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KYC processes are broken

Annually, financial institutions invest heavily in compliance to prevent financial crime. In fact, 1.28 trillion USD is invested every year, yet 2.1 trillion USD is laundered globally. Our current KYC processes do not have sufficient effect. To achieve the goal of detecting and preventing financial crime, we must transform the way we are doing compliance.

This article is based on Rikke Øksnes' presentation during our conference Compliance Disrupted 2021. You’ll find the recording of her presentation in the bottom of this page.

4 common KYC mistakes

There are several factors that can contribute to the insufficient KYC processes of obliged entities:

  1. Manual paper-based processes
    Lengthy processes for both customers and employees take away time from sales activities and risk assessments. More than 50 % of sales people in financial institutions spend 1.5 days per week onboarding clients, that could be used on revenue generating activities.

  2. Fragmentation and legacy systems
    The different steps of the KYC process are not connected, and employees are working in silos. Information and documentation are put in different systems, which makes it difficult to get a holistic overview.

  3. Weak AML Governance
    Unclear roles and responsibilities lead to gaps in the overall risk understanding.

  4. Lack of AML Competence
    An effective KYC process needs employees who truly understand the regulatory requirements and know how to fulfill them in practice.

Additionally, changes in criminal behavior and customer interaction affect how well KYC processes work. Reviewing your company risk assessment regularly is important due to the rapid advancements in technology. The technical innovation can benefit both criminals and customers, so keeping track of tech trends is necessary to adapt accordingly.

Digitization is critical for effective compliance

Ineffective compliance can lead to a bad reputation, regulatory fines and unhappy customers. If you don’t have effective systems in place you can lose customers, investors and talented employees.

Here are three examples of how digitization can benefit your organization:

Interaction with customers:

Developing solutions for digital customer communication is crucial for sales and KYC purposes. During the pandemic, 41% of customers have been unable to open bank accounts, due to the lack of digital interfaces. Easily available financial services, smooth customer experiences and user-friendly KYC processes, are all competitive advantages.

Interaction with data sources:

Collecting KYC data can take a long time and there are a lot of data sources, both public and private available, but manually collecting this data is quite a labor-intensive task. This can be automated by using APIs to query the information and return it directly into your system.

Interaction with IT systems: 

In many organizations the KYC process is fragmented, and compliance employees are working in different systems. A lacking flow of information makes the overview you need, difficult to get. Integrating CRM systems with a compliance solution, will give you a better flow of data and a better end-to end journey.

Get Rikke’s 5 tips on building a sustainable foundation for KYC, in the video below

 

Our Client Lifecycle Management solution allows you to digitize you compliance process! Read more about how we can help you:

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