Bridging the gap in KYC Compliance: The Rising Tide of Automation

Bridging the gap in KYC Compliance: The Rising Tide of Automation

The financial sector has for long been bogged down by manual processes in adhering to regulatory standards. The spotlight now shifts towards embracing technology, particularly in Know Your Customer (KYC) operations. Fenergo has outlined the opportunities for KYC compliance automation.

In a recent global survey, KYC Trends in 2022, Fenergo sought opinions from over 1,000 C-suite executives across 100 corporate and institutional banks. The focus of this survey was to analyse the direct and indirect costs associated with cumbersome, manual KYC procedures.

KYC operations encompass a variety of discrete tasks like identity verification, data and document collection, validation of information, unwrapping ownership structures, performing Anti-Money Laundering (AML) checks and more. The stats are quite revealing – a mere 2% of businesses have managed to automate over 90% of their KYC tasks.

On the contrary, about 28% of firms still carry out 41-60% of tasks manually. The inclination towards automation is a quest for improved accuracy and quality in KYC reviews. This also reflects apprehension about the operational efficiency and sustainability of human resources engaged in high-volume, process-driven tasks. The ultimate goal is to achieve compliance targets through higher levels of automation, standardisation, and integration.

The ideal solution appears to be a comprehensive Client Lifecycle Management (CLM) platform. It not only simplifies the KYC process but also offers actionable client insights by connecting with internal systems, data providers, vendor solutions and customer channels.

KYC process backlogs are typically a byproduct of an inefficient system. It’s no surprise then that 35% of the survey participants identify backlogs as their primary compliance challenge. Resource allocation is another pressing issue with 30% of the firms voicing their concern over talent acquisition and retention. Given the arduous nature of manual tasks in the life of a KYC analyst, automation might just be the key to a more efficient future.

Recent geopolitical upheavals, like the Ukraine crisis, highlight the need for robust KYC and AML systems and controls. With 33% of the respondents pointing out changing sanctions and regulatory norms as their major compliance challenge, automation becomes crucial to keep up with the evolving regulations.

In large banking institutions, corporate and institutional clients tend to have complex ownership arrangements, diverse business lines and numerous subsidiaries. The ability to share a client’s KYC data across the bank can enhance data accuracy and eliminate redundancy. However, the survey indicates that 61% of banks lack the ability to fully share client profile data for KYC reviews.

Take the case of BNP Paribas which has embraced technology and automation for KYC, thereby enhancing operational efficiency. The bank developed a global utility for KYC, One KYC, that leverages Fenergo’s CLM and KYC technologies for the entire group. This has led to the creation of a repository of standardised, accurate, and complete KYC data and documents which can be shared across the group for all its corporate clients.

The survey suggests that firms looking to build a connected and automated KYC ecosystem should focus on the collection of data and documents via a client-facing digital portal, monitoring primary sources for changes in ownership, and integrating transaction and behaviour monitoring.

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