Eight reasons to digitalise KYC and AML interactions

There are quite a few reasons why digitalising KYC and AML interactions can be beneficial for your business. Here is a selection of them:

Digitalised processes can strengthen your security. Automated document verification processes can be more thorough than manual checks. Any anomalies, poor quality data and discrepancies are either flagged or not allowed into the system (in the case of a poor-quality document, for example).

As well as meeting regulatory requirements, digital AML and KYC processes can be tailored to meet your internal risk matrix so that you can create your own workflows, based around the risk level of the client, how you would like them to navigate through the process and the documentation that is required.

With regulations continually changing, it is likely that you will need to carry out KYC and AML checks more and more often and more thoroughly in the future. At the same time, document quality is a concern: you want accurate data and records for your files and regulators are also demanding exceptionally good quality documents to limit risk.

Despite the need for better quality documents, using traditional KYC and AML collection methods, clients often inadvertently send poor quality documents. Poor copies, blurred imagery and unclear data that can trigger lengthy manual processes to seek out better quality documents. The collection process then needs to be started again, risking delays and unhappy clients who do not always understand why they are being asked to send the same information a second time. Digitalised KYC and AML processes can increase quality because software automatically analyses and checks incoming data submitted by your clients for clarity and quality. Documents that are not appropriate quality for your needs are rejected before they can make it into your systems. Clients can only upload clear documents, and it is easy and quick for them to do so.

Manual-heavy processes can leave room for clerical errors, especially when your teams are uploading client KYC data by hand into systems, as is often the case in traditional AML and KYC onboarding and update processes.

Machines can do more than simply reducing administrative errors and transferring data correctly into your systems. Identification processes are highly sophisticated and spot discrepancies that may not be noticeable to the human eye. Image analysis software that compares a person’s ID document with a photo or video and related sophisticated algorithms can be more efficient in spotting potential inconsistencies, for example.

Because of their very nature, KYC and AML systems also give you more digital evidence. Using electronic data trails and logs, it is easier to prove that you have appropriately executed due diligence and client file update campaigns, especially if you use timestamping and electronic signatures.

You are legally required to store documents as evidence that you have carried out due diligence, and these are easy to classify and keep in dematerialised form.

Understanding the overall status of your client files, which documents need to be updated and files that may need to be verified more regularly can be challenging if you are dealing with paper files and non-automated reporting. When your records and customer due diligence is digitalised, data is easy to compile and regroup into different reports – everything can be viewed and exported at the click of a button. Files which need to be updated, campaign dashboards and the status of all or some of your data is at your fingertips with simplified search and reporting functionality. Searching for certain types of files, based on your needs, is also easy thanks to filtering options.

Fully remote relationships may not be suitable for every business; if you are a private bank, for example, your clients may appreciate a hands-on and personalised interaction with you. On the other hand, retail banks may find that customers want fast and efficient onboarding and KYC/AML update processes that take a minimum of time to complete.

There are ways to cater to both scenarios. For firms, whose clients want a more hands-on experience, initial client onboarding can take place at an in-person meeting. Additional digital identification checks can be carried out remotely as a second step. KYC and AML updates can then either be digital, in-person or an appropriate combination of both.

For regulated firms where fully remote client identification and KYC file updates are the best options, all processes can be digitalised, redefining the customer experience and interactions.

Digital identification tools can make it easier to manage, review and carry out KYC and AML campaigns. A digital platform such as KYC Manager will allow you to send remote requests on an ad hoc or regular basis to specific customers and clients. These can either be to comply with periodic review obligations or to carry out targeted digital AML and KYC updates of customer files.

Onboarding clients and collecting KYC and AML often involves multiple parties in-house. While your compliance teams are ultimately responsible for ensuring you are operating in line with regulations, using traditional onboarding and document collection methods, they typically do not liaise with clients directly. Instead, they rely on front office teams who collect necessary documentation, completing client AML and KYC files.

For their part, client-facing teams are doing their best to compile the right KYC and client information, but they are hampered by client delays, reception of documents of varying degrees of quality and documentation being sent in multiple different formats (in-person, via email, post, etc.) and then manual update processes. The result is that while KYC and AML client file updates are being carried out, your business has little oversight of the completeness and progress of campaigns.

Digitalising client onboarding and KYC and AML updates streamlines the process for all parties. Compliance retains control of the campaigns and they can set up new campaigns as regularly as they need. They can send reminders and follow-ups as regularly as needed. Front office teams have access to the same system and viewing rights of relevant client files, allowing them to see if clients have updated documents and giving them the ability to remind clients if they have not when they are interacting with them as part of their usual activities. Relevant back-office teams also have access to the system as required.