About a-team Marketing Services
The knowledge platform for the financial technology industry
The knowledge platform for the financial technology industry

A-Team Insight Blogs

Five Misconceptions About KYC Compliance in 2020

Subscribe to our newsletter

By Ian Henderson, CEO, Kyckr.

Know Your Customer compliance suffers from a problem of unintentional secrecy. Everyone knows that organizations are responsible for meeting their KYC and AML obligations and keeping up with KYC best practices, but that’s becoming harder and harder to do. KYC is not simply a matter of going down a list and marking tasks as done. This is a continually evolving discipline that touches multiple departments and processes. By misunderstanding KYC priorities, companies risk not only failing to adapt to the changing compliance landscape, but also missing opportunities to evolve and expose themselves to hefty fines and reputational risk.

If you hold any of the below misconceptions regarding KYC compliance, take this opportunity to unlearn outdated beliefs, so you can help your organization move in the right direction.

1. KYC looks the same for every business.

While most regulated businesses report to the same regulators and are beholden to the same rules, internal compliance does not look the same for every business. Companies have different processes and different regions of operation, not to mention different partners and customer bases.

Just as no single tool or process can cover all KYC requirements for an organization, no single industry or group of companies can follow the exact same approach. Businesses and leadership teams should consider their individual needs and opportunities, then examine compliance options from that perspective — not go with the most popular solution in the market by default, unless it suits their needs.

2. Businesses can automate the entire KYC process.

Automation is great. By automating pieces of the KYC process, companies can slash processing times from weeks down to hours, identifying potential business risks and threats in the process. However, automation cannot fully replace genuine human engagement.

Organizations still need humans within the KYC compliance process to work with the tools, understand the business initiatives, and keep an eye out for inconsistencies. Investing in better tools can make these humans’ jobs easier, but even the most intelligent types of compliance technology remain decades away from human-free compliance monitoring, tracking, and intelligence.

3. KYC compliance is a checkmark exercise.

Never treat KYC compliance as a checkmark exercise. Not only do the penalties for KYC failures reach astronomical figures, poor compliance practices can even lead to jail time if leaders fail to treat KYC compliance with the respect it deserves.

Recognize the need to focus on this area for the sake of safety and peace of mind, and use the time spent to seek opportunities to expand compliance into a genuinely beneficial function of the business. Done correctly, organizations will learn that KYC compliance hosts a bounty of opportunities.

4. A bit of online research is sufficient to onboard a client.

When it comes to Customer Due Diligence, client onboarding requires more than a bit of Google research and good luck. Compliance is a complex, multifaceted area, with a variety of stakeholders, best practices, and risks to consider.

Without direct access to accurate and legally authoritative information sources, verifying customer-provided data can be a painful and time-consuming experience and can cause significant friction in the customer experience. Relying on unknown sources for company filings not just drains analysts’ time and causes delays for customers but can result in basing KYC decisions on outdated and unreliable data that can in turn expose the business to regulatory risks.

5. Customers understand and appreciate KYC compliance-related delays.

Customers today have become accustomed to immediacy. From B2C to B2B, people do not enjoy or tolerate long wait times the way they used to. Even in industries with long sales cycles, prospects and customers expect the individual processes within those sales cycles to run quickly and smoothly.

Organizations that treat KYC compliance as a mandatory hassle (or worse, an afterthought) set the stage for inevitable delays. Completing accurate records at the time of customer onboarding is a complex task encompassing several, typically manual processes. It is also a major cause of customer friction. On average it takes 26 days to onboard a customer (Thomson Reuters, 2017) and 73% of financial institutions have reported losing customers due to friction in the process (LexisNexis, 2017). When customers suffer the consequences of these delays, they do not understand or care about the reason, only about the inconvenience they experience.

For the reasons outlined here and many more, KYC compliance deserves more attention than it receives. Businesses should look at their KYC functions not as regulated requirements but as potential value adds. In changing this mindset, more organizations can begin to harness the benefits of a well-oiled KYC compliance machine.

Subscribe to our newsletter

Related content

WEBINAR

Recorded Webinar: How to apply innovative e-comms surveillance whilst ensuring control, compliance and enhanced productivity

Remember the days when email was the predominant media for electronic communications within and among financial institutions? Fast forward to today, and email represents a declining fraction of these e-comms, many of which are hosted by modern collaborative platforms such as Microsoft Teams, Webex, Slack, and Zoom, and all of which are subject to surveillance....

BLOG

Themis Secures £3.1 Million Funding for Financial Crime Platform

Themis, provider of a digital financial crime platform, has secured £3.1 million in its latest Pre-Series A funding. The London-based company raised £1.7 million in a seed round in 2021, and will use the funds to continue development of its automated due diligence platform, Themis Search and Monitoring, that was released in 2020. The platform...

EVENT

ESG Data & Tech Summit London

The ESG Data & Tech Summit will explore challenges around assembling and evaluating ESG data for reporting and the impact of regulatory measures and industry collaboration on transparency and standardisation efforts. Expert speakers will address how the evolving market infrastructure is developing and the role of new technologies and alternative data in improving insight and filling data gaps.

GUIDE

Regulatory Data Handbook 2022/2023 – Tenth Edition

Welcome to the tenth edition of A-Team Group’s Regulatory Data Handbook, a publication that has tracked new regulations, amendments, implementation and data management requirements as regulatory change has impacted global capital markets participants over the past 10 years. This edition of the handbook includes new regulations and highlights some of the major regulatory interventions challenging...