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The expansion of anti-money laundering (AML) and counter-terrorist financing (CTF) regulations has raised the bar for due diligence on businesses, increasing costs and putting pressure on operational teams to maintain a smooth corporate client onboarding experience.
Because falling short on AML obligations can lead to steep penalties and reputational damage, we explore the need for Know Your Customer (KYC) process improvement, the ways automation can improve efficiency and customer service, and how operational leaders can build a strong case for KYC transformation.
The case for KYC process improvement
While digital transformation has been a continuous trend over the last decade, the less glamorous “back office” world has moved at a slower pace than customer-facing experiences. Investments made are yet to reduce reliance on manual processes. Recent research reveals that most AML compliance budgets still go to human resources, rather than technology and data. Given the rapid changes in the regulatory landscape and the complexity of operating in multiple jurisdictions, KYC teams often find themselves struggling to keep up.
This results in inefficiencies and friction within the corporate client onboarding process, damaging customer experience, growth and profitability of financial services, and exposure to regulatory censure and heavy fines for AML regulatory breaches.
Operational leaders have the opportunity to empower onboarding analysts with value-driving solutions that streamline the KYC workflow, shifting manual work onto software and freeing up analysts to focus on other priorities.
What are the key benefits of KYC process improvement and automation?
Improving the KYC process delivers a range of benefits across the customer journey for internal and external stakeholders.
Improved client relationships
Average corporate client onboarding can be as much as 60 days, and while this time is not just spent on KYC, transforming the process to make it speedier and more efficient can significantly reduce onboarding durations. Automation also gives compliance teams more time and resources to manage high-risk cases and focus on customer experience.
Managing risk more effectively
KYC automation reduces the risk of human errors and missed steps, while also enabling banks to quantify risk more accurately by accessing a wider array of customer data points.
Productivity and efficiency gains
Automation reduces the time spent on KYC data and document retrieval, collection, analysis, and management by up to 98 percent, by streamlining previously manual processes. This enables you to scale your onboarding and compliance functions without adding additional team members.
End to end financial improvement
Increasing levels of automation lower not only the costs of onboarding corporate customers, but also the long-term costs of KYC remediation and periodic or event-driven refresh. FIs also benefit from reduced risk of fines with improved compliance, while catching relevant cases faster and more reliably.
Building a business case for your KYC transformation project
Given that KYC transformation touches every layer of an organization, it can be a very complex undertaking to manage. A successful KYC transformation project requires buy-in from multiple stakeholders—this starts with a considered business case.
Key considerations for your business case
Your business case for KYC process improvement should outline the precise requirements to achieve your transformation goals and set realistic expectations for the rest of the business about what will be achieved, and when and how much it will cost. This includes:
- Quantifying the scale of the issues to be solved.
- How your project will solve these and what ‘good’ looks like.
- Timelines and structured goals to manage scope and delivery throughout the transformation journey.
- Resources required, including team, capital, and technology.
- Reporting and review processes to keep the project on track.
Priorities for your KYC process improvement project
KYC process improvement is a holistic process—for instance, changes in one area of your workflow may highlight deficiencies or opportunities in others. To prepare for this, operations teams should consider priorities across the KYC and compliance landscape, including:
- Policies – identify any policies that may need to be redesigned to meaningfully support the shift to greater automation, including how future policy changes will be managed while the program is underway.
- People – target the removal of organizational silos as well as planning how job roles may change and what communications and training requirements might be required as a result.
- Processes – identify opportunities to improve and streamline processes, bringing relevant groups and stakeholders together to map out the new process design.
- Technology and data – understand the data sources you need and why you need them. More data is not always the answer, particularly if it adds complexity to a process without necessarily improving risk detection.
Managing expectations for digital transformation
Transforming your KYC processes is a journey based on incremental improvement, not immediate change. FIs should seek to adopt an approach that is gradual, deliberate and evolutionary. Your choice of a technology transformation partner will also have a significant impact on your pace of change.
Working with third-party vendors can provide valuable knowledge. Encompass has worked with leading global banks on complex KYC transformation projects, enabling us to bring firsthand experience that can accelerate the time-to-value for your project. We recommend customers identify lower-risk markets or customer segments that can be automated first, while also planning long-term KYC process improvements.
Achieving long-term value in KYC process improvement
A well-conceived and well-executed KYC process improvement project combines short-term wins and long-term gains. Choosing the right transformation partner is key to achieving your goals, as well as evolving your project over time. Encompass’s KYC automation platform helps leading FIs streamline KYC and AML compliance tasks to reduce costs and improve customer experience, with features including:
- Trusted KYC data sourced via pre-built integrations with global primary and premium KYC data providers.
- Intelligent process automation for the smart retrieval and collation of data and documents.
- Streamlined corporate structure unwrapping and UBO verification and visualization.
- Digital KYC profile produced for every search, complete with full data attribute lineage and source documents providing the foundation for KYC refresh, KYC remediation, and perpetual KYC (pKYC).
- Full audit trail creation to prove end-to-end AML compliance to regulators, dynamically tracking every action taken in real-time.
- API connections to transfer information between workflow platforms and Encompass to enhance your existing corporate client onboarding processes.
Learn more about KYC transformation
If you would like more guidance on building a case for change and KYC process improvement, get in touch with Encompass and book a consultation with our experts or explore our KYC automation platform benefits to understand the impact and use cases of implementing digital KYC processes.