The finance industry encounters a higher occurrence of fraudulent activities in comparison to other sectors, witnessing a significant surge in instances of data breaches and incidents of identity theft. In order to counteract these financial crimes, banks need to perform customer risk evaluations during the onboarding process by employing automated procedures. This approach helps prevent biased assessments and establishes ratings based on the Know Your Customer (KYC) system. By utilizing automated systems, banks can generate dynamic ratings that are capable of adapting to evolving circumstances. These ratings can then be seamlessly integrated into transaction monitoring systems to establish rules and scenarios for effective risk management. Regularly monitoring customers throughout their relationship with the financial institution is crucial to ensure the safety of the financial system.
KYC and AML procedures are essential for financial institutions, but they can also present a substantial challenge. Recent reports indicate that adhering to these regulations incurs significant costs, both direct and indirect. As a result, there are growing concerns about the ability of banks to carry out their daily operations effectively. However, the adoption of automated technologies can help alleviate the existing pressure on financial institutions and facilitate compliance with KYC and AML regulations.
Onboarding: Financial institutions typically conduct a risk assessment of new customers as part of the onboarding process. This involves using screening software to ask customers a series of questions. If the customer successfully completes the risk assessment, they are granted access to create an account and engage in transactions.
Ongoing: To ensure ongoing compliance, financial institutions have established regular and standardized procedures for when customers modify their account information or when updates to the watch list information occur. This process is referred to as systematic screening.
Real-Time: Financial institutions employ transaction-based screening for specific types of transactions, such as wire transfers, in real-time. Before these wire transfers leave the internal system of the financial institution, they are screened against watch lists. Since wire transfers are vital services that can occur at any given moment, this screening is performed as needed and requires quick turnaround times.
Financial institutions expended a total of $500 million globally.
Financial institutions that are in the top 10% globally spent a combined $100 million.
Customer onboarding expenses increased by 19%.
In a week, salespeople spend 1 ½ days onboarding new clients.
Financial institutions can enhance customer authentication by utilizing digital identity verification solutions that rely on reliable data sources like credit bureaus and government databases. By doing so, they can differentiate between customers with extensive credit histories and those with limited ones.
The collaboration between banks and Fintech providers presents an opportunity for infrastructure modernization and enhanced customer offerings. Fintech companies can leverage their expertise to develop tools and services that enable banks to deliver superior digital services to their customers. In order to maintain a competitive advantage, banks must swiftly and effectively implement these solutions. This approach not only aids in combating financial fraud and identity theft but also alleviates the burden of outdated KYC and AML compliance policies.