Top 3 Technology Trends Radically Changing KYC/AML Compliance
A few weeks back we published a blog titled “The Birth of AML-Tech” which touches upon a few AML technologies that help enhance the KYC compliance process. The CDD procedure is a crucial component to evaluate and monitor customer risk. A best KYC program consists of Customer Identification Procedure (CIP) for collecting and validating the data which is not easy. Documents can be counterfeited. Ownership structures can be covered. And, monitoring transactions become difficult with practices like trade based money laundering. This makes it necessary for financial institutions to adopt better technologies to help compliance and risk teams. Here are three of the latest technology trends that are radically changing the way institutions gather, verify, screen, monitor and store customer information.
AI is the bedrock of many new technologies for KYC and AML. AI is comprised of many branches such as machine learning (ML), natural language processing (NLP), neural networks, and fuzzy logic. These technologies allow systems to “think”, and over a period of time, automatically train and enhance the systems’ outcome prediction accuracy.
An AI based system can provide dynamic questionnaire that can adapt as per the customer responses. Further, the system’s Intelligent Process Automation (IPA) capabilities would help significantly reduce FIs’ KYC profile update. Additionally, it would enable ability for real-time transaction monitoring based KYC anomaly detection. Finally, process effectiveness can be improved by utilizing AI enabled workflow automation that significantly reduces FIs’ staffing expenses related to the client onboarding processes and remediation.
Once associated only with Bitcoin, blockchain may prove to be a positive disruptor with the potential to redefine and reimagine the KYC/AML. It will enable financial institutions to keep up with changing regulations, quickly validate customer information for KYC, drill down to the ultimate beneficiary owner, eliminate duplicate processes and provide a more seamless customer experience for on-boarding.
The technology behind blockchain is based on a distributed, time-stamped ledger with “blocks” added for every transaction. With distributed technology, there is no single point of failure. And since information is not stored in a central location, it is almost impervious to hackers, making blockchain extremely secure and conducive for financial transactions.
Blockchain can help verify customer identity, with details like source of funds, nature of business, and provide ongoing monitoring along the way. Every financial institution has to perform the KYC/CDD process, and upload the due diligence information to the central registry that stores digitized data tagged to a unique identification number for each customer. By using this reference number, firms can provide new services to a customer within the same banking relationship since they have access to the stored data to perform due diligence.
The financial institutions are building upon the technologies using big data, state-of-the-art transaction monitoring and KYC methods, such as social biometrics. Using this technology – a person’s footprint gathered through Google, Facebook, Twitter and other social networks – can provide valuable information about an individual that can’t be obtained from other sources.
Social biometrics has the added benefit of capturing information about millennials, the underbanked and the unbanked, who have little credit history but often have a social presence.
Another benefit of social biometrics is that it incorporates constantly changing information from the internet, which offers a dynamic view of exposure. When used in concert with traditional credit and KYC data for AML and compliance, social biometrics provides banks with a more robust way to assess risk and identity theft and fraud.
FIs can gain immensely by leveraging these technologies in their KYC/AML operations. These systems can massively enhance the overall KYC/AML process effectiveness, and bring in huge cost savings for FIs. Additionally, it would significantly improve customer experience for the FIs.
At Cenza Technologies, we adopt a customer centric approach and constantly upgrade our KYC Process to include the latest cutting edge technologies to serve our Financial clients across the world. Discover how Cenza can streamline your KYC process and expedite Client Onboarding and Remediation. Do reach out to us to know more.