Keeping up with the volume of regulatory change has been a major challenge for financial businesses over the last few years. A situation that has been accelerated by the Covid-19 pandemic and the greater adoption of digital, remote and hybrid environments.
The landscape has changed considerably, and businesses have had to adopt technology and digital processes to meet consumer and increasing regulatory demand. Coupled with this, financial crime has increased and is set to continue advancing with the current economic crisis. Banks in particular have seen new crime methodologies to deal with, despite spending 3% of their annual revenue on financial crime compliance.
With a greater acceptance of hybrid methods of working and day-to-day activities, we discuss how this affects AML and KYC onboarding and what best practice looks like.
#1: Using compliance software in hybrid environments
With businesses adopting hybrid working, compliance teams need a central repository for their daily tasks. Manual processes are extremely difficult to manage remotely with documents and files placed in different physical and digital locations; the risk of human error is exacerbated; and gaps in processes are all too commonly exploited by fraudsters.
To ensure your team is effective in their roles, a scalable and secure cloud-based solution will provide access for all team members, whatever their location, at any time. A single source of truth means that your entire compliance team can access the information and see the same view of all cases.
#2: Data security delivered with RegTech
A key regulatory challenge relates to data and privacy in this new hybrid world. Remote workers require access to data from various sources. To mitigate data breaches, businesses must set strict access rights on devices and systems. Managing one platform that can handle all compliance tasks, from KYC onboarding through the entire lifecycle of monitoring and remediation for enhanced CDD, is far easier, and secure, to deliver than multiple passwords across disparate systems. RegTech can do just that – it delivers a single, secure application to manage all regulatory compliance.
#3: How the customer experience changes in a hybrid world
Asking your customers to come into your office/branch to verify their identity is a massive barrier to your business. In a hybrid environment, customers can choose how they interact.
KYC onboarding can place a heavy burden on customers to collate the necessary documents, with some customers often asked to provide the same documents multiple times throughout the workflow, breeding frustration and increasing abandonment rates.
Businesses must be flexible as one size doesn’t currently fit all demands. Offering a solution that can be used in branch, or virtually by a customer from their home or office, can keep your business ahead of competitors, as well as opening new geographical markets for growth with the use of digital cloud solutions for compliant onboarding.
In today’s ‘always on’ environment, customers want the convenience of signing up to a product or service in minutes, from anywhere, on any device. Businesses need to efficiently respond to this increasingly preferred demand for remote onboarding, led by hybrid initiatives.
#4: Facial or biometric solutions for hybrid onboarding
Understanding the risks inherent in the post-pandemic world, businesses must seek a better way to manage and verify customer data. Many are adopting biometric tools for hybrid onboarding to facilitate a better user experience.
The closest method available to replicate physical identification is biometrics. With very little in the way of ‘friction’ during the verification process it’s an accurate, private and secure way to verify new customers, or employees for Right to Work requirements.
‘Liveness’ detection is a vital feature for biometric-based recognition solutions. It verifies that the person attempting to confirm their identity is a living subject and not a copy or imitation. Cybercriminals are increasingly trying to spoof remote processes by using photos or videos of an individual’s authorised face. However, ‘liveness’ prevents these spoofing attacks as it combines biometric facial and voice recognition, identity verification and lip-syncing authentication to reduce the chances of fraud.
Businesses must ensure best practice and look for a compliance solution that includes biometric and facial recognition, if it is to adapt to this new world of hybrid transactions. This technology makes it easier for businesses to perform essential remote onboarding for Know Your Customer (KYC) procedures in real-time.
#5: Central source for ongoing KYC monitoring
As markets expand and businesses scale, so too does the need for ongoing KYC monitoring and remediation. With customers spread across new territories and jurisdictions, manual monitoring and remediation becomes impractical as access to different registries is hard to manage.
This new hybrid world creates many opportunities for growth, but only if there are scalable solutions that enable businesses to continue to be compliant.
Your clients’ risk status can change at unparalleled speeds. It is no longer sufficient just to re-check your client data when the regulator calls or wait for the next remediation project. Instead, your business must provide evidence to the regulator that there are processes in place to monitor, identify and remediate client data, to reduce the threat of ongoing fraud.
Businesses need to invest in ongoing client monitoring tools to enable real-time alerts on relevant changes to clients’ risk status. Receiving alerts of changes in company structure, beneficial ownership, directorships, and customers and their financial stability, through an agile cloud solution can significantly reduce your business (and personal) risk and operational overheads.
Digital first culture for hybrid compliance
Businesses must balance so many elements when it comes to compliance – regulatory demands, customer experience, risk exposure, operational efficiencies, and budget.
Throwing more resources at compliance is no longer the answer. Instead, compliance professionals need to accelerate and adopt a culture of digital transformation. By having an internal culture of digital first, the compliance function can elevate itself within your entire business and impact the overall strategy. Investment in technology to automate and simplify processes, will elevate their position within this new hybrid world.