To contend with the pandemic, many businesses have been compelled to expand and improve their digital customer products, services and channels at speed. While know your customer (KYC) is a critical control for detecting and preventing financial crime, highly manual processes can lead to protracted onboarding and even abandoned applications.
Many firms with manual processes tend to struggle to get the full measure of prospective customers. They encounter difficulties collecting necessary information, substantiating ownership structures, screening against sanction lists, and making informed risk decisions.
Highly manual processes are also error-prone, with operations and investigations relying heavily on people, especially for data gathering. More needs to be done to shift away from high costs and poor-quality processes, which expose firms to heightened AML risk.
Many financial institutions are increasingly taking the lead from fintech disruptors to harness data, build holistic customer profiles, reduce noise and increase the efficiency of financial crime control frameworks. Across the globe, the verifications of individuals’ and entities’ details is steadily moving from physical and paper-based to digital.
Unfortunately, the mechanism remains fragmented as the digital identification documents (IDs) issued by one country are not always accepted in another. There is now an urgent need for digital ID interoperability across countries to ensure faster, cheaper and more convenient and accurate eKYC.
The EU’s recently announced electronic Identification, Authentication and Trust Services (eIDAS) regulation provides a framework to mutually recognize electronic IDs issued by its 27 member countries, thus enabling interoperability and trust in cross-border electronic transactions across the EU.
Against this backdrop, some key industry trends have emerged in the following areas:
- Cloud-based and SaaS-based solutions
- Blockchain technology
- Crypto markets present a growing but as-yet underestimated financial crime risk.
- Non-fungible tokens (NFTs) NFTs have exploded into the mainstream
- Artificial intelligence (AI) AI spending is growing exponentially.
- Supervised and unsupervised machine learning
- Network analytics and robotic process automation (RPA)