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Modern life is complicated.

We have more purchasing choices than ever, more ways to keep in touch, more ways to work and more ways to spend our leisure time. Our personal, business and financial relationships are more complex and internationally intertwined meaning that our decisions have the power to influence more people.

That’s also presented us with more risks. Interconnectivity has enabled the easy spread of malicious and dangerous information designed to frighten and divide communities. It’s also opened new avenues for criminal activity across borders and often without detection.

Inevitably, that’s resulted in more legal and regulatory structures to meet those challenges and for companies seeking to navigate the dense new risk minefields, technology is making things easier.

As we’ve shown in previous blogs, Know Your Customer offers an automated solution that is taking the complication out of day-to-day life for companies’ KYC departments. It’s putting power in the hands of the corporate compliance officers entrusted with implementing measures to protect their businesses, reputations and assets from the influence of money launderers or agents seeking to misappropriate funds for terrorism and other perils.

  • It’s making KYC scalable, meaning customers can take advantage of its functionality as much or as little as they need, without having to invest in new manpower or equipment;
  • It pulls all strands of the KYC process into one digital package, from pre-deal screening to rolling case management;
  • It has inbuilt functionality and APIs to cope with everything from transliterating Chinese and non-Roman scripts to automatic document search on international company registries;
  • It utilizes state-of-the-art security and verification software that ensures the veracity of documentation, and;
  • It is reducing customers’ costs and cutting KYC-dedicated man hours.
  • And it’s doing it in ways that traditional paper-based manual processes simply cannot.

Crucially, automation excels in meeting the core pillars that shape the new KYC regulatory environment: that it must be dynamic and take a risk-based approach.

In the past, establishing the risk levels of new clients, new operations, new markets, and so on, had been a simple one-size-fits-all, box-ticking exercise. It was easy, but it wasn’t very good: threat levels could often be woefully underestimated for high-risk subjects and low-risk targets could face unnecessarily stringent checks.

That changed in 2012 when the Financial Action Task Force proposed a system of assessment that would enable compliance departments to ascertain a target’s threat level rather than simply assume it. In theory, this risk-based approach would give clients banks and companies the flexibility to stress-test the threat levels of potential clients and, importantly, give them a frame of reference against which they could tailor their risk-mitigation measures.

In practice, it’s taking time to bed in. But the advent of automated systems, especially Know Your Customer’s, is accelerating its acceptance and deployment.

Our solution’s inbuilt alerts and checks test key risk parameters on a regular basis, and informs the customer of any changes to their KYC subject’s risk assessment. In this way, it acts as a customer’s compliance eyes and ears, ensuring they meet the standards expected by regulators.

So, for instance, when a customer finds that its interactions with a particular client increases substantially over a short period of time, or when evidence emerges of a client’s undisclosed dealings with a high-risk entity, our solution will flag those changes.

Incidentally, that programme of checks remains in the system for the life of the relationship with the customer, similar to a diarised manual process but with the added certainty that a standard process is being followed. Additionally, the system is configurable to a customer’s risk profile, ensuring consistency of assessment over time and across borders, eliminating potential disparities in human assessments.

As we head into a key new year for new corporate regulations, it’s going to be crucial that companies are in control of their KYC obligations. It’s no longer enough for a compliance team to simply SAY it’s doing its best – it must show in detail that it is taking EVERY possible precaution to iron-clad itself against financial abuse.

With a devastating string of deadly incidents this year reminding us why regulators are toughening rules, companies have no excuse for sitting back and letting the automation revolution pass them by.

In our next series of blogs, we’ll take a deeper look into some specific KYC and anti-money laundering challenges around the globe. Click here to be added to our newsletter!

Last updated on March 21st, 2024 at 01:33 pm

Claus Christensen

Claus Christensen is the CEO & Co-Founder of Know Your Customer. His vast array of previous experiences includes founding a technology company that develops email server infrastructure products for 60,000+ global customers and serving as VP Electronics at Thielert Aircraft Engines. A regular contributor to leading industry publications and a recognised expert in the anti-money laundering and financial regulation space, Claus is also the host of the RegTalks podcast and a senior lecturer of the Centre for Finance, Technology and Entrepreneurship (CFTE)’s RegTech Course.