92% of businesses believed that the existing Know Your Customer, KYC onboarding procedures cost about $28.5m. According to a Thomson Reuters study. On the other hand, according to UN estimates, the cost of international money laundering yearly ranges from $800 billion to $2 trillion, or 2-5% of world GDP.
Regulatory organisations are pressuring firms further by upgrading Anti-Money Laundering (AML) compliance rules in an effort to boost detection rates in light of this gap and reports that just 1% of money laundered can be found and dealt with by the authorities.
This blog discusses five crucial actions a company must take to fulfil its Know Your Customer (KYC) onboarding and AML compliance obligations.
Data gathering, evaluation, and customer verification
Regulated enterprises must determine whether new customers are bad actors at the point of KYC onboarding before engaging in any transactions with them. A company needs at the very least gather the necessary information to prove the customer’s visual identification. Need to be together with their name and address. Depending on the risk appetite of a business. More improved due diligence may be used in light of the rise in fraud instances. Verification of the date of birth, identity documents, and third-party account information are examples of additional information.
The business registration number, name, registered address, and date of incorporation, as well as details on the company officials and Ultimate Beneficial Owners. It should all be included in the KYB onboarding verification process.
The information asked can be tailored using conditional logic (a set of rules) to resemble legal logic by employing a digital onboarding system with sophisticated APIs. The system stores the data after it has been uploaded and checks it against the data sources stored on the platform. RAG scoring is then used to display the results: Red recommends not to proceed. Amber indicates that additional checks are needed, and Green indicates that there is a precise match with the appetite for risk. Customers can upload their documents or use biometric facial recognition from anywhere. At any time thanks to digital solutions housed in the cloud, which means a result can be provided for verification within seconds.
Information Sources:
Regulated enterprises should align themselves with a provider that can deliver reliable data from a number of sources—quickly. They are in accordance with GDPR requirements—in order to perform the verification necessary above. While a slow onboarding process is likely to result in a bad customer experience. Using manual methods and look-ups can be very time-consuming and expensive. The consumer will leave if the process is disjointed and there are too many obstacles to clear. It will leave the company with a broken sales funnel. In 2020, 63% of European consumers surveyed reported having given up using a digital banking app during onboarding.
Client Due Diligence on-going
KYC compliance is not necessarily a retrospective process that happens after onboarding; it can also be a proactive procedure that gives an organisation a competitive edge. Successful continuing client due diligence (CDD) reduces risk, improves customer awareness, and fosters opportunity. A robust CDD approach will also reveal situations that call for Enhanced Due Diligence (EDD).
The past few years have demonstrated to us the importance of good continual monitoring for achieving compliance. Ongoing basic client due diligence is crucial to determine whether a customer enters a higher-risk category.
Correct KYC Data
In terms of continual monitoring and correction, a strong KYC/KYB onboarding system will be vital. A company will gain from employing an automated platform to store its compliance data as the only source of truth. When remediation is necessary, utilising a set of “rules” to carry out remediation initiatives makes the process much simpler.
Campaigns for KYC onboarding or remediation can be distributed in bulk using an automated platform. In comparison to any manual process, customers might receive personalised communications that are linked to their records.
If prompted by a significant incident or a regular review, remediation can be successfully managed, made simple, and in line with GDPR requirements.
Regulatory Inspection
Regulators do not anticipate businesses to completely eradicate fraud. They do, however, expect to see evidence of a risk assessment and systems in place to ensure due diligence. For CDD, it is essential to have a secure audit trail of any alterations made to the customer record and continuous interactions.
Moreover, a robust compliance programme can be built using the digital audit trail to cover the whole client lifecycle. Businesses that want to expand will require a strong KYC onboarding programme that not only scales with the company. But also produces an audit trail that is simple to administer and can be utilised to safeguard the company.
