Data sits at the heart of a KYC compliance process. Without electronic data checks, KYC in today’s digital world would be impossible. But there’s more to KYC data than just running the numbers.
Data is a hugely valuable commodity and a powerful tool. It’s no accident both Google and Facebook’s business modelsare based on collecting user data.
Data, of course, also sits at the heart of KYC (know your customer) compliance processes. Without electronic data checks, KYC in today’s global digital economy would be impossible. And there’s a lot more to KYC data than just running the numbers - data really is everything.
The value of KYC
At their most basic level, KYC checks are about verifying a customer is who they say they are; that they can be trusted; and that their finances are legitimate. Achieving a threshold of trust means obtaining proof and proof is obtained from data - specifically data held or shared digitally.
Regulated firms collect and process a whole range of data to prove a customer’s identity, both primary and secondary. This might be anything from a government identity database to scanning media channels.
The process of reviewing digital data helps identify and weed out criminals seeking to launder money, which can be associated with different illegal activities ranging from terrorism to modern slavery to drugs trafficking to cybercrime. Data used to verify individuals applying for financial products also helps prevent crimes like fraud.
On the flipside of the coin, KYC data ensures legitimate customers get access to financial services that are essential to everyday life from approving credit cards to online payments to investments and beyond. Access to financial products is hugely important to people and KYC helps smooth the path to accessing them.
There is, therefore, huge value in good quality KYC data because it protects regulated firms from criminals, it ensures compliance with anti-money laundering and other financial crime regulations, and it brings real customers onboard with important financial products.
Building trust online
KYC data checks play a crucial part in building relationships with customers too. They start the customer's journey with a good experience and are an opportunity to build mutual trust.
A well-run KYC process that is smooth, simple and transparent helps show customers a firm is ethical and responsible - that they can trust the organisation with their money and their information.
Equally, the same KYC process will enable the firm to establish trust with its clients for an ongoing relationship that will hopefully lead to loyalty, advocacy and upselling opportunities.
There is no denying that storing and processing data correctly has become more complex and high-profile. Scandals such as Cambridge Analytica have played a big part in making the general population more aware of the value of their data and its power in the world. It has also made many people more wary of how much data they share online and what those companies might do with it.
In the EU, for example, the General Data Protection Regulation (GDPR) gives the data subject an array of rights, including the right of access to that data, to be informed of the data held about them, and to have that data erased. This changed the T&C's sign-ups of nearly every business in Europe, if not the world!
And the stakes are high as companies failing to comply with GDPR can be fined up to €20m or four per cent of global revenue – whichever is highest. While GDPR remains the world’s toughest data privacy regime, other countries aren’t far behind. More than 120 countries currently have data privacy laws, and that number is growing.
Financial services companies are acutely aware of how they must comply with data protection law and how compliance with those laws must feed into their KYC checks.
The global nature of financial services also presents challenges when it comes to accessing KYC data. A database that’s readily available in one country may be non-existent in another.
An inability to access robust, quality data can leave a company in the lurch when it comes to expansion or it could create heightened risks. Accessing KYC data in particular regions therefore needs to be built into the company’s risk strategy, and it needs to be a major consideration when selecting a technical partner to help orchestrate its data checks and automate KYC processes.
Data is not always accurate. It can be out of date, or might be incorrect. Data is open to human error and can also be manipulated. In a world where big decisions are driven by data, it’s really important to trust data sources or data providers.
Inaccurate data leads to bad decisions, undermining the KYC process and the strength of a business. Customers who are entirely legitimate can find themselves rejected, while criminals can be allowed in.
It's a good idea to use sources of trusted, accurate data, as well as robust verification processes that employ methods such as matching customer information against two different data sets.
With great power comes great responsibility
Over the past two decades, the amount of data created collectively across the world shot up beyond anyone’s wildest dreams. In the time it’s taken you to read this sentence, you will have created around 1.7MB of data. It gives us extraordinary powers to do good, but it also has the potential to be seriously misused.
And that’s why it’s so important to consider a service provider’s attitude to data when you are looking for specialist services like support with KYC processes.
Expertise and experience in digital KYC are of course important, so are partnerships with trusted data providers, and it’s a good idea to explore a firm’s attitude towards accessing, collecting, storing and using data.
It can be hard to know who to trust online and that’s why data is at the heart of knowing your customer.
Get in touch
PassFort has more than 25 leading data provider partners covering a world of individual and corporate checks. The information needed to satisfy KYC, KYB and AML data checks can be integrated through PassFort's single API.
If you would like to talk to us about your digital KYC processes, accessing quality data or who PassFort partners with to provide quality data, please get in touch! We would love to hear from you, so mail us any time at firstname.lastname@example.org.