Preventing Compliance Risks During Customer Onboarding

Preventing Compliance Risks During Customer Onboarding

Know your customer, otherwise known as Know Your Client (KYC), is the name of the methods conducted by a bank or financial company to verify the identity of their clients. This allows them to evaluate the risks (or if there are any risks) of implementing a business relationship with the client. KYC processes are also applied to find out if there are any illegal or malicious intentions on the side of the client. Anti-Money Laundering (AML) regulations, as well as measures against money laundering applied by banks or other financial institutions, are also sometimes called KYC.

Companies doing business outside the finance industry can also apply KYC measures to protect themselves against compliance issues and illegal third-party activity. As global financial and industrial transactions grow more proliferous, any company conducting business should start applying KYC measures, regardless of their company size or industry.

Past KYC processes were simply filling out forms and providing documents to prove the legality of the business and that there was no illegal intent. Today, KYC procedures are far more advanced. They leverage modern technology and software capabilities, such as automated KYC, which is supported by machine learning and pattern recognition.

Does My Financial Services Firm Need To Perform a KYC Compliance Check?

The short answer is yes. In fact, not only financial companies or banks but every company should implement KYC measures to be on the safe side, especially those conducting business internationally . KYC measures help companies, banks and financial institutions guard themselves against financial issues like white-collar crime, which includes money laundering, corruption and fraud. Since these situations may have dire consequences for any company, it would be wise to remain vigilant against them.

In some countries like the UK, all regulated companies in all industries have to conduct Know Your Customer checks when starting a new business relationship.

KYC measures are also effective in financially securing the company. Since the basic idea of KYC is to prove that the client is who they claim to be, KYC is one way to make sure that payments or any other type of business between the company and the client is certain to come to fruition.

How to Undertake a KYC Compliance Check When Onboarding My Clients?

Performing a decent KYC process usually starts with verifying the client. This means proving that the identity of the client, their field of business and any other information provided by the client is valid. This is one of the most basic and simplest ways of ensuring compliance and guarding the company against illegal financial activity.

During this process, all recent activity and the activity history of the client is inspected under the spotlight, with any unusual activity raising red flags. Even business data and personal information of managers and external parties can be examined, including name, date of birth, residential address and photo identification. Some banks and financial institutions also request the client to verify the ownership or organisational structure of a company involved.

Any red flags or detection of any kind of unusual, irregular or unclear activity requires further evaluation. This continues until there are no red flags or everything is clear.

KYC checks are usually made when a business relationship with a customer is just forming, where there are suspicions of money laundering or financing terrorist activities, when there are suspicions about the identity of a customer or suspicion arises at any stage of business, or when there are major change of circumstances with the nature of the business with an existing customer.

Even small companies or entrepreneurs who are about to accept payments above a certain amount are advised to run KYC measures on the client.

Key Benefits of Using an Automated KYC

KYC measures are necessary but they are also time-consuming, require expertise, and can sometimes be costly when performed manually. In some scenarios, sparing the time to thoroughly apply KYC measures can cost a business key opportunities, especially time-sensitive transactions.

This is why most companies, banks and financial institutions rely on automated KYC measures. Automated KYC measures decrease the time needed for KYC without sacrificing security. They are also reported to increase operational efficiency and client experience. In addition, they can be integrated into a company’s existing client onboarding workflow.

Automated KYC solutions make it easier to onboard new clients while ensuring their data is stored securely and to regulatory standards. They can also provide enhanced due diligence when it’s required. Automated KYC solutions perform continuous checks, even after the business relationship has already been established. The software can monitor client information updates, the company’s structural changes, and any movement in beneficial owners.

Automated KYC solutions are a good way to keep up with Anti-Money Laundering regulations as they can automatically keep up with any regulatory updates. This ensures banks and financial companies remain compliant. Automated KYC solutions are a good way to keep company data secure.

Fineksus offers automated KYC solutions that are integrated with their PayGate Inspector, which can scan customers against Sanctions and PEP.

As you can see, acquiring an automated KYC solution is a solid, efficient and cost-effective way to keep your company compliant and safe.

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