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Perpetual KYC in Fintechs: Is It Worth It?

by Pedro Ferreira
  • Perpetual KYC pushes fintechs to systematically keep reviewing accounts and transactions.
fintechs, KYC
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For fintechs, if customer behavior is constantly changing, so should risk profiles adapt through Ongoing Customer Due Diligence. Perpetual KYC is a way of keeping up with new threats as well as new regulations.

As OCDD procedures work as compliance obligations in which companies must monitor accounts while also assessing the risks they might pose for financial crimes such as money laundering .

What Is Perpetual KYC in Fintechs?

perpetual KYC in fintechs

Perpetual Know Your Customer (KYC), in essence, pushes fintechs to systematically keep reviewing accounts and transactions, but also risks.

Accordingly, real time analytical capabilities are key as Ongoing Customer Due Diligence requires fintechs to be prepared to constantly monitor account status as a way of tackling any emerging risk.

Data should thus be viewed in a holistic way but what happens when capabilities are limited and deep analysis is hampered?

What Activities Are Tracked via Ongoing Customer Due Diligence?

There are certain data sources and activities which require tracking with a high degree of scrutiny, namely:

  • Changes made to the account’s information
  • Status changes
  • Trade data
  • Risk thresholds
  • Suspicious activity

Deviations from the account’s standard activity are promptly identified which in turn leads to alert triggers. Subsequently, staff investigations should take place.

Main Points for Fintechs (and Banks) When Dealing with KYC Measures?

The 3 main pain points are usually:

  • The high volume of data
  • The inherent manual nature of KYC processes
  • The difficulty in understanding their clients and assessing risk.

Can Fintechs Help Deploy High-Quality Ongoing Customer Due Diligence Measures?

It’s important to understand that pinpointing the right threshold which triggers an investigation differs from detecting much more sophisticated patterns which keep fraudsters off the company’s radar.

Payment fraud analytics and Artificial Intelligence (machine learning) can help as it becomes easier to keep track of larger numbers of transactions and uncover patterns which might arise from fraudulent transactions and other illegal activities.

What Countermeasures Can Fintechs Take?

As much as machine learning and fraud analytics can help fintechs uncover patterns fraudsters might use, fintechs still need to take into account that they need to deploy effective countermeasures as these are quintessential in what concerns compliance determination.

In fact, there is a known gap between the SARs filed (suspicious activities reports) and actions taken after the fact.

While SARs reports help tackle fraudsters, further action should be taken so that fintechs send a clear message that they will not enter or maintain business relationships in which risks aren’t able to be properly mitigated.

As such, in terms of OCDD, it becomes crucial that fintechs develop systematic procedures which can give them the ability to follow through on any given red flag.

Moreover, processes must be drafted in a way which can effectively speed up fintechs’ response to any given scenario.

Lastly, considering taking steps towards KYC remediation might be a change which fundamentally alters risks profiles.

How Can Perpetual KYC Help Fintechs?

Generally speaking compliance, when done right, can effectively be turned into a competitive advantage.

By shifting into an ongoing due diligence approach, these venues can consequently save time and costs while learning much more about their clients.

The process entails a shift in mindset as it no longer becomes a check-the-box measure, but rather turns into a holistic view of client data.

And, while checks are automated, work becomes not only scalable but also spread out over time, thus alleviating staff’s workload.

Forward-thinking fintechs will understand precisely how implementing perpetual KYC measures will effectively empower operational efficiency via automated checks while improving customer experience.

By having perpetual KYC procedures in place fintechs will be empowered to a higher standard of vigilance will unquestionably help in creating a much more transparent organization.

As such, fintechs which make OCDD one of their core values will become an example of good governance, something which can easily translate into earning the trust of both clients and investors.

For fintechs, if customer behavior is constantly changing, so should risk profiles adapt through Ongoing Customer Due Diligence. Perpetual KYC is a way of keeping up with new threats as well as new regulations.

As OCDD procedures work as compliance obligations in which companies must monitor accounts while also assessing the risks they might pose for financial crimes such as money laundering .

What Is Perpetual KYC in Fintechs?

perpetual KYC in fintechs

Perpetual Know Your Customer (KYC), in essence, pushes fintechs to systematically keep reviewing accounts and transactions, but also risks.

Accordingly, real time analytical capabilities are key as Ongoing Customer Due Diligence requires fintechs to be prepared to constantly monitor account status as a way of tackling any emerging risk.

Data should thus be viewed in a holistic way but what happens when capabilities are limited and deep analysis is hampered?

What Activities Are Tracked via Ongoing Customer Due Diligence?

There are certain data sources and activities which require tracking with a high degree of scrutiny, namely:

  • Changes made to the account’s information
  • Status changes
  • Trade data
  • Risk thresholds
  • Suspicious activity

Deviations from the account’s standard activity are promptly identified which in turn leads to alert triggers. Subsequently, staff investigations should take place.

Main Points for Fintechs (and Banks) When Dealing with KYC Measures?

The 3 main pain points are usually:

  • The high volume of data
  • The inherent manual nature of KYC processes
  • The difficulty in understanding their clients and assessing risk.

Can Fintechs Help Deploy High-Quality Ongoing Customer Due Diligence Measures?

It’s important to understand that pinpointing the right threshold which triggers an investigation differs from detecting much more sophisticated patterns which keep fraudsters off the company’s radar.

Payment fraud analytics and Artificial Intelligence (machine learning) can help as it becomes easier to keep track of larger numbers of transactions and uncover patterns which might arise from fraudulent transactions and other illegal activities.

What Countermeasures Can Fintechs Take?

As much as machine learning and fraud analytics can help fintechs uncover patterns fraudsters might use, fintechs still need to take into account that they need to deploy effective countermeasures as these are quintessential in what concerns compliance determination.

In fact, there is a known gap between the SARs filed (suspicious activities reports) and actions taken after the fact.

While SARs reports help tackle fraudsters, further action should be taken so that fintechs send a clear message that they will not enter or maintain business relationships in which risks aren’t able to be properly mitigated.

As such, in terms of OCDD, it becomes crucial that fintechs develop systematic procedures which can give them the ability to follow through on any given red flag.

Moreover, processes must be drafted in a way which can effectively speed up fintechs’ response to any given scenario.

Lastly, considering taking steps towards KYC remediation might be a change which fundamentally alters risks profiles.

How Can Perpetual KYC Help Fintechs?

Generally speaking compliance, when done right, can effectively be turned into a competitive advantage.

By shifting into an ongoing due diligence approach, these venues can consequently save time and costs while learning much more about their clients.

The process entails a shift in mindset as it no longer becomes a check-the-box measure, but rather turns into a holistic view of client data.

And, while checks are automated, work becomes not only scalable but also spread out over time, thus alleviating staff’s workload.

Forward-thinking fintechs will understand precisely how implementing perpetual KYC measures will effectively empower operational efficiency via automated checks while improving customer experience.

By having perpetual KYC procedures in place fintechs will be empowered to a higher standard of vigilance will unquestionably help in creating a much more transparent organization.

As such, fintechs which make OCDD one of their core values will become an example of good governance, something which can easily translate into earning the trust of both clients and investors.

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