In the interim, consider a pragmatic approach in keeping with agile principles that strive for incremental improvements and fast learning, using available customer information. As a result most customers undergo similar or barely differentiated levels of KYC and due diligence, with banks often devoting unnecessary resources on the majority of their customers posing minimal or no risk.Ī model that segments customers more finely – perhaps into as many as 10 to 30 categories – can ensure remediation efforts are aligned with the level of risk. The remaining 90-plus percent, however, are grouped into two or three segments, or occasionally only one. These customers are prioritized and undergo enhanced due diligence. To manage both risk and value, segment customers more finelyĮxisting AML customer risk-rating models will likely identify between 0 and 5 percent of customers as potentially high risk-although in some banking segments this proportion can be higher. AI can then accelerate learnings from these outputs.ġ. ![]() There are plenty of off-the-shelf solutions and data providers that can help quickly stitch together an integrated solution. To quicken progress, make use of third-party data, external providers and artificial intelligence (AI).This will inform required actions and provide operations, the board and regulators a clear view of how remediation efforts are faring. ![]() Tailor and track remediation efforts at the individual customer level.By automatically posing more questions to customers whose responses suggest higher risk, the burden on less-risky customers is kept to a minimum. Self-service should be the default option for customers providing KYC information. Deploy self-service solutions that are risk-sensitive and carry minimal execution costs.Most banks expend disproportionate effort on customers who pose very little or no risk. To manage both risk and value, segment customers more finely.Here are four steps that can quickly cut the backlog, improve the customer experience and, importantly, shift the focus to optimizing value while mitigating risks.įour steps to ensure a risk-based KYC and due diligence remediation The same ‘digital first’ approach that has transformed banks’ commercial and operational performance with digital technology and agile methodologies can similarly transform KYC and due diligence. Customer insights and lessons learned during due diligence aren’t taken into account in monitoring activities or when setting controls. ![]() Queries ping pong back and forth between customers, frontline and back-office staff. Previously-recorded information is buried in various paper or electronic files, proving hard to access and aggregate. In addition, there are plenty of inefficiencies in the process, which remains largely manual to this day. Collecting, validating and continually updating data for millions of customers is time consuming, and frequently changing requirements means that approaches to KYC needs to be rethought. Why? Firstly because of the scale of the task. Yet many are overwhelmed by the very first steps of the process, finding themselves sitting on large know-your-customer (KYC) and due diligence backlogs. Add to that the reputational cost of getting embroiled in money laundering scandals and it’s not hard to see why banks are so keen to meet anti-money laundering (AML) requirements. August 23, 2019Banks worldwide have paid over $30 billion in penalties since 2009 for failing to crack down on financial crime.
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