Republished: September 20, 2018, updated to reflect the latest industry news, trends and insights. Know Your Customer KYC procedures are a critical function to assess and monitor customer risk and a legal requirement to comply with Anti-Money Laundering AML Laws. Do you know your customer? After all, identity theft is widespread, affecting over 13 million US consumers and accounting for 15 billion dollars stolen in 2015. The mandates that any individual conducting financial transactions needs to have their identity verified. The desired outcome is that financial institutions accurately identify their customers: A critical element to a successful CIP is a risk assessment, both on the institutional level and on procedures for each account. You need to make sure any potential customer is worthy; customer due diligence CDD is a critical element of effectively managing your risks and protecting yourself against criminals, terrorists, and corrupt Politically Exposed Persons PEPs. Up to now, regulations call for a risk-based assessment. However, as of January 1, 2017 The New York Department of Financial Services NYDFS requires specific measures of. KYC News Around the World The complexity of know your customer KYC regulations continues to bite banks and is acting as a severe deterrent to the financing of trade. South Korean banks are setting barriers when it comes to offering services. Combining mobile network carrier data with existing KYC sources is a real game-changer. One month, four months? Welcome to the well-meaning but truly inefficient world of onboarding and KYC — where financial services firms are mired in manual processes and where wait times are forever, and expensive. In spite of heavy investments, FIs have been unable to optimally counter the growing peril of money laundering. Money laundering is an ever expanding problem for the American insurance industry. An increasing number of individuals are using insurance accounts to hide money from federal taxation agencies — and the industry needs to step up and tackle the situation head-on. The Monetary Authority of Singapore MAS is piloting a national know-your-customer KYC utility for financial services, based on the MyInfo digital identity service, jointly developed by the Ministry of Finance and GovTech, the lead agency for digital and data strategy in Singapore. This is creating more and more challenges for operational managers to build flexible, scalable processes and systems to be able to address use cases that have not yet even been articulated. These changes came into effect on 16 September 2016. KYC Resources The CDD Requirements to collect substantially more information to open financial accounts need not be a burden. By using intelligent, sophisticated identity verification methods, the process can be virtually automated while retaining full compliance and risk tolerance. With the passing of the US Patriot Act in 2001, the concept of customer due diligence became law. Since then, the US has strengthened CDD requirements, and similar laws are now in place around the World. As of 2013, according to PwC, at least 74 countries have AML legislation with some form of CDD requirements. Financial institutions have a lengthy list of Anti-Money Laundering compliance requirements. They face a mountain of risks from a large number of financial transactions, each of which can carry significant risks. AML compliance programs are built on a systematic review of a large number of financial transactions. The focus of this review has to be on triggers that identify suspicious transactions or customers. KYC Know Your Customer is not just a compliance issue anymore. In terms of human resources, senior management is spending increasingly more on time on KYC and Customer Due Diligence CDD , staff is getting bogged down on fulfilling compliance requirements, and customers are getting frustrated due to delays and difficult onboarding. In recent years, there has been an increase in both the frequency and the magnitude of fines imposed by financial regulators against banks for failing to comply with anti-money laundering AML and know your customer KYC rules. A common response to this disciplinary action by a financial institution is to de-risk, reject or close the accounts of groups of customers considered high-risk based on increasingly strict AML standards. What two words can strike fear in the hearts of chief compliance officers and their staff? Automate KYC to significantly cut time spent in manual functions. Customers can provide information electronically and their identity validation and screening conducted automatically; only the results need reviewing by BSA staff. This process will create a record ready for audit, notify customers for any additional information, and provide automatic reminders to make sure that registration and validation process is complete. AML and KYC compliance can be especially challenging for companies that are looking to expand outside their home country. Being compliant requires staff to learn and understand the laws, regulations, rules, and standards applicable in each market to ensure adherence. Because , compliance departments may be faced with a heavy workload as they face a steep learning curve. Is your financial institution FI set when it comes to operating a successful AML watchlist? Is your watchlist screening efficient, comprehensive, cost-effective and reliable? For banks that have taken advantage of these new opportunities, one huge benefit is revenue growth potential, meaning what was once considered a cost is now a competitive advantage. APIs offer a viable option for FIs needing to satisfy compliance requirements while securing a competitive edge. All workflows, where possible, should take advantage of digital processes. Full digital KYC is the near-future and companies that fight it will find themselves on the losing side. Paper trails that are slow, expensive and prone to errors make for excellent hiding places for corruption, tax evasion and other financial shenanigans. With eKYC, the speed and transparency of digital processes offers a way to onboard good customers and detect bad actors and prevent them from abusing an account. One of the biggest KYC challenges faced by respondents was the amount of time spent on onboarding new clients. A recent survey revealed that the average time to onboard a new client is 26 days — and expected to rise. Take the necessary steps to ensure that your organization meets compliance obligations. The traditional onboarding process for new clients is a time-consuming, labor-intensive, manual process that can lead to frustrating delays. Find out how electronic identity verification enables financial institutions to comply with tough industry regulations without burdening customers.
