What is KYC Remediation?
KYC remediation is the process of cleaning and updating your client’s data to ensure compliance with the latest regulations. Each customer’s assigned risk must continue to reflect the appropriate risk rating. The frequency of periodic reviews on your data will be reflected in your company’s approach and risk assessment, but should generally fall within a 6 – 36-month cycle depending on the high, medium or low flag you allocate. An efficient KYC remediation process can significantly reduce your business risk whilst also creating an opportunity for you to better understand who your customers are and how best you can further serve them.
KYC Remediation projects have traditionally required a high level of investment in budget, resource and time; usually because of the over-reliance on historical manual processes and ‘paper’ trails.
Seemingly simple remediation projects can quickly become complex once you factor in the collection and re-verification of international client data operating in multiple jurisdictions, and where the data is held in different formats and platforms. For this reason, remediation is often placed on the back burner and is only actioned once a regulator comes to call.
In today’s changing business environment and increasing market volatility, the customer you have today may no longer be the customer you originally onboarded. For this reason, delivering efficient KYC remediation is critical to your business success.
KYC remediation drivers
KYC client lifecycle remediation is vitally important, it not only keeps your data clean, (or flags queries for further investigation) but also prevents the risk of financial penalties. Not that fine avoidance should be your primary KYC remediation driver. Other drivers include:-
- Delivering efficiency and operational savings
- Understanding your customer’s current situation so that you can offer appropriate products
- The retirement of legacy systems and improved customer experience
- Internal changes to the risk appetite of the business
- AML KYC Periodic Reviews
- Future-proofing your business against further changes in compliance legislation
Delaying a remediation project exposes your firm to a higher risk of aiding money laundering, fraud, or being caught out by the regulator for non-compliance which can have a detrimental effect on your brand and reputation.
However, KYC remediation isn’t all about avoiding pitfalls. By improving your client data and ensuring information is accurate, it enables you to support revenue-generating campaigns through upselling and cross-sell opportunities.
Effective KYC remediation process and logic
At NorthRow we understand that KYC remediation can be complex. We have allocated 5 key steps to deliver an effective process to ensure timely delivery of your remediation requirements:-
Step 1 – Identify outdated data and high-risk clients
The primary guiding principle for executing a successful KYC remediation program is for firms to focus on remediating the risk presented by the customers, rather than every data point in the file. Not all customer-data files will need to be remediated. It is much more efficient and effective for the organisation to identify areas of highest risk first and allocate the necessary resources and experience to these more complex out of date records.
Step 2 – Automate KYC remediation for cleaning data
Due to the sheer volume of client KYC data that needs to be remediated, firms should invest in automated software solutions that can quickly segment customers against a high, medium and low-risk strategy.
With the NorthRow Regulatory Rules Engine, regulated businesses can remove much of the interpretation of the required obligations by applying rigorous logic to the available data.
Step 3 – Collect missing client identity data
Using a highly configurable API solution the data can not only be segmented and cleansed but gaps can also be plugged with consistent standards set to ensure all data is compliant. The automated cloud solution efficiently re-verifies your client’s data and documentation against multiple sources in far quicker time frames than outdated manual processes.
Step 4 – Add clean data to CRM
All data and documentation required to support the compliance process can be identified with the application of the rules logic and returned as ‘clean data’. The verified data can then be confidently used throughout the business, such as sales and marketing for remarketing and additional revenue opportunities.
Step 5 – Ongoing client monitoring
Specific automated alerts, relevant to your business, can be used to deliver a relevant risk-based approach to continuous monitoring to ensure the avoidance of more complex remediation and ongoing Customer Due Diligence and monitoring.
Avoiding future remediation headaches
Digitally transform legacy technology
KYC remediation is often not seen as a revenue-generating activity and for this reason, has not had sufficient technology investment. Client data is often kept in multiple siloed legacy systems, which makes having a holistic view of a client impossible and creates a barrier for businesses when it comes to meeting regulatory compliance of the KYC lifecycle.
Using legacy systems and outdated manual remediation processes not only provides a haven for bad actors to take advantage of any gaps in your compliance processes but also dramatically increases overall KYC remediation project costs and prolongs the project delivery time.
By digitally transforming your compliance functions using scalable and secure cloud solutions, you can facilitate expanded remediation projects, seamlessly handling increasing volumes of client documentation and data into a single view of the relevant data and sources.
Invest in better onboarding solutions
The problems with KYC remediation programmes begin with a weak underlying onboarding process. The issues here include inadequate methods of obtaining and/ or maintaining records and multiple poor-quality data-capture systems.
An initial investment in robust client due diligence processes from the very onset can avoid large scale future remediation projects. The trick is to invest in onboarding tools that maximise data capture and identification without sacrificing client experience and to store the customer data in a single “golden source” so that you can respond quickly to any future changes in legislation or identified risks.
Digital client self-service verification solutions
For gathering hard to reach client data – utilising digital self-service solutions to allow your clients to update their own information and upload ID documents at their own convenience also greatly improves the efficiency of the remediation process.
Client onboarding solutions such as NorthRow’s RemoteVerify solution allows clients to use their own smartphone, to capture ID documents, facial-biometric data, address verification and more, improving the efficiency of your remediation process.
Invest in skilled people for enhanced due diligence
Skilled remediation resources are not easy to find, let alone retain. By providing your compliance teams with a digital solution the laborious repetitive tasks can be removed, allowing them to focus on using their skills and knowledge on areas that will ensure employee engagement and deliver complex remediation cases that require enhanced due diligence.
The regulatory pressure on the market to prevent money laundering and fraud will continue to rise. We have seen several hundred amendments to regulation since the global pandemic and anticipate that this will continue for years to come, as fraudsters and money launderers find ways to circumvent existing technologies. Businesses will be continually under pressure to find solutions to stay ahead of those hoping to misuse their services. Investment in digital solutions will be a necessity as it will deliver more efficient KYC remediation and future proof compliance functions not only now but well into the future.
At NorthRow we have worked with leading Building Societies, Estate Agents, Payments firms and Wealth Managers to improve the efficiency of their KYC remediation projects, reducing resource costs, improving risk management processes and helping meet regulatory compliance obligations.
Get started with the NorthRow team today to learn more about how we can help you.