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Benchmarking: how to improve your KYC and AML processes

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We often use benchmarking when assessing options and making decisions in everyday life. For example, the popularity of electric cars has spawned its own new benchmarks for consumers to consider when making choices between price, range, and charging time.

When it comes to financial crime, we can also use benchmarks to provide some insight and intelligence around processes such as around know your customer (KYC) and anti-money laundering (AML).

Benchmarking is about external comparison

Your financial institution will likely have some internal targets and agreements around products, quality and service levels – often referred to as key performance indicators (KPIs). But benchmarking is about how one financial institution compares to a peer or other comparable organisation.

This external view can provide valuable information around the effectiveness and efficiency of the KYC process.

For example, say on average your KYC analyst is producing 20 KYC files per month; your first-time quality control pass rate is 76%; your onboarding abandonment rate is 23%; and the onboarding time is three weeks. Are these comparable to the performance of other financial institutions and the industry average?

By measuring and comparing against industry ‘best practice’ benchmarking, you can identify where your KYC process are, and are not, effective.

Health warning

There is a health warning when applying benchmarking, which is that no two organisations are the same. They all have different client mixes, maturity, different levels of automation and risk appetite.

So, benchmarking can be highly variable and is meant to act as a guide to spot differences and where they appear out of sync with industry practice which then requires direct further investigation.

Reaping the benefits

Do lower quality control rates point to a need for more effective training? Can you reduce abandonment rates by a more disciplined onboarding process with relationship managers? Or does low file productivity point to legacy technology or an ineffective client outreach process?

Benefits can extend to your clients – for example, in reducing the number of client interactions for a refresh case. They can also help prioritise investment, help assess the effectiveness of policy implementations; or clarify your operating model (for example, which role is most effective in collecting KYC information from your clients).

Ideally, benchmarking can be stated in numerical terms to aid comparison with the caveat noted above.

It is healthy to get a sense of what the industry is doing – what are the benchmarks for your KYC processes; and whether you can learn and benefit from how other institutions have improved their process.

How can Delta Capita help?

Delta Capita has an experienced client lifecycle management (CLM) team that run managed services and perform KYC across many financial institutions. With this experience, we have a good view of industry best practice and how KYC benchmarking can provide you with a valuable insight.

To find out more, contact us and speak to one of our experts.