Moving towards Perpetual KYC (Know Your Client)

Perpetual KYC refers to the continuous monitoring of clients through optimal automation, allowing only a small fraction of cases to require human intervention. To build a perpetual KYC model, a framework needs to be in place to support an automated solution. Our Navigating CLM series investigated some of the key features that are vital for building a base to implement perpetual KYC.
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By introducing perpetual KYC into your Client Lifecycle functions it allows you to:

• Find the needle in the (risk) haystack. High capacity within financial crime operations teams is currently being spent on periodic reviews of large client sets, often reconfirming that little to no change has occurred since the last outreach, especially, by definition, in low-risk client segments. Fundamentally, this is ineffective risk management. To achieve the “risk-based approach” that has been the buzzword for some time, organisations need to focus where they expend valuable resources.  
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• Run efficient KYC functions to achieve a better cost/income ratio. Implementing a perpetual KYC approach enables organisations to focus their time on investigating meaningful changes, which enhances the firm's capability to scale operations and expand its customer base. By leveraging technology to streamline and automate processes, organisations can achieve cost efficiency gains while also reducing manual errors, thereby minimising the need for case rework. Additionally, utilising technology allows for reduced reliance on resource augmentation and burst capacity to address fluctuations in case numbers and spikes in client maintenance resulting from periodic review cycles.
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• Change skill requirements in KYC functions for a more sustainable approach. As a result of focusing skilled analysts on key areas of risk, the skillsets may start to shift from mass volume review of lower risk cases (data gathering), to point review of more complex and higher risk files. Similarly in screening, rather than high volume review of false positive screening hits, organisations should focus on true investigations that hit the red flags identified. This is a more sustainable approach which reduces the need to flex the cost base and decreases the volume sensitivity to new onboards.
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• Focus on the data points that matter. The sheer volume of client data collated as part of onboarding is significant, with experts confirming that there is a core of ~20 critical data fields that really make an impact on AML (Anti Money Laundering) risk compliance. Furthermore, if the strategy towards external vendor tooling transitions to outcome/value-based processing, focusing on meaningful changes and material updates, rather than paying for complete customer coverage and insignificant data point alterations, it can lead to greater efficiency and cost savings.
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• Obtain compliance buy-in with explainability. Being able to explain to the regulators, compliance, and senior stakeholders is critical to adopt a perpetual KYC approach. Policy embedded, rules-based technology help drive case requirements and define screening review triggers. Policy-led decision matrices deliver peace of mind to risk adverse stakeholders including regulators and compliance. Whilst the introduction of industry reliable client data sources as part of outreach and monitoring will provide regulated public sources of information.

Delta Capita has worked with clients to introduce perpetual KYC features by:

• Discovery, selection, and implementation of technology partners. DC have supported in tools including, CLM workflow tools, orchestration layers, Screening and Monitoring tools and technology accelerators to remove manual processes. We have implemented an industry leading CLM workflow for several investment banks as well as providing project support on the implementation of banks’ internal CLM workflows. Delta Capita can also offer our own CLM workflow tool, Karbon.
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• Advising on data providers and aggregation techniques. To collate client data automatically and speedily from trusted external and internal data sources to initiate pre-screening validation and outreach collation. This has reduced the number of client touchpoints.  
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• Defining People Strategy. DC Advisory projects have looked across CLM role responsibilities, CLM functional models and used operational excellence principals to optimise processing. Through realignment, education, and training of the functions we can redefine analysts’ roles into trigger-based investigators and procedural optimisers. Restructuring of the firm’s logical application architecture we can look at how to efficiently integrate the firm’s technology and pass data across components, providing an investigation tooling that provides analysts with a holistic picture of their client, allowing for quicker cycle times and more accurate investigations.
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As well as supporting risk and efficiency outcomes, the advancement of new technology may allow organisations to re-visit the concepts of data sharing across institutions and creation of “KYC Passports” in a KYC utility concept. In discussions with multiple clients, through DC breakfast sessions and beyond, we have debated cross border data challenges, conservatism of regulators and compliance teams, gaining customer consent – all balanced against the ever-present cost efficiency needs of Financial Institutions.

Learn More on how Delta Capita can partner with you.

If you are interested in learning more about how Delta Capita can support implementation of Perpetual KYC, please get in touch today.

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