Establishing Effective KYC

What does your KYC policy need and what should you consider in order to establish the most effective KYC policy for your organisation?

Posted by: 
Alexis Fox-Mills
Mar 4, 2021

March 4, 2021

Cost of compliance failure

In the first half of 2020, regulatory fines issued for anti-money laundering (AML) far exceeded those imposed for the whole of the previous year. In 2020, AML fines amounted to $706m compared with $444m in 2019.

The reason for the majority of AML-related fines were familiar transgressions: failing to ensure customer due diligence and failure to comply with regulations.

The message is clear: companies need to get better when it comes to establishing Know Your Customer (KYC) policies that are right for their business.

Importance of KYC

The reasons for establishing a robust and effective KYC framework go way beyond simply avoiding fines of course. Financial services businesses have an obligation to follow the law, but there is also a moral imperative to protect customers and to stop criminals from profiting from crimes such as fraud, drug trading, and human trafficking.

There are monetary costs related to financial crime, for instance the UK government estimates that economic crime costs the economy around £37 billion each year. However, there are also real human costs associated with fraud and other financial crime typologies.

The affects of financial crime on vulnerable groups; on financial services customers; and even on compliance professionals can often be de-prioritised or overlooked when billions of pounds are at stake.

Businesses getting their KYC and AML procedures right plays a crucial role in saving money and in stopping this wrongdoing.

Good KYC makes business sense

We've talked about the importance to people, businesses and the economy when it comes to KYC. Failure to establish the right compliance policies and procedures has a human cost; it can cost firms in terms of fines or revenue; and it can also make or break reputations.

Establishing the right KYC policy and the right customer experience around compliance helps firms identify legitimate customers who have a need for services while also providing the first step in building trust and long-lasting relationships.

Effective regulatory management and compliance processes have now become a source of competitive advantage. Disruptors in the financial services industry have digitised and automated KYC, poaching swathes of customers along the way.

Businesses that get their KYC model right remove friction from their processes while maintaining the law and staying true to their risk appetite. The net effect is better experiences for genuine customers going through due diligence, and swift identification of high-risk profiles.

Establishing effective KYC

So what is the right KYC policy for your business, your customers, and the regulations you have to adhere to?  

PassFort has teamed up with experts in financial crime, compliance and RegTech to produce a paper that examines what's involved in establishing a KYC policy.

It covers how to create an approach to KYC that fits your business model, including:

+ Consideration of your firm's risk

+ Keeping customer experience front of mind

+ Making KYC better, not just faster

+ Making regulation clear to staff

+ Choosing what to automate

Get part one in the series, and sign up for parts two and three today.

Get in touch

We would love to hear from you if you are establishing, executing or reviewing your approach to KYC. Please get in touch anytime and a member of the PassFort team will get right back to you.


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