How to Meet KYC and KYB Compliance Obligations More Effectively

No sector has been transformed as quickly and as successfully by digital technology as financial services. Pushed by the pandemic, people and businesses across the globe have embraced digital banking and payments at an unprecedented pace. By the end of 2021, more than two billion people were already active online banking users; by 2024 that figure is predicted to exceed 2.5 billion.

As more and more innovative Fintech providers have entered the market to meet escalating demand, competition is intense. For established businesses moving into digital services, and for new tech-driven entrants, the test they must meet is the same – to attract customers by offering helpful digital services and a seamless, rapid customer experience. The attention span of the average client is short; any hiccup or delay in their first interactions with a digital service is enough to persuade them to give up and move on.

For highly regulated businesses in payment and banking services, this is a huge challenge. As financial services have innovated and evolved, so have the techniques of fraudsters, money launderers and criminals. In this environment, robust screening checks are not only a regulatory requirement but an operational necessity – and firms are struggling. The recent APAC True Cost of Financial Crime Compliance study from LexisNexis Risk Solutions found that the projected cost of financial crime compliance across all financial institutions in APAC has reached $50.1 billion. According to the report, a combination of higher geo-political risk, tighter anti-money laundering (AML) and counter terrorist financing (CFT) regulations and evolving criminal threats are driving up the cost of compliance.

The biggest screening challenge for firms, according to the LexisNexis Risk Solutions survey, is around customer onboarding, particularly KYC checks and positive identification of PEPs and ultimate beneficial owners. Language barriers and difficulty in accessing relevant documentation mean that, for many, this step is a frustrating and inefficient experience that results in customers dropping off and compliance teams wasting time and money – on average it takes seven hours to resolve a KYC alert, and two thirds of firms expect alert volumes to increase in the near future. 64% of surveyed firms in APAC said that they had experienced delays in customer onboarding during the Covid-19 pandemic and 67% said that compliance had a negative impact on customer acquisition generally. Reversing this trend is essential if firms are to successfully compete in a crowded market.

So, what can financial services providers do to improve the efficiency of customer onboarding, without compromising on the robustness of checks?

The answer lies in technology. Digital transformation calls for a more sophisticated, multi-layered solution approach to financial crime compliance, one that is focused on assessing and mitigating risk. But too many firms are still relying on manual processes and limited data sources.

Automation and digitisation of onboarding and KYC checks is a highly effective way of creating a rapid but robust compliance process that does not disrupt the experience of legitimate customers. LexisNexis® Risk Solutions has teamed up with award-winning RegTech company Know Your Customer to provide a highly efficient, comprehensive and robust onboarding and KYC solution for clients.

Know Your Customer’s modular solution, delivered through an intuitive SaaS platform as well as a Restful API, allows firms to build a customised corporate onboarding process that exactly fits their needs and meets the three most significant compliance challenges:

• KYC Workspace manages the workflow of the compliance function by digitizing and automating the activities of compliance teams across multiple offices, business functions and locations.
• KYC Data provides real-time access to more than 500 local company registries worldwide, including automated data extraction and shareholder identification from official documents.
• KYC Review provides live monitoring and perpetual KYC refreshing, so firms can be sure they are compliant at all times. The system automatically ensures that the client information held by compliance teams is always accurate.

The combination of Know Your Customer’s workflow capabilities and industry-leading registry coverage with high-quality LexisNexis Risk Solutions AML data and screening solutions means that clients can create a transparent, holistic view of each customer, where all risk factors are gathered and processed in one centralized location.

The integration of LexisNexis® WorldComplianceTM Data into the Know Your Customer solution gives users the confidence that screening processes will make use of the most comprehensive, robust, and up-to-date datasets available. WorldComplianceTM Data covers these critical areas:

• Politically exposed persons (PEPs) – almost two million structured profiles of PEPs, which are organised by administrative divisions to help define the levels of power, prominence and potential risk represented by individuals, their family members and key associates
• State Owned Enterprises – a comprehensive list of government-owned and government-linked corporations and businesses, sensitive enough to capture entities with 1% investment or ownership by a government organization or state
• Sanctions – aggregated information from the most important sanctions lists worldwide, including OFAC, the EU, UN and UK. WorldCompliance Data also provides profiles of businesses, vessels and aircraft owned or controlled by anyone on an OFAC, EU or UK sanctions list, as well as entities that are not directly named on sanctions lists, but which might pose a risk because of their relationship to a sanctioned subject
• Enforcements – from more than 1,600 enforcement sources worldwide, including the SEC and FBI
• Adverse media – profiles that have been linked to illicit activities from more than 30,000 news feeds worldwide

All companies, shareholders, beneficial owners and individuals are screened automatically against comprehensive LexisNexis Risk Solutions watchlists at the time of onboarding and then on an on-going basis automatically, all managed from one integrated control tower. This centralisation of all KYC and AML activities means that onboarding times can be reduced from up to 26 days to less than one day.