The new era for KYC processes

Know Your Customer

Customer identification and verification, or the Know Your Customer (KYC) process, is a vital part of the anti-money laundering (AML) activities of financial institutions, the development of which has been on the rise for the past decade. As the KYC process is also a very visible part of banking activities for the customers of financial institutions, the functionality of the KYC process has significant implications for customer satisfaction, further increasing its importance.

However, in early 2020, the pandemic essentially shut down the world in a matter of weeks and caused a shift in both criminal behaviour and a financial institution’s ability to interact with their customers. As a result, this highlighted several areas within the KYC process that still crucially need development.

According to the Deloitte Regulatory Outlook 2021, due to the unstable situation in the world, financial crime has increased. As technology advances, cybercrime becomes more diverse and tracking down criminals is more complicated due to the anonymity enabled by the Internet. A decline in the use of cash has meant that illicit funds are more commonly transferred using cryptocurrencies and online wallets. The Internet enables real-time international cooperation between criminals, which means that their victims can also be located anywhere in the world.

Furthermore, customer onboarding processes and other customer contacts have also moved online, making it more difficult to identify or interact with customers due to insufficient existing digital solutions. As cybercrime has increased, the online processes of financial institutions have resultingly become a common target of cyberattacks, thus making both the proper information and cyber security of the new technologies vital. From the customers’ point of view, the shift to online channels has impelled them to switch from traditional branches to online banking regardless of their age group. As such, it is particularly important that banks find a balance in the services and channels that they offer as the use of digital services may create challenges for certain elderly customers.

All of these factors have had a significant impact on financial institutions and their ability to perform the customer due diligence process in accordance with AML regulatory standards. At the same time, however, these challenges create an excellent opportunity for banks to further develop their KYC processes so that they are more diverse and customer-friendly, and in order to keep up with both criminal activity and the continuous changes in the world.

Read the most up-to-date trends affecting KYC processes and their development here >>

Oliko tieto hyödyllistä?