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Some things are best done the old way. Modern small-batch craft brewers, for instance, have revived traditional methods of making beer, and vinyl records, with their richer sound and tactile experience, are all the rage again.

But many more old practices should be consigned to the dustbin of time. Chief among them, the creaky mechanisms long used in customer-identification compliance.

In an age when automation is streamlining the way companies meet their regulatory obligations, it would be foolish for firms to deploy hit-and-miss 20th century processes to meet 21st century regulations. That’s especially so when regulators expect even the most basic of requirements to be met with the fullest, quickest and most accurate of responses.

It’s a simple fact that the old means of compliance can no longer meet those obligations and companies that don’t yet understand that may find themselves facing severe penalties.

Probably the best way to illustrate the dangers that bedevil companies insisting on manually KYC-ing companies and individuals is to compare those clunky processes with the sleek experience of carrying out the same tasks using Know Your Customer’s case-management platform.

Effective document verification vs guesswork

Under new structures, best-in-class KYC practices demand that only original documents be submitted for compliance, not certified copies. Our software automatically retrieves the necessary documents and data from their original sources through APIs and other digital links with issuing bodies such as company registries. In this way, we can guarantee the veracity and authenticity of the documents we gather and on which we carry out key searches.

By contrast, many manual search processes are built on the shaky foundations of copied documents, facsimiles that can potentially carry little or no verification of authenticity.

It’s glib to say so, but it is worth stressing nonetheless, that copies are not official documents, and official documents are all that will legally cut the mustard today. After all, what guarantee can a copy offer that it’s based on a legitimate source or certifier? And without prior certification of a certifier, there will always be questions over the validity of a copied document.

Trusted data vs risky records

You may argue that copies of personal documents certified by a trusted party — a solicitor, for instance — are sufficient. The simple response is: no, they’re not.

A process that relies on certification without the need to provide hard evidence that the certifier has indeed done their job properly, is shaky at best. The best way to ensure proper authentication is to take the certifier out of the loop altogether and concentrate on verifying the official document for authenticity to the highest level.

To this end, our virtual compliance desk takes those documents, subjects them to international algorithmic checks and compares them against more authentication markers than any individual is able to do.

The same technology that allows us to link seamlessly into a rich source of document archives also automatically inspects and verifies that retrieved data for authenticity. For something so quick — it takes mere seconds to carry out – the process can be the difference between successful onboarding and regulatory penalties.

High-tech checks vs human fallibility

AML laws now require companies to employ technology that is dynamic and fit-for-purpose in their search and clearance processes. The mind is a wonderful machine but it’s no match for the latest techniques in forgery identification.

The client that has opted for Know Your Customer’s automated solution will deal only with ID submissions that have been run through robust software security checks built on the same artificial intelligence technology behind many international airports’ verification systems.

And while, ultimately, that client will have to decide if the case presented to them meets their risk profile, they can rest assured that the information they’re working on has been gathered, authenticated and packaged to the highest technological standards available.

There are many reasons, practical and financial, for replacing manual KYC processes with a dynamic, all-in-one automated solution. But probably the one we need impress most is that Know Your Customer’s system is purpose-built to meet today’s – and tomorrow’s – regulatory requirements. While other corporate KYC products exist, none link all necessary processes into one standardised, central case management platform. Know Your Customer’s solution was built as a compliance tool for compliance professionals.

As strict new laws are now enforced with the threat of imprisonment for board members and damaging corporate fines, the need to upgrade has never been greater.

Last updated on April 23rd, 2023 at 07:22 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.