KYC in 2021 – Shaking Things Up in the Financial World

Despite the considerable investments made by industry leaders, KYC is still a challenge in the finance sector.According to a report from Global Newswire, the global market size of digital KYC is expected to reach USD 1,015.36 million by the end of 2026 with a compound annual growth rate (CAGR) of 22% between 2019 and 2027. Did you know that banks and other financial institutions experienced record-breaking fines in 2020 for breaching the KYC/AML laws? The aggregated sum of these fines was EUR 12.09 billion. Apart from the hefty penalties, damaged business reputation, loss of customers and inability to comply with the regulations are some additional consequences of not implementing KYC for customers.

A lot has changed due to the coronavirus pandemic, so the finance sector must be prepared to face the evolving KYC in 2021 and beyond. 

Suggested: A complete guide to understanding KYC compliance regulations

Perpetual KYC will be the New Normal

Gone are the days when the financial institutions reviewed their customers on a high-risk rating basis. Now, corporate entities have a better way to perform identity verification checks and keep their customers’ profile updated whenever needed. The future of KYC is perpetual because the regulatory landscape will become more and more rigid in the coming years. Financial institutions need real-world data and update customer profiles regularly on the basis of their preferences. Only then, companies can provide a seamless KYC experience to the customers.  

More Rigid Regulations to Comply With

As mentioned earlier, the KYC regulations will become more and more rigid for all businesses, especially in the finance sector. Advancing technology is helping businesses in taking preventive measures against fraudsters, whereas criminals are figuring out better ways of fulfilling their illicit desires. Henceforth, the regulatory environment comes into action and law enforcement agencies make sure banks and other financial institutions take all necessary steps to fight fraudulent activities. In the coming years, the finance sector has to deal with more stringent regulations which means, enhanced AI-driven KYC will become inevitable. 

Strengthening Compliance Activities through Data Sharing

Communication is the key to achieve effective compliance with KYC laws across the world. As financial institutions dig deeper into their compliance concerns, unnoticed issues will emerge and they will look up to their partners to weed out those obstacles. Organisations have to consider working closely with compliance teams, share more customer data and solicit more advice to adapt to the changing ecosystem for KYC. 

Bring More Automation to Refresh Onboarding Processes

The traditional KYC process will experience magnificent automation since data collection in real-time is dependent on advanced technology. For instance, collection of business information, structure, UBOs and shareholder information is no longer required manually from the clients. Similarly, the automated KYC process no longer needs human intervention. The traditional KYC process will take a new road to automation known as continuous KYC. This will regularly monitor customers rather than completing the process manually.

It All Boils Down To…

KYC has experienced many changes, and currently, automated or AI-powered Know Your Customer identity verification system is in action. Considering the significant rise in criminal activities, the need for automated KYC increased. Now, the regulations are becoming stringent and the increasing customer expectations are hard to meet. Moreover, the digital world needs a Know Your Customer solution that can verify customers, onboard them in no time and ensure effective compliance with the laws. Therefore, there is a high probability that perpetual KYC will take over the world in the years ahead. The need for manually updating consumer profiles will no longer be an issue. 

Ongoing or perpetual KYC is a great way of maintaining updated consumer profiles and preventing fraud.

Get in touch with our experts to know more about KYC.