The journey to perpetual KYC

enable pKYC across five categories: Data, Policy, People, Process and Technology.

The journey to breaking the cycle of costly, inefficient, manual KYC processes becomes possible with automation and a transition to perpetual KYC (pKYC).

pKYC requires a digital ecosystem of internal and external systems involving multiple vendors, where component parts and providers come together to deliver continuous ongoing monitoring for the entire client lifecycle. Digital KYC customer profiles are maintained dynamically, in a proactive, technologycentred, and data-driven environment.

This moves the dial from traditional reactive periodic due diligence refresh cycles, which are typically five, three and one years for low, medium or high-risk customers, to an event-driven dynamic approach. By transforming the process, an organisation drives:

■ Risk reduction by moving from a reactive approach to a proactive approach of mitigating risks before they escalate

■ Increased efficiency and productivity through higher levels of straight through processing (STP), allowing analysts to focus on more complex profiles

■ Improved client experience that results in higher levels of customer loyalty and advocacy

■ Better KYC outcomes with a holistic single view of the customer, throughout the client lifecycle

■ Future proofing for regulatory change and scale across jurisdictions p

Kyc Advisory Board

The journey to pKYC is not straightforward. Aside from a widespread lack of understanding of what it takes to get to a truly perpetual process, banks are likely to face several other challenges.

The latest whitepaper from Encompass’ pKYC advisory board, Planning Your Journey to Perpetual KYC, provides a framework for pKYC adoption, brought together by the insights of KYC experts from financial institutions, consultancies, and technology vendors. This framework outlines the components required to

Each organisation will begin their journey from a different point and sub-components of the five categories will have various levels of importance at each stage. The framework can be used to develop a realistic plan for how to progress to perpetual KYC; making the adoption journey easier to execute.

Strong Foundations

From the outset the organisation must recognise the need for robust data – both from internal and external sources. Without access to real-time accurate data there will be a temptation to return to time-consuming and inefficient periodic reviews. Initially, data cleansing may be required and, although this is tedious, it is essential to achieve a baseline of clean data to kickstart a process.

It is important to understand what elements of data, as well as customer attributes, are important to fulfil the pKYC requirements laid down in the scoping phase. If pockets of data are identified as being irrelevant to decision-making, they to unearth material risk, and with low levels of human intervention. A digital customer record produced during onboarding, via a KYC process automation platform like Encompass, provides the foundation for pKYC and the digital baseline for future comparisons.

Third-party data ingestion is a critical element of obtaining a single view of a client that an institution can trust. Tracking sources and history of third-party data is key. Triangulation helps to understand where data is misaligned to reveal areas of risk and generate review triggers. Effective entity resolution and a unified data model are paramount if firms are to realise the utility of their technology stacks.

Organisations can now address the issue of analyst resource levels, which, in recent years have been a huge headache and one not forecast to change soon. Often, firms have been faced with numbers of analysts at their disposal either being too low to achieve the policy, or so high that the process becomes a budget-stretching challenge.

Automation addresses these major bottlenecks and facilitates STP for operational efficiencies, a reduction in risk exposure and in costly human error.

Transition Journey

before seeking the best way to improve their own situation. While identifying all the attributes required for the journey to pKYC, the organisation must also satisfy its own risk management policies.

STARTING THE p KYC JOURNEY

Ultimately, pKYC is a business decision, based on the desire to reduce risk, improve compliance and increase efficiency.

Securing the budget for a business transformation project is the first step, but resourcing the project, and the process, are equally important. Digital transformation is a specialist area and the right components to achieve the stated aim – or even to determine the best way forward – need to be considered if success is to be found. It is important to recognise that pKYC approaches continue to evolve, and there’s no one size fits all solution.

Finding the right solution partners, who are capable of understanding and then delivering the process, is vital.

Taking steps to introduce a strong, digital automated KYC process, is one thing. Going further and appending a digital automated perpetual monitoring process is quite another. The two, however, have a symbiotic relationship –one does not work well without the other.

can be de-prioritised. By doing this, the organisation’s remediation workload will lighten as the transformation journey progresses, and priority can be given to the most important data elements.

EVENT-DRIVEN KYC

A process that involves parallel running of periodic and event-driven reviews across the whole pKYC journey, can be critical to the success of the transformation project. Event-driven reviews should combine trigger-based investigations with analyst-led manual file reviews for more complex profiles. Technology is the enabler to these processes and policies. It allows vast levels of data to be analysed and verified quickly

Banks that encounter the daily challenges brought by legacy systems, manual processes and siloed data can build a dynamic journey to overcome specific KYC challenges through the adoption of automation. From the outset of the pKYC journey, a strategy and culture for transformation is necessary. A commitment to building a framework, delivered over time, will be required across a variety of stakeholders – from the executive through to the regulators. With an agile approach, and commitment to the longer term, the journey must outline key milestones, and include review and measurement.

Regulatory Tightrope Walking

Internal factors are key, but the regulatory environment must also be considered. Many clients’ activities span the globe, and the differing attitudes and rules of regulators across jurisdictions can prove problematic to finding a level of consistency. Understanding the regulator’s appetite for new KYC processes such as pKYC is vital to adoption and success. While data is a priority area, organisations should begin by assessing their current state of operational readiness,

At any point in the transformation journey, organisations can benefit from automating the KYC search part of the process to create digital KYC profiles for all customers containing company information and documents, data attribute lineage and a dynamic audit trail.

Those that choose not to embrace new techniques and technology will miss the opportunity to improve operational efficiencies, reduce risk and enhance customer experience.

About Encompass

Encompass enables firms to deliver revenue faster, drive operational efficiency and demonstrate consistent compliance with dynamic KYC process automation. Its customers include global banks and financial institutions, such as Wolfsberg Group members. It has strategic alliances with a range of trusted data, technology and consulting partners, enabling seamless integration into existing workflows and systems.

Website: encompasscorporation.com

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Twitter: @EncompassCorp