Continual Compliance – The Journey Towards Perpetual KYC

  • Al Catto, Managing Director at Beyond

  • 01.02.2021 09:45 am
  • KYC

Regulation and operational efficiency requirements are driving a move away from traditional Periodic Review (PR), towards real-time, ongoing customer due diligence - also known as continual or perpetual KYC. However, even with the benefits it promises (reduced caseloads, improved customer experience, less costs etc) adoption amongst financial services has been slow.

Unfortunately, perpetual KYC cannot be treated as a simple, one-time investment and exercise. It really is a transformational journey that requires complex changes to be made in areas such as data, monitoring and policies.

So where should organisations start?

Building the baseline

Perpetual KYC essentially comes down to being able to measure data change – for it to operate successfully you need to have a baseline version of client data to start the process. This involves a number of steps:

Data harmonisation

All of a client’s data (across different products, jurisdictions, geographies and business lines) must be collected. Once gathered, any overlapping, contradictory data must be resolved to provide a single source of the truth

Data remediation

the data needs to be accurate, therefore the baseline data will require analysis, review and sign-off

Creation of a single client view

once the data is cleansed, this should be placed in a single client record which can be accessed by all relevant systems throughout the client lifecycle

Developing monitoring capabilities

Once the baseline is live in systems, external and internal data sources must be monitored to identify and changes to individual client data attributes or behaviour. This will require:

Monitoring capability

This may involve company registries, new sources, screening lists and transactional monitoring systems

Refined policies

clear policies which articulate which data changes or threshold levels constitute a material change and trigger a cross-check, manual touch and potentially full client refresh. Non-material changes may be addressed by straight-through processing (STP) to the client record

Data automation

monitoring may identify a considerable number of non-material changes across the client population. Data automation solutions such as optical character recognition (OCR), robotic process automation (RPA) and artificial intelligence (AI) and machine learning (ML) solutions may be needed to prevent manual intervention

Rules engines

the policy will need to be digitised and encoded to drive rule engines which implement regulation and policy within appropriate systems. A digital approach to policy also enables the management and impact of policy change over time

Observe and react to reality

The true power of perpetual KYC becomes evident once monitoring systems are combined with transactional data. The ability to compare the data baseline ‘expectations’ and the transaction monitoring data, with how the client behaves in reality, provides the intelligence to determine when a client is operating outside expected parameters.

Unexpected behaviour almost certainly indicates that there is a reason to review the client, either to determine if their behaviour presents a potential risk scoring change, a need for some form of intervention, or more positively, it may indicate a need for additional support and services, representing a revenue opportunity.

Preparing for the challenges

Most institutions will not achieve perpetual KYC overnight, however developing a vision, engaging in the process and starting the journey to a lower cost, more compliant and proactive future state will pay dividends in the medium and long-term.

It is good to be one step ahead of the challenges you’ll face and here at Beyond, we’ve used our first-hand experience to produce a practical guide which tackles:

  • approaches to accelerate the journey to perpetual KYC;
  • How to avoid common obstacles; and
  • How to realise the benefits of perpetual KYC.

You can download a free copy of the guide here.


Author's Bio:

Al, Managing Director at Beyond, has worked for the Big 4 and boutique consultancies, delivering transformation for leading Financial Services brands. He has led multiple large-scale programmes, including the delivery of complex, global client onboarding systems.

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