There is no doubt that banks need to rethink the KYC process , putting the customer at the center, in order to maximize the value of customer onboarding. Unfortunately, many customers are still onboarded through a manual, paper-based process that is inefficient, costly, and error-prone. On the other hand, simplifying KYC procedures, developing open communication channels, and improving the integrity of consumer data are all essential initial steps to transform KYC obstacles into opportunities.
Learning from the past in terms of regulation
Following the global financial crisis of 2008, regulators communication email list imposed stricter regulations on banks, and financial institutions were increasingly hit by unexpectedly high compliance costs. For example, the regulatory burden led some banks to stop lending to small businesses, divert resources from product development, and face significant fines for failing to keep up with seemingly constant regulatory changes. This burden is sometimes seen as an unavoidable evil.
Additionally, due to multiple high-profile money laundering and corruption scandals, financial institutions have been forced to establish more stringent KYC processes. Organizations of all sizes are trying to adapt to new laws and increased compliance expenses, ranging from more arduous due diligence in the onboarding process to stricter monitoring and reporting requirements under an expanding Bank Secrecy Act (BSA ) .
Additionally, KYC standards have been strengthened due to regulations such as Dodd-Frank and FACTA to prevent increased counterparty risks. Implementing additional KYC onboarding and reporting standards to combat tax evasion, illegal organization financing, anti-money laundering, and politically exposed persons can reduce customer risk. The Panama Papers have led to further changes in KYC. For example, the Customer Due Diligence Final Rule came into effect to identify the beneficial owners of corporate bank accounts.
With the increasing difficulty and cost of adopting a compliant KYC process, banks must be more creative in determining how to turn these problems into opportunities. For example, a new value proposition can help restore trust, which has always been a pillar of a financial institution’s success. For example, consumer protection is no exception when it comes to the issue of trust.