Exploring the perpetual KYC model: Advantages and hurdles in crime prevention

KYC

In the financial sector, the introduction of perpetual Know Your Customer (pKYC) practices marks a significant pivot from traditional methods such as KYC.

According to SymphonyAI, financial institutions have historically relied on initial due diligence during the customer onboarding phase, but with escalating KYC requirements, there is a push towards continuous updates and monitoring. This shift aims to maintain up-to-date customer records and enhance overall financial crime prevention strategies.

The journey towards implementing a perpetual KYC system has been gradual, with many financial services firms prioritising other initiatives due to cost and resource constraints. However, the move away from periodic reviews, which can be resource-intensive and provide a less-than-ideal customer experience, towards a continuous monitoring model is gaining traction. This shift is driven by a need to better understand customers’ behaviours and activities, particularly in response to recent data breaches and increasing cross-border transactions.

Leveraging automation and data analytics is central to enhancing the efficiency of the KYC process. Perpetual KYC doesn’t just update client information based on a set schedule but reacts dynamically to new data as it becomes available. This proactive approach allows for quicker responses to potential risks, streamlining the onboarding process, and reducing the likelihood of exposure to financial crimes.

Traditional periodic reviews often miss timely updates, allowing criminal activities to remain undetected. Perpetual KYC addresses this by immediately flagging changes, such as updates in beneficial ownership or risk profiles. This method not only enhances risk mitigation but also optimises the effort spent on each client, focusing resources more effectively on where they are needed most.

Despite its advantages, the transition to a perpetual KYC model is not without its challenges. It requires significant investment in technology and a shift in organisational culture to embrace new standards and practices. The data strategy, in particular, plays a crucial role as it involves capturing and integrating diverse data types across various systems to trigger real-time updates.

For a perpetual KYC program to be successful, it must be incorporated from the outset of the client onboarding process. This involves rethinking how data is captured, monitored, and maintained to ensure continuous and automated updates. Establishing robust compliance policies that can be digitised and integrated into daily workflows is essential, as is the ability to blend automated processes with human oversight to manage risks effectively.

By redefining customer due diligence through perpetual KYC, financial institutions can enhance their crime prevention capabilities, making the financial ecosystem safer and more resilient against the backdrop of evolving risks.

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