How to streamline KYB onboarding and ongoing risk assessment in lending firms

KYB onboarding in lending firms

In the highly regulated UK lending market, effective Know Your Business (KYB) procedures are crucial for mitigating risk and ensuring compliance. However, lending firms often face significant challenges in KYB onboarding, which can complicate and delay the loan approval process. 

A reliance on manual processes to verify complex ownership structures, coupled with significant variability and inconsistency of data across jurisdictions can be detrimental to customer experience, leading to dissatisfaction and potential loss of business. 

But, it’s not just a matter of conducting a one-off client risk assessment at the point of onboarding. As time goes on, risk profiles can change dramatically from the beginning of a commercial relationship, increasing risk and the threat of financial crime without proper ongoing diligence and monitoring

It is crucial for lending firms to continuously track changes in a business’ financial health, legal status, and overall risk profile, to stay on top of any red flags or indications of suspicious activity. 

In this article, we explore several practical strategies to streamline KYB onboarding and ongoing risk assessment processes, ensuring both continued compliance and a friction-free customer experience.

Onboard and determine the risk of customers 

Onboarding customers efficiently while accurately determining their risk profile is essential for ending firms to comply with AML regulations and provide a seamless customer experience. Implementing streamlined KYB processes powered by technology can significantly reduce the time and resources needed to verify the legitimacy of businesses, vet UBOs, PSCs, and directors, and assess the overall risk of lending to new corporate customers. 

🔗 7 essential elements of KYB checks

Automating comprehensive risk assessment processes can help in identifying high-risk customers at the outset. This proactive approach not only helps in mitigating potential risks but also enhances the customer onboarding experience by reducing friction.

With a KYB solution such as NorthRow’s WorkStation, firms can automate the collection and analysis of customer information from multiple global data sources, ensuring a thorough and accurate risk assessment without unnecessary delays. To boot, our KYB platform provides real-time risk scoring and comprehensive business and identity checks, ensuring that all regulatory requirements are met from the moment a new customer is onboarded.

Understanding the risk of your customer throughout the lending term

Effectively understanding the risk profile of your customers throughout their lending term is paramount in maintaining compliance with AML regulations. Regulated lending firms must adopt a dynamic approach to customer due diligence (CDD) that goes beyond the initial onboarding phase. 

By continuously assessing the risk a corporate client poses, firms can detect and respond to any changes in customer profiles or risk statuses that might indicate money laundering or other financial crimes. This continuous monitoring is crucial in identifying any emerging risks that could compromise the firm’s regulatory standing and financial integrity. 

What’s more, an ongoing risk assessment allows for a proactive approach in managing any potential threats that crop up. It ensures that the risk profile of each customer is updated in real-time, reflecting any changes in their circumstances or risk profile that may fall outside of your firm’s appetite. 

It is important for risk and compliance leaders to use advanced technology platforms and monitoring tools to keep abreast of these risks round the clock, ensuring that any suspicious activities are promptly identified and addressed and nothing is overlooked.

Assign an iterative risk score to each entity 

Assigning an iterative risk score to each customer entity allows lending firms to dynamically manage risk throughout the customer lifecycle. This often involves continuously updating the risk score based on real-time data and risk profile monitoring, ensuring that the risk assessment remains current and reflective of any changes in the customer’s profile or activities. By employing iterative risk scoring, firms can quickly identify and respond to emerging threats, maintaining robust AML compliance and protecting the firm’s from the risk of non-compliance.

🔗 The far-reaching repercussions of non-compliance with AML and KYB regulations

Track changes in risk profiles and status

Traditional AML compliance processes often rely on periodic reviews at defined intervals and manual reporting, making it difficult to detect suspicious activity in real-time and increasing the risk of regulatory non-compliance and financial penalties. 

What’s more, manual monitoring can’t keep pace with the speed and volume of clients most businesses have on their books. This often results in missed opportunities to detect any changes in risk profiles, customer behaviour, or suspicious activity.

By implementing ongoing monitoring solutions systems, lenders can ensure continuous oversight of customer activities, promptly identifying any changes that may indicate increased risk. Automated tools reduce the need for manual monitoring, allowing compliance teams to focus on more strategic tasks and in-depth investigations, ultimately enhancing the firm’s overall compliance and risk management processes. 

With these tools, lenders can effortlessly track changes in customer status and behaviour without dedicating extensive resources to manual research with automated analysis of real-time data feeds to detect any changes to customer risk profiles, flagging potential risks for further investigation. This approach allows firms to maintain a high level of vigilance over their customer base while optimising the allocation of compliance resources.

Up-to-date risk profiles throughout loan term

Maintaining an up-to-date risk profile for customers throughout their lending term is a critical step for KYB compliance to effectively mitigate financial risks.

Using an automated KYB solution can facilitate seamless updates to customer risk profiles based on changing information, ensuring that firms stay abreast of any changes in customer behaviour or financial status. 

With real-time alerts and notifications of any significant updates to customer risk profiles, compliance teams can ensure timely action and intervention before any issues become problematic. This proactive approach not only improves the accuracy of risk assessments but also strengthens your firm’s ability to detect and respond to emerging risks, and promptly adjust risk profiles, scores and customer statuses in response to new information, regulatory changes, or emerging threats.

With automated alerts and workflows, teams can take appropriate actions when significant changes are detected. For example, if a customer’s risk profile increases due to changes in business information, a new UBO, a company director being designated a PEP, or other changes in their risk profile, automated KYB systems will notify compliance teams and automatically trigger enhanced due diligence processes or escalate the case for further review.

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