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.
With advanced screening mechanisms in place, businesses can automate many aspects of the due diligence process, such as:
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.
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.
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.