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How to Safely Optimize Your KYC Verification Process

Know Your Customer (KYC) processes have become critical for banks and financial organizations racing to grow while trying to ensure compliance. This set of processes starts with KYC verification—a personal or corporate banking customer proving their identity—before moving on to additional checks and balances designed to prevent financial crimes and fraud.

What is KYC verification?

KYC verification is part of the customer onboarding process, which has huge importance for both customer lifecycle management (CLM) and compliance. During onboarding, KYC verification and due diligence processes confirm a customer’s identity and assess their level of financial crime risk. 

Consider anti-fraud as a lifecycle that all begins with KYC. If KYC is the entry point into your organization's anti-money laundering (AML) and fraud processes, then KYC verification, as the first step to your KYC process, becomes even more important. Getting KYC verification wrong can have quite severe consequences across your organization. And because KYC verification can be the first touchpoint you have with a new customer, it’s a chance to make sure they get a good first impression of the customer experience they can expect from you.

During the Fraud and Financial Crime Europe 2022 conference in London, Rhys Jones, Global Head of Banking at Vuram, described the importance of KYC verification by saying, “The best way to mitigate and reduce financial crime is to understand who you’re working with from the beginning.”

Challenges of KYC verification for financial institutions.

The entire KYC process is one of the most complex and regulated endeavors in banking, involving anti-money laundering laws and a host of other regulations. And KYC verification is just one piece of that process. Banking and other financial services institutions must constantly balance the corporate customer’s desire for speed against the bank’s need to meet stringent, ever-evolving regulatory demands that carry stiff fines. 

And while KYC requirements in banking represent a vital part of the overall compliance effort, the related processes banks use to meet those requirements have historically been dragged down by legacy technology, data silos, and manual workflows. 

Rhys described this challenge: “It’s a balance between getting [customers] onboard quickly, but trying as much as possible to understand who they are to mitigate the risk.”

To gain speed and provide better experiences while managing risk, banks and financial institutions must find ways to deal with these challenges.

To learn how you can optimize other pieces of the KYC process, get the guide: Powering Seamless KYC Operations.  

The KYC verification process: 2 ways to optimize—safely.

Rhys Jones offered tips to optimize your KYC verification process, gleaned from his experience leading banks and financial organizations.

Jones explained why KYC verification is so important: “Often, the first time a customer interacts with your organization is during the onboarding process. So you can’t afford to spend six months, twelve months scrutinizing and trying to understand the customer’s ins and outs of everyday business, because they’ll get fed up. They’ll go somewhere where the process is more streamlined.

1. Centralize financial crime data.

Detecting illegal activity or financial crime is all about data: access to data and having good data. By centralizing your data strategy, you take a big step toward a better verification experience for customers and employees—not to mention a safer one. “Financial crime [data], we believe should be centralized,” Rhys said, “because data is today’s gold.” 

Centralizing your data means connecting insights from disparate systems’ data sets. This is an advantage in fighting fraud and criminal activity in any process, but it’s particularly helpful for KYC verification.

The old way of approaching the KYC process data was linear. “The most advanced organizations—the banks that are leading the way in this—they’re managing to access that data at various points in real time or near real time,” in that lifecycle, added Rhys. “They’re not waiting until it goes all the way through the workflow and then you pick it out at the end and you’re reporting on it. That’s an old way of working.” With a new way, you can access data from disparate systems in real time. 

How does this work? It’s thanks to data fabric technology. A data fabric is a virtualized data layer that sits on top of all a bank’s or other organization’s systems, enabling the IT team to connect their custom software solutions to any data source in the organization. The data stays in the source systems, but the bank gets a unified view, connecting data silos without the need to replace legacy systems. This data can then be used to support every process across an organization. 

The bottom line: Centralizing data leads to more accessible, accurate data for KYC verification, which lets business users make smarter, faster decisions and improve the customer experience.

2. Connect niche software solutions with an orchestration layer.

Banks use a wide variety of niche software solutions, such as sanction screening applications, to deal with specialized needs related to financial crime prevention. But that’s only one part. Rhys says, ”The interesting part is when you get to the next stage,” which means the part of the process that follows after the niche software is used. Turns out, most of these steps are repeatable and common. 

For example, a bank may use niche software for activities related to KYC verification, such as transaction monitoring and name screening. But once a team notices an issue during monitoring and screening, a few steps happen: 

  • Create a case.

  • Triage the case.

  • Assign the case to someone.

  • Review and remediate the case.

Because these steps often repeat across processes, there's an opportunity for your organization to move faster via an orchestration layer, created by business process automation technology. A platform like this enables your IT team to build a workflow, save the code, and reuse it when the situation occurs again. This saves time—and if the solution is low-code, there’s the potential to develop new custom solutions up to 10x faster. They can also connect to data so it supports and informs the entire lifecycle, giving business users more data to make informed decisions.

The bottom line: Think about your KYC verification process and any related niche software in context of the entire technology stack. Look for opportunities for IT teams to eliminate redundancies and work faster, speeding up the pace that your enterprise can deploy new technology and evolve it as regulations or markets change. 

The result: A faster KYC verification process.

By applying strategies like these to streamline the KYC verification process and other related KYC processes, banks can improve customer service, speed up time to revenue, and increase data transparency. This new way of working with data allows banks to leapfrog competitors in both client satisfaction and risk management.

Download this whitepaper to learn how another digital transformation strategy, hyperautomation, can accelerate and shape the future of corporate finance: Hyperautomation for Finance Companies: 4 Ways to Move from Bots to Business Value.