Switching from manual to digital: How to better handle KYC & AML processes in 2020?

Switching from manual to digital: How to better handle KYC & AML processes in 2020?

The second day of this year’s unique ICT Spring edition brought together local and international experts around the topic of Fintech. The morning conference entitled “Beyond Covid-19: a world of opportunities for Fintech companies”, which took place on September 16th, had experts discuss the latest digital innovations, with a focus on the post-Covid-19 crisis.

Our co-founder Jonathan Prince took the stage during the morning and sat with Pascal Bughin, Chief Operations and Compliance Officer of La Mondiale Europartner, an insurance company that is part of the French Group AG2R La Mondiale. During this fireside chat, Jonathan and Pascal addressed the topic of how to better handle KYC & AML processes in 2020, and the need to switch from manual to digital practices in the interest of answering the increasing number of regulatory constraints.

What are the challenges that AG2R La Mondiale faces due to the increasing regulations in KYC & AML?

LMEP (La Mondiale Europartners), as other insurance firms, is increasingly constrained by the regulatory environment, driving us to adapt our businesses to be more sensitive to heightened requirements. Dealing with multiple regulatory constraints while maximising value is a multifaceted problem. One of our main challenges is to have the infrastructure in place to measure and evaluate our adherence to the requirements without additional resources and heavy paper-based processes. In addition, improving the quality of the large volumes of data that we collect and increasing the frequency of data updates is also paramount to our business.

For instance, when talking about AML due diligence, until now LMEP was only updating client files when an operation occurred, which would create an absence of updates for a long period of time.  This process, in addition to being paper-heavy, was not customer-oriented and generated a bad customer experience since the setbacks appeared at the time the client wanted to perform an operation on his contract.

Pre-digital operations typically use electronic communications such as email, with either attachments or links to shared drives, to pass task outputs along the chain of work. While this can be made to work, it lacks a control infrastructure to enforce individual responsibility and accountability and to ensure coordination across departments. These inefficiencies have the potential to create gaps in our firm’s defence against money laundering.

Thanks to KYC Manager, a digital customer lifecycle management platform, that we are integrating into our business in collaboration with Finologee & Harmoney, we are trying to reshape the way we manage our clients through their entire lifecycle.  This tool will allow us to optimise the management of our KYC-related processes, files, and data sets to comply with a wide range of compliance obligations. Moreover, using an intelligently automated KYC solution can establish a digital process with a formal workflow across all stakeholders: insurance brokers, compliance department and end-customers, allowing the creation of a digital client profile that will persist throughout our institution’s relationship with the client.

A system like KYC Manager will not only help us mitigate fraud and money laundering but also make our processes more efficient and paperless.

What are the opportunities offered by digital KYC for your firm?

Innovation and digitisation are a key focus area for the AG2R La Mondiale Group. We are confident that moving from manual to digital workflows will allow us to enhance our business in many ways.

  • Firstly, digital KYC will empower our employees to focus on value-add work and reduce manual tasks through automated data collection, validation, and update processes. Through deploying paperless workflows, we will be able to reduce errors, costs, and timelines, and increase our ability to meet client expectations for timely service.
  • Secondly, we will be able to drive even greater value via an agile and collaborative platform and ensure our compliance processes can meet regulations today and in the future.
What would make it a success?

Well, as of today we could say that we have already had our first success, as we were able to convince on of our major partners to cooperate with us in the design of this platform and to test it with their entire client-base.

However, once launched, it will be important to analyse some KPIs and compare them to the ones from previous paper-based campaigns, to really understand the impact of the solution. Some KPIs to keep mind will be: the conversion rates; the quality of the data provided by the clients; the number of exchanges between the partner and the clients to validate their data; the time that the compliance department needs to validate the new client’s risk scoring; the speed to extend this digital process to other partners; the possibility to adopt this tool for other regulatory obligations, etc.

Do you have any tips to share with other insurance firms or large financial institutions?

Today, co-creation with start-ups and ICT vendors is the key for financial services institutions to accelerate digitisation and automation.

For instance, for us as an insurance firm, we need our fintech providers to understand what are we trying to achieve with our business and how do we want to make our clients life better and easier, and then they can bring all of the support and the solutions that we need to achieve those goals in a more effective way. Therefore, building trust with the fintech partners will be the first step towards working together.

On the other hand, it is vital to rely on the fintech’s technical skills, but it is also important to always highlight and make clear the level of quality that we want to offer to our clients. Even if we are just developing a proof of concept, the client’s experience must be positive.

Finally, it is also essential to collaborate with the brokers on this co-creation journey. We will not succeed by forcing our partners to use a new process without demonstrating them the added value of it.  Hence, it is crucial to select the right partner to develop a proof of concept and define the scope and objectives together.