5 pitfalls to avoid when implementing digital KYC solutions

Are your ‘Know Your Customer’ (KYC) compliance procedures up to scratch? Or are you making the KYC process more difficult than it needs to be? Many businesses are using digital KYC processes to collect vital verification data. The market for e-KYC solutions is expected to reach $1,568 million by 2027. However, mistakes can be costly, allowing criminals and fraudsters the chance to sidestep your KYC security.

Why KYC compliance is important

All financial institutions are required to verify the identities of their business partners, clients, and customers to comply with anti-money laundering and financial crime regulations. KYC is a crucial layer of security and risk management for any financial organisation. Not following AML regulations means companies can risk huge fines – 58% of the total value of non-compliance fines issued by the FCA in 2021 were related to AML failings, amounting to a total $441 million.

5 Mistakes to avoid when beginning digital KYC implementations

Machine learning, AI and data analytics are transforming governance, risk and compliance functions across the insurance and financial sectors. So it’s no surprise that digital KYC solutions can provide an efficient and effective means to collect and verify personal documents and data. Avoid these pitfalls when implementing your digital KYC processes to ensure that your KYC implementation is as effective as possible:

 1. Relying on manual processes
An over-reliance on manual processes to support your digital KYC infrastructure is not only inefficient but runs the risk of introducing human error into the data you collect. Automation can save you time and money and can allow you to use your human resource more effectively, switching your data analysts’ focus from collection and data cleansing to risk mitigation.

 2. Using incomplete data

With any KYC process, having access to data is critical. But with a digital KYC process, having incomplete data can stymie compliance efforts, minimise your ability to extract useful insights into customer behaviour and allow criminals openings to exploit flaws in your data. Improving the quality and quantity of your data should be a priority.

 3. Failing to account for regulatory change

Industry best practice, national AML laws and international legislation are constantly updating and changing. Organisations need to be aware of changing standards and keep their governance and compliance processes up to date to avoid errors in KYC that can leave them open to fines. When implementing digital KYC processes consider their adaptability to regulatory change.

 4. Not keeping tech updated

When considering a digital KYC implementation most smaller businesses will choose a third-party supplier, while larger organisations may choose to develop processes in house. Both options can leave companies relying on old technologies as the cost of updating can be prohibitive. Just because the tech you are currently using has worked well in the past doesn’t mean it will continue to be effective as fraud detection technologies and consequently the quality of fraudulent documents continues to improve.

 5. Lack of security

As we continue to collect more and more personal data and identify consumer information through digital KYC and other processes, we must consider the overall security of that data. Complacency when it comes to data storage and access can leave companies open to costly ransomware attacks and data breaches. Not to mention the reputational damage that can come from consumer data loss.

How can you avoid these mistakes when it comes to your digital KYC implementation?

Firstly, you’ll want to ensure you create a comprehensive digital implementation roadmap that covers the entire lifecycle of your KYC implementation project. Be sure to build in solid change management processes and regular audits of your KYC compliance procedures.

To implement digital KYC effectively you’ll also need to invest in the skills and experience you’ll need to achieve a cohesive and complete implementation. Which is where a dedicated specialist recruiter can help.

Keep your governance, risk and compliance at the cutting edge with Davies Resourcing

The increasing rigour demanded from regulators and the development of new technologies means that Risk and Compliance departments across the financial and insurance sectors need to function at the highest level.  Getting the most from your KYC data will require specialist teams that are highly skilled in technology and data analytics.

Davies Resourcing can help you create a bespoke recruitment strategy that can source the specialist skills you need to drive your business forward. Specialist in the insurance sector we can accelerate your search and ensure the best possible fit for your business.

Please, get in touch to find out more about how we can help your business.