Banking on customer due diligence: how intelligent technologies can streamline compliance
Banks are currently facing what has been described as their biggest test since the 2008 financial crisis. In this environment, staying focused on activities like anti-money laundering (AML) compliance has never been more important – as Enda Shirley explains
With organised crime profiting from the pandemic, financial institutions have a moral as well as a regulatory duty to perform rigorous Know Your Customer (KYC) and Customer Due Diligence (CDD) checks.
How do they do so whilst crucially minimising operational costs and customer friction? With real-time, automated, machine-learning powered platforms that can provide the customer insight regulators demand whilst freeing up staff to work on higher value tasks.
Cost and friction
The importance of cracking down on global money laundering should by now be obvious. In the EU, only
an estimated 1% of illegal proceeds are currently seized by authoritiesi. International standards body the Financial Action Task Force (FATF) is warning that COVID-19 has given organised crime groups (OGCs) even more opportunities to generate such funds — through schemes such as the sale of counterfeit medical equipment and fraudulent claims for government stimulus moneyii.
The problem for financial services firms, especially the smaller ones, is that the quantity and quality of data that must be collected to comply with KYC/CDD checks has become increasingly onerous in recent years. For example, they must now identify the full Ultimate Beneficial Owner (UBO) structure and source of wealth of any new corporate customers. The extra time required to collect and analyse this data could slow onboarding and damage the customer experience in an era of open banking where competition is fierce.
A smarter approach
It may be tempting to relax the rules, but the price of non-compliance could be significantiii. Financial institutions must therefore perform a delicate balancing act: doing enough to keep regulators happy without creating too much customer friction. The challenge is that many are still labouring under the manual processing of applications, which relies on spreadsheets and other legacy technology, plus employees’ own interpretation of the regulatory compliance environment. This may introduce delays and potentially costly human error.
Banks can tackle these challenges by seeking out intelligent compliance tools featuring real-time processing, robotic process automation (RPA) and machine learning. These offer a smarter way to perform KYC/CDD checks, establishing a holistic view of each customer during onboarding whilst performing ongoing due diligence (ODD) checks and reviews to maintain compliance as customer circumstances change.
With the right technology provider, banks of all sizes can proactively mitigate the financial and reputational risks of non-compliance whilst enhancing customer relationships through speedy processing.
To find out more on how we can help you streamline customer compliance checks while boosting staff productivity and cost efficiency, get in touch today.
i. The world’s dirty money by the numbers, Arnau Busquets Guardi, Politico (May 21 2020)
ii. COVID-19-related Money Laundering and Terrorist Financing, FATF (May 2020)
iii. BNP Paribas sentenced in $8.9 billion accord over sanctions violations, Nate Raymond, Reuters (May 1, 2015)