An efficient, streamlined KYC program is key to helping banks stay compliant and avoid costly fines. Here’s how no-code can help.
For financial institutions, knowing everything there is to know about a customer and their account isn’t just good customer service—it’s the law. With hackers and identity thieves growing savvier every day, banks must redouble their efforts to verify that their customers are who they say they are.
To sketch just the tip of the iceberg: New account fraud jumped 88% from 2018 to 2019, 40% of account takeovers take place within 24 hours of unauthorized access, and 87% of consumers have unknowingly left their personal banking or financial information exposed online. As such, banks must be constantly vigilant to ensure they aren’t doing business with a fraudster. That’s where KYC workflows come in.
Below, we explore everything you need to know about KYC and provide a sneak peek at how Unqork’s new partnership with Arachnys, the market-leading provider of KYC and AML data, can make streamlining KYC using no-code even easier.
What Is KYC?
“Know Your Customer” or “Know Your Client” is the mandatory process of verifying the identity of a client when opening a new account. The process covers all the steps financial firms must take to establish a customer’s identity, understand the nature of the customer’s activity, confirm that the source of the customer’s funds is legitimate, and assess any money laundering risks associated with the customer.
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KYC procedures are an integral part of enforcing anti-money laundering (AML) laws, which are regulations and procedures that make it harder for criminals to disguise illegally obtained funds as legitimate income. If banks practice ineffective KYC or fail to enforce AML rules, they will face hefty fines: Under the Bank Secrecy Act (BSA), a bank found in violation of AML regulations can be fined between $10,000 and $100,000 for each day the violation occurs. What’s more, the bank will have to forfeit all assets and funds involved in criminal activities and will likely suffer reputational damage, as well.
To demonstrate compliance with AML rules, banks’ KYC programs must include the following elements:
Customer Identification Program (CIP): As designated by the Patriot Act, a CIP mandates that any person conducting a financial transaction must have their identity verified to prevent fraud, money laundering, and other illegal financial activities. A CIP encompasses identity verification procedures that include documents (e.g., Social Security card or birth certificate), non-documentary methods (e.g., biometrics or face ID), or a combination of both. A bank must verify this information within a reasonable amount of time.
Customer Due Diligence: Due diligence helps banks decide whether a potential customer is trustworthy so they can protect themselves against criminals, terrorists, or politically exposed persons (PEP) who might pose a security risk. The three levels of customer due diligence are Simplified Due Diligence (SDD), Basic Customer Due Diligence (CDD), and Enhanced Due Diligence (EDD). It’s up to the individual institution to determine the risk a customer presents and perform the appropriate level of due diligence to verify their identity.
Ongoing Maintenance: After initially verifying a customer’s identity, banks must routinely check on them, their account, and their financial transactions to ensure nothing is amiss. This includes monitoring for unusual spikes in activity, cross-border activity, media mentions, the inclusion of people on sanction lists, and more.
Common KYC Challenges
KYC procedures shouldn’t be taken lightly, but many banks and financial firms struggle to implement and practice them efficiently. Generally speaking, the two most significant obstacles to efficient KYC are paper-based processes and time-consuming onboarding processes.
Many large financial institutions—particularly those that deal with institutional banking—are notoriously reliant on paper for their daily operations, and KYC can exacerbate this pain point. Depending on the types of materials needed, verifying a customer’s identity may involve a significant number of manual back-and-forths between multiple people, which is time-consuming and often error-prone. What’s more, the data moving through these paper-based processes isn’t always perfect—it’s often scattered across disparate apps or systems, out of date, incorrect, or not clean.
Sorting all this out also extends the onboarding process. According to Arachnys, it takes corporate banking customers 90 to 120 days on average to make it through onboarding. Unsurprisingly, then, 85% of customers report a negative KYC experience, with 12% ultimately changing banks because of it.
“With the Arachnys data sets integrated into Unqork, businesses will be able to bring best-in-class KYC and AML processes to market faster than ever thanks to Unqork’s unique no-code platform. This partnership represents a critical step in Unqork’s work to digitize the entire customer onboarding and monitoring process in a way that reduces costs, saves time, and improves outcomes for our clients.” — Rabih Ramadi, Head of Financial Services & Insurance at Unqork
Today, banks’ average annual spending on KYC compliance and CDD hovers around $48 million (including labor and third-party costs), and 10% of the world’s top banking institutions spend at least $100 million per year on these processes. The question, it seems, is not if banks are investing enough to improve their KYC processes and related business outcomes; it’s whether or not they are investing in building the right kind of KYC solution.
How No-Code Can Help
No-code can help banks optimize KYC procedures without breaking the bank. Unqork’s Customer Onboarding Solution enables you to minimize repetitive data entry to accelerate onboarding, digitize workflows that filter into KYC and due diligence processes, and improve client experience via self-service flows. With a no-code platform, you can unlock all these features (and more) in a fraction of the time for a fraction of the cost, ensuring streamlined KYC procedures and AML compliance. Indeed, one of our clients went to market with their custom onboarding solution in just eight weeks!
Unqork’s new partnership with Arachnys promises to make mastering KYC even easier. This partnership will combine the Unqork platform with Arachnys’ database of global KYC and AML data to help enterprise clients digitize their onboarding, servicing, and monitoring processes and inspire the next generation of KYC solutions.
“With the Arachnys data sets integrated into Unqork, businesses will be able to bring best-in-class KYC and AML processes to market faster than ever thanks to Unqork’s unique no-code platform,” says Rabih Ramadi, Head of Financial Services & Insurance at Unqork. “This partnership represents a critical step in Unqork’s work to digitize the entire customer onboarding and monitoring process in a way that reduces costs, saves time, and improves outcomes for our clients.”
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