Know Your Customer (KYC) checks are an integral part of any institution’s due diligence procedures and fight against fraud. As technology gets increasingly sophisticated, so does fraudulent activity. This calls for robust mechanisms to counter this rising threat and stamp out fraud risk.
KYC checks allow you to do your due diligence before you onboard a customer or participate in a transaction with a supplier. To that end, reliance on technology has increased as institutions try to take a proactive approach towards mitigating risk. But how do you ensure that your KYC process is as effective as it can and should be? We discuss this below.
3 ways to maximise efficiency in the KYC process
1. Advanced screening
With advanced screening mechanisms in place, businesses can automate many aspects of the due diligence process, such as:
- High-risk identification: Advanced screening solutions can screen everything from global watchlists, sanctions lists, and adverse media databases. This identification mechanism should be applied to potential clients who are deemed as high-risk as part of their initial KYC checks.
- Automated data collection and verification: Screening tools can automatically collect and verify information from various sources, including public records, credit bureaus, and social media. This not only reduces the likelihood of human error, but also saves all parties precious time. According to a study by McKinsey, organisations that automate KYC checks have been able to reduce case-handling times by 20 to 30%.
2. Boosting verification capabilities
It is possible that not all ID documents and company information provided to you by a potential client or partner are going to be authentic. This is why doing your own research as a company is critical.
Company Watch provides access to verified company information and risk data. This is intended to empower businesses to conduct comprehensive due diligence, which we call Enhanced Due Diligence or EDD. EDD as part of KYC checks allows for a detailed analysis of a company’s financial health, a key indicator of the level of financial risk you will be dealing with.
3. Investing in perpetual KYC
Traditional KYC processes often involve a one-time check at onboarding. However, customer information can change rapidly, necessitating ongoing monitoring and updates. Perpetual KYC involves continuous due diligence and KYC checks throughout the customer relationship.
According to a report by PwC, in 2024, financial institutions across Australia, New Zealand and Asia were fined USD 5.8 billion for anti-money laundering and KYC compliance failures. This was largely due to a lack of continuous monitoring of customer partnerships.
How can you avoid this?
By implementing the following procedures, not just as part of the initial due diligence process, but periodically throughout the partnership you are entering into.
- Validating IDs and documents
- Company screening
- Validating public information
- Monitoring audit trail
- Checking director information
- Verifying legal history
The best approach is to build periodic KYC checks into the initial contract upfront.
In the same report, PwC states that the biggest challenge that banks face when trying to implement perpetual KYC, is, difficulty in finding one end-to-end solution for their due diligence process.
Think of it this way - if you’ve used a number of third parties or internal mechanisms to conduct initial KYC checks, the only way to ensure continued accuracy is to duplicate the process repeatedly throughout the length of the contract. This is not only time-consuming but also tough to track.
Hence, it is important to have a trusted advisor with a deep understanding of the required KYC technology solutions available in the market to avoid repeated lengthy market scans and selection processes.
As an end-to-end due diligence solution, Company Watch can help businesses conduct robust KYC checks in half the time and repeat the process quickly and efficiently in the future.
Key takeaways
- KYC checks allow you to conduct due diligence before you onboard a customer or participate in a transaction with a supplier.
- With advanced screening mechanisms in place, businesses can automate many aspects of the due diligence process, such as high-risk identification and automated data collection and verification.
- Our Enhanced Due Diligence (EDD) process as part of KYC checks allows for a detailed analysis of a company’s financial health.
- Perpetual KYC involves continuous due diligence and KYC checks throughout the customer relationship.
