The Periodic KYC Process
Typically, compliance officers review the following elements during the periodic AML and KYC process:
- Review of the customer’s information: This includes collecting and verifying their full name, date of birth, address, ID number, and the collection of the customer’s original ID documents to identify any material changes
- Screening of the customer against global and country-based watch lists and sanctions
- Reassessment of risk ratings in case of substantive changes in the ID documents (e.g. a different residential address)
- Periodic review of the customer’s transactions and comparing it against forecasted account activity (this is generally performed via fully automated identity verification and screening tools)
- Detection of potentially suspicious activities
Pinning Down the Problem
Responding back to periodic KYC data requests made by the bank drives customers crazy if handled incorrectly. At times, customers are even required to show up in person to have their documents verified. For most businesses, the emergence of artificial intelligence-backed identity verification solutions has eliminated the need for such manual methods of document verification. Nevertheless, a high amount of inefficiency still remains.
KYC experts are often caught up between the expectations of the bank and the customers. Repeatedly requesting for additional documents results in unsatisfied and frustrated customers — a situation that can prove to be detrimental to the financial well-being of a company.
With the bar on compliance being globally raised, the costs and resources associated with secure customer onboarding and periodic KYC checks have increased exponentially. Because of this, KYC procedures are often placed at the bottom of to-do lists, which ultimately harms the bank in the form of hefty non-compliance fines on top of reputational damage.
Is There An Alternative?
A basic solution to overcome the above-mentioned problems is to analyze the KYC process from the perspective of the customer i.e., the KYC procedures within a bank must be designed in such a way that the experience of the customer is optimized.
With the help of digital strategies – such as online customer portals, support for multiple channel communication, and direct engagement with bank branches or relationship managers, the inherent friction in obtaining the necessary customer documentation can be substantially reduced.
Further improvements in the efficiency, productivity, and customer experience can be gained by shifting from periodic KYC reviews to perpetual KYC.
What is Perpetual KYC?
In the perpetual “know your customer” process, also known as ongoing KYC, the information of the customer is updated based on specific triggers or events, rather than on the specified amount of elapsed time. Triggers for perpetual KYC can be determined by the bank’s internal KYC policies. Typically, it includes any event that indicates outdated information.
