Self-evaluation: Does it make sense for you to invest in a KYC system?

Meo
September 12, 2024
5 min read

Both the legal and financial industries are experiencing a significant shift in how Know Your Customer (KYC) processes are managed.

Manual methods, once a standard, are being replaced by automated systems. This change comes from increased global business, more regulations, and complex financial crime.

Clients want faster service.

Regulators impose large fines for mistakes.

Automated KYC systems offer a way to address these issues.

Considering the shift from manual to automated KYC processes? This guide helps you evaluate your current methods against the potential of automation.

Estimate how much time you spend:

When you get a new client

How long does it take for one of you to:

  • Write an email/ ring and ask for information?
  • Follow up (if the client doesn't reply)?
  • Check ID?
  • Check PEP status?
  • Check for sanctions/adverse media?
  • Make the matter and client risk assessment?
  • Store the information in the correct location?

What is the salary of the person that executes these tasks?

If it's a corporate client:

  • Do everything mentioned above to verify the beneficial owners?
  • Make sure that you know all the beneficial owners?
  • Verify the company information in official registers?
  • Check the company for sanctions/adverse media?

And what does it require from your clients?

Consider the client's perspective:

  • Multiple requests for information, often redundant
  • Lengthy wait times during the onboarding process
  • Frustration with repeated follow-ups
  • Potential loss of business opportunities due to delays
  • Confusion about the extent of information required
  • Concerns about data privacy and security

To ensure that these steps are being followed:

  • Ongoing monitoring of your clients?
  • That the manual procedures are updated on a regular basis?
  • Ongoing control of the manual procedures?
  • Correct documentation of risk assessments when the relationship is initiated and if it changes?
  • That verification of data can be documented?
  • An overview of all your clients' risk profiles
  • An overview of the number of clients that are PEP
  • That all client relations have been approved
  • That you know and remember when you need to re-verify your clients' data
  • That there isn't any personal information on clients saved in emails?
  • That all client data is archived and timely deleted
  • That you know exactly who has access to what information and can document who has or has had access.
  • That you can tell your clients which data you handle and why.

How likely is it that you'll make a mistake or forget a step when you are busy?

When there is an audit

  • How much time do you need to prepare for an audit when you have to document what you do and the evidence is lying in emails and folders of various colleagues?
  • Can you pull a list with the client overview that the authorities require at an audit? List of high, medium and low risk, different jurisdictions etc.
  • Can you provide that data on the clients that are selected for control?

Now that we are at it, have you remembered to make your Firm-wide risk assessment and document your policies and procedures? - if it isn't written down and reviewed annually, then it doesn't count.

What tasks could you spend your time on instead?

Consider the consequences

If your clients aren't satisfied

  • How many will choose another firm where the client onboarding is easier?

If you don't pass an audit

  • What will it mean for your reputation, if you get a sanction, a fine and that it is publicly known?
  • A sanction can also result in your company being put on public risk lists and then your business partners will require an enhanced AML control of your company before they can work with you.

If it goes all wrong

  • What will it mean if the criminals get hold of you and you unknowingly participate in money laundering and/or terrorist financing?
  • How big a fine will you get?
  • What will it mean to your reputation?
  • Who of you will in the worst case risk going to jail, if your policies, procedures and controls aren't good enough?

The benefits of an automated KYC system

✓ Increase onboarding conversion rates by 60%
✓ Reduce the costs of running AML compliance operations by 75%
✓ Improve your compliance team productivity 3-4 times on average
✓ Give your clients a good first impression with a professional onboarding
✓ Stop the criminals, avoid fines and stay GDPR and AML compliant

Automated systems cut time spent on repetitive tasks. This frees your team to focus on complex risk assessments and strategic compliance planning. KYC policies are applied consistently, with real-time updates and comprehensive audit trails.

These systems boost your defence against financial crime. They generate audit trails for regulatory inspections and detect suspicious activities faster through real-time monitoring. This limits criminal exploitation, protects your reputation, and helps avoid regulatory penalties.

Your team can concentrate on high-risk cases and compliance planning. KYC policies are applied uniformly across all clients, reducing human error—a common audit issue. As regulatory scrutiny and fines increase, automated KYC strengthens risk management and maintains smooth operations.

Consider how automation could enhance your workflows, improve accuracy, and boost your team's ability to meet growing regulatory demands.

Not sure if an automated KYC system is right for you? Contact us. We're here to advise based on your specific needs.

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