The role of AI in revolutionising KYC processes in 2024

The year 2023 highlighted the urgent need for KYC (Know Your Customer) automation and effectiveness, especially in volatile markets. Financial institutions faced significant challenges due to manual processes, prompting a shift towards innovative solutions. Optimizing data strategy and focusing on relevant attributes have become critical in navigating the financial landscape efficiently, ensuring optimal outcomes and reducing workload.

In a recent post by Encompass Corporation, the firm outlined what will be the future of the KYC industry in 2024.

In 2024, automated KYC processes are expected to lead industry priorities. This includes external data capture, outreach, and workflow automation. Driven by client demands, regulatory pressures, operational efficiency, and cost factors, technology is poised to play a key role in managing complex requirements. The development of digital KYC profiles offers real-time contextual insights for accurate decision-making, standardizing data sourcing and providing a unified customer view.

The primary goal is to improve customer experience by reducing outreach and enhancing straight through processing (STP) rates. Companies also aim to leverage the completeness of digital KYC profiles, taking advantage of new legislative opportunities like the UK Economic Crime Act, US Corporate Transparency Act, NY LLC Transparency Act, and the EU Anti-Money Laundering (AML) package. This technological shift is expected to reduce operating expenses and utilize talent more effectively, allowing banks to scale KYC delivery and adapt to evolving risks.

The industry is likely to see increased collaboration among regulators, RegTech providers, and financial institutions. Regulatory sandboxes and proof of concepts will be more widely used to introduce viable solutions. This collaboration is essential for addressing challenges such as data gaps in customer records and the integration of legacy systems, along with managing maintenance costs.

Artificial Intelligence (AI) is set to play a significant role in KYC processes, focusing on specific tasks with predefined rules and enhancing customer experience. The use of tools like portals will streamline KYC procedures, marking a departure from traditional methods. However, to maximize the benefits of AI and Generative AI (Gen AI), banks must first establish robust digital and automated processes, ensuring high data quality for deeper customer insights.

The rise of Gen AI is a key prediction for 2024. While it won’t replace KYC analysts, it is expected to accelerate existing processes and enable analysts to detect financial crime risks more efficiently. Despite its momentum, banks need to understand and manage the risks associated with AI, requiring a progressive approach to adoption, especially given the complexities of KYC.

Banks face challenges with the sheer volume of data. To address this, a laser focus on data attributes that drive KYC risk rating changes is necessary. Technology plays a vital role in collecting and analyzing data to identify the most relevant attributes. Global regulations are expected to increase, driven by various factors.

FinTech presents technology-driven solutions for handling complex data sets and making informed decisions. A shift towards exception-based case reviews by humans is anticipated, leading to more effective KYC process delivery.

The industry expects more global regulations in 2024, driven by geopolitical, legal, and economic factors. Corporate and commercial banks must adapt and leverage technology for agility. The removal of access to beneficial ownership registers in 2023 hints at a trend towards more regulation and thresholds. Banks must be agile in response, focusing on technology for increased efficiency.

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