By Hugo Chamberlain, COO, smartKYC.
The future of high-net-worth client onboarding has arrived – and it is one well suited for our post-COVID world. Automated and paperless, it enables wealth managers to accelerate acquisition, fully comply with the most stringent KYC regulations and deliver a frictionless start to the beginning of the client relationship.
In this case study we address the challenges and benefits in making a vision reality by sharing our experiences of working with one of the world’s largest wealth management institutions.
This ambitious project was to be an industry first: to reduce onboarding time to less than five minutes for UK clients while adhering to the optimal due diligence required for opening deposits of £15,000 or more.
Here’s how it can be done:
Five steps Five minutes
- ID and address verification
The first step in any Know Your Customer process is to verify customer identity. This usually requires the applicant to upload the relevant documents and then for the bank employee to review them. But by connecting the onboarding platform to a consumer credit reporting agency, the agency can directly access data from the UK electoral roll and automatically verify an applicant’s address.
- Bank account verification
In this same way consumer credit agencies can also verify the applicant’s bank account by checking that the bank account details correspond with the now verified name and address.
- Intelligent questioning
The same agencies can then ask three questions the answers to which only the applicant would know. For instance: Who provides your credit card? What was your credit limit at the time of your last statement? What address were you living at on 15 March 1999? Assuming we have three matches, we can now safely vouch for the applicant’s identity.
So far so good, but the next phase, the screening part of the process, is more complex and takes some time. At this stage it’s key to keep the applicant engaged, so what better time than to ask the applicant questions about their investment criteria and goals, while the technology undertakes the final two checks.
- Watchlist checking
An integral part of all KYC screening is to check the applicant against the relevant watchlists. Although watchlists such as Office of Foreign Assets Control (OFAC) or the EU sanctions list are available, most financial institutions opt for an aggregated provider such as WorldCheck or the Dow Jones Watchlist.
While this could be shrugged off as a simple cross reference check, when fully automating this process there are numerous subtleties in making sure our applicant isn’t someone else with the same name. Done badly this can throw up myriad of false positives which causes way more setbacks than all the automated gains.
Diligence is the key requirement here to ensure the bank’s exact checking criteria is digitised intelligently and consistently replicated in the automated system.
- Adverse media
Adverse news screening is a term bandied about a fair amount in the KYC industry, but what does it mean? An applicant who is accused of money laundering of course falls into the ‘adverse news’ category. However, someone accused of having an affair may also receive adverse media coverage, but that’s not relevant for AML or KYC screening purposes.
The ability to distinguish between the two was fundamental to the success of the project. So a granular understanding of what qualifies as adverse media according to the bank’s criteria is needed to ensure the automation processes mirrored the existing manual systems. AI and natural multi-language processing (NMLP) technologies come into their own here as in the right hands they are able
to aggregate, analyse and vet information from multiple data sources, in multiple languages in multiple alphabets and then intelligently filter the white noise and extract the pertinent nuggets relevant to KYC.
Bring on the new normal
The net result was that the bank was able to deliver a remote, seamless, paperless onboarding solution that provided optimal levels of due diligence and a slick, stress-free experience for the customer. With acceptance rates of 80% legitimate applications, onboarding time was around three minutes.
We believe in a post COVID world it won’t be long before the majority of onboarding takes place this way and for many wealth managers coping with the new normal, that time can’t come soon enough.