The Ultimate Perpetual KYC Guidelines for FIs

What is Perpetual KYC?

Banks and FIs typically perform periodic reviews of their customers’ profiles at best every three to six month. Typically, it’s much longer for lower-risk customers. However, these reviews are notoriously time-consuming and typically involve a heavy manual process.

Perpetual KYC (sometimes referred to as Dynamic Customer Due Diligence or Continuous Customer Due Diligence) represents a seismic shift in how banks traditionally perform their KYC and Customer Due Diligence (CDD) reviews. Instead of relying on end-users or customers to confirm if the provided information is still current, pKYC solutions can automatically update the person’s profile. These insights are especially important for customers who rapidly shift from a low-risk customer to a high-risk customer in a short span of time. 

What does pKYC look like in practice? Let’s look at a typical update in profile information: a change in address. Banks don’t need to get an alert whenever their customer has a simple change of address when they move from one town to another. However, if the customer has moved to another high-risk country (e.g., North Korea, Morocco, or another financial crime hot spot), an alert is certainly warranted. 

Another example is how the customer’s professional career has changed. If a customer works as a software engineer and moves from a major technology company to a startup, there’s no need for an alert. However, an alert is definitely needed if the same person has suddenly shifted from working as a software engineer to a position in the gambling industry or appears to be in the arms trade.

In other words, pKYC solutions enable banks to know both who their customers are and how their behaviors are evolving. Just as importantly, pKYC alerts FIs to significant milestones in a customers’ life that affect their risk level and the organization’s risk exposure.

3 Key Benefits of pKYC for Banks and FIs

Implementing strong pKYC practices and solutions can benefit FIs in a few distinct ways. These benefits include:

• Reduced Overhead: pKYC solutions enable FIs to shift away from a manual process and implement automated tools that are continuously monitoring how customers’ profiles are changing. Using an event-driven approach instead of performing a review on, for example, a 1-year cycle, frees up teams and personnel to focus on only the cases that warrant additional review.
• Minimize Inefficiencies: Improved efficiencies is another benefit of pKYC’s automated improvements. Automated pKYC solutions can reduce errors that often plague manual reviews. For example, an analyst may simply have a bad day – skip over a critical update to a customer profile and fail to rate the customer appropriately. FIs can avoid these types of mistakes and ensure continuity across their teams via automation.
• Minimize Customer Friction: pKYC solutions enable FIs to implement a robust KYC compliance program. Faster and more seamless data collection is a cornerstone of these programs. The faster FIs can ingest and collect data, the better organizations will know who their customers are and predict how they should behave. Having this granular knowledge allows FIs to understand which customers pose a higher risk and warrant greater scrutiny, while low-risk customers are able to conduct their business without unnecessary friction.

3 Steps to Implement pKYC Practices

While shifting from conventional KYC practices to perpetual KYC might sound like a tall order, it doesn’t have to be. Here are a few simple steps banks and financial institutions can take to implement pKYC at their organization now.

1. Implement Strong Data Hygiene and Integrity Controls

Any effective risk management strategy requires FIs to ensure they’re looking at the right criteria and are appropriately ranking a customer’s risk. FIs need to make sure they have the right controls in place to collect data. What’s more, FIs must make sure the data is the right data and is fed correctly into the FI’s system to generate alerts – and do so in real time. 

2. Consolidate Data Across Multiple Sources

Banks also need to compare data that a customer provided with data that is publicly available and look for possible discrepancies. This includes geolocation data on individuals to build digital trust. For example, does the information about the individual’s mobile device match the information provided? What if they claim to be based in the US, but the device they provided is registered in Turkey? FIs can use machine learning solutions to verify the information provided by the customer is accurate or if an alert is necessary.

3. Use a Holistic Approach to KYC to Defend the Customer Experience

FIs that put these data collection systems in place are in a unique position to reduce customer friction and significantly improve customer satisfaction. Armed with a strong data collection network and processes, FIs can truly know who their customers are and provide them with personalized services. This holistic approach enables FIs to improve customer engagement and proactively protect customers from fraud and scams. 

All banks understand that risk is part of their business. Every customer presents a certain level of risk at the onboarding stage and throughout their lifecycle with the bank. But banks and FIs that proactively protect the customer experience with automated pKYC solutions are in a stronger position to minimize financial crimes and safeguard their customers. 

Download our eBook The Future for Financial Crime Risk Management to learn how to bring cohesion to disparate data and solutions.