What lessons can banks learn from real-world pKYC implementation?

Banks implementing perpetual KYC (pKYC) are learning that the greatest lessons extend well beyond technology.

Success comes from aligning strategy, culture, and technology around a shared goal of trusted, continuous compliance. Once a Corporate Digital Identity (CDI) framework is in place, pKYC continuously monitors for material changes in CDI. When changes occur, a materiality assessment is triggered which determines the level of KYC review conducted. This ensures risk profiles stay current without repeating full diligence.

Real-world examples show that pKYC and CDI are as much about mindset and process as tools. Banks must rethink how they manage data, risk, and client relationships in a dynamic regulatory landscape.

At a recent Encompass roundtable, senior banking and technology leaders shared candid insights on implementing pKYC and CDI frameworks.

Here are four key takeaways:-

1. The regulator isn’t the enemy; they’re a travel companion

Banks often approach regulators cautiously, avoiding scrutiny until a process is “perfect.” A better strategy is proactive, iterative engagement, treating regulators as partners, not adversaries.

One bank implemented a pKYC and CDI model by sharing intentions at every stage. They ran new models alongside existing ones and sought approval at each “stage gate.” They began with low and medium-risk clients, excluding high-risk accounts. This created an evidence-based improvement, not a remediation effort.

The result: a collaborative regulator relationship, reduced friction, and greater freedom to innovate without fear of pushback.

2. Real risk lies beyond the paperwork

A strong sentiment among the group was that the industry is hyper-focused on collecting documents. For example, passports and proof of address, that provide surprisingly little actual risk management advantage. The most valuable risk signals are often hiding in plain sight within the bank’s own internal data.

Effective pKYC relies on behavioral indicators like PEP and sanctions hits, transaction alerts, and credit changes. These create a dynamic, real-time risk picture that static documents cannot deliver. There is also a view that small changes in aggregate can equate to a material change if observed within a shorter timeframe.

Defining materiality is a challenge that many banks are still trying to navigate and remains iterative. Creating business rules to accommodate the various scenarios that occur in isolation, or in parallel, is an obvious hurdle. Over time this could be something that AI lends itself to support.

3. AI is a tool within the toolbox

Contrary to market hype, leaders took a pragmatic and skeptical view of AI’s current role in compliance. The consensus was clear: AI is an iterative improvement, not a revolutionary force, at least not yet.

The group saw AI as “a tool in the toolbox,” not a standalone solution. The discussion revealed a paradox that continues to stall adoption. The industry demands near-perfect 99.9% accuracy from AI, yet leaders quietly admit that even their best human-led processes, with a four-eye check, are still wrong 15-20% of the time. A technology that gets it right 90% of the time is deemed “not good enough”.

Participants highlighted the difficulty of using AI for seemingly simple tasks. One example was normalizing a 14-field address for SWIFT payments. Ambiguity can cause AI to “build in the gaps” or even “hallucinate.” A “human in the loop” is vital to validate outputs and refine prompts. While AI boosts productivity for specific tasks, it remains unable to manage complex compliance decisions independently.

4. The biggest roadblocks are often internal

One of the most open themes of the discussion was the importance of internal culture. Within compliance teams, this can significantly influence the pace and approach to innovation. Several participants noted that compliance, when viewed as a “business enablement function”, plays a vital role in supporting organisational objectives and safeguarding both the business and its clients.

This positive dynamic is best fostered when there is alignment within the department. Senior leaders often provide strategic guidance, while junior staff implement policies with diligence. Meaningful cultural transformation, aimed at moving from a document-centric mindset to a pragmatic, risk-based approach, is most successful when championed by leadership. With support from the top, technology and process improvements in compliance can flourish, further reinforcing compliance as a valued partner in driving responsible growth.

The path forward is iterative and human-centric when implementing pKYC

Meaningful progress in financial compliance is not about a single technological breakthrough. It is about a combination of pragmatic strategies, such as taking regulators on the journey; a cultural shift toward data-driven, behavioral risk management; and the intelligent, iterative integration of new tools like AI.

The most advanced firms are realizing that technology is only as effective as the culture and strategy that guide it. By leveraging CDI, banks can enable practical, scalable pKYC, turning these insights into continuous, real-world compliance improvements.