are available to bank staff responsible for deepening their institution’s relationships with corporate clients.
Mike Kearney | Encompass
Mike and Nick moved on to providing their views on various important issues for MSPs, including how to best deal with increasing workloads and changing regulations.
They also discussed the impact of automation, particularly on analysts.
We know that digital transformation allows human experts the time to do what they do best – to assess sometimes complex situations and make high quality, informed decisions. Freeing KYC analysts from the burden of collecting and analysing volumes of digital information improves their job satisfaction and reduces attrition.
Increasing productivity in KYC operations crucially accelerates the pace of client onboarding which increases customer satisfaction and allows earlier engagement by the bank’s commercial specialists.
By making KYC more effective, Encompass creates additional benefits that MSPs can deliver to their clients. By returning many more documents than human experts, Encompass reduces the burden on corporate treasury teams, who, when subjected to outdated KYC, on average, spend 26 days a year responding to requests for information from compliance professionals.
Financial institutions’ move to growth strategies brings into focus their urgent need to increase productivity and reduce costs in onboarding and KYC operations. Encompass offers a proven solution to satisfy these requirements.
Encompass’ intelligent process automation conducts live document and data collection, analysis and integration from public and premium sources to bring transparency to complex corporate structures and ultimate beneficial ownership, delivering the most accurate and complete KYC on demand.