With ever-tighter regulation and the need for enhanced due diligence when onboarding both individuals and entities as customers of your firm, it is important to remember what the C in KYC stands for: client, not criminal.

KYC (Know Your Client) screening has become synonymous with checking for “red flags” on a firm’s clients, with enhanced scrutiny and stricter regulation coming into effect since the terrorist attacks of 9/11.

But client knowledge should never be the exclusive preserve of the compliance function, nor should it be an activity designed solely to provide reasons not to do business with someone. Instead, we advocate a holistic approach, whereby technology-led relationship intelligence is used to good effect at all stages of the client journey. Overarchingly, we believe KYC is about identifying the opportunities as well as the potential risks a relationship represents, and using everything you can know about a client to increase satisfaction and loyalty, and deepen wallet share.

Broad business benefits

The business benefits of this approach are wide-ranging, however, as it lays a foundation for resolving many of the pain points that currently plague the sector. Faster, frictionless – and more confident – onboarding is just the start.

Having a single view of the client, from an intelligence perspective as well as a process perspective, reduces the (very real) risk of duplicated effort and critical data loss, but more importantly it enables better client engagement and the provision of higher quality advice. It will also help your organisation function better, putting an end to siloed technology investments and fostering real alignment between compliance and relationship managers (RMs).

So, what do we mean by “relationship intelligence”, and when might it be deployed? In essence, we mean serving up precise, useable information on clients and prospects. This might be with an eye on risk or opportunity, and could be before, during or after onboarding. There are compelling use cases at each stage.

Pre-onboarding

At the prospecting stage, our technology means that RMs are alerted to specific lead opportunities as defined by the business. These lead triggers could include a breaking media reference to a specific type of liquidity event, a material change at a corporate registry, such as a new director appointment, or a new share allocation.

A tear sheet is then automatically generated containing need-to-know information on the target, including their background, assets, career history, lifestyle, hobbies, philanthropic and political interests, source of wealth and so on.

Furthermore, it might be found that Target A  is a patron of the same charity as happy Client B and the RM therefore has the potential for a warm introduction to Target A. Armed with all of this, the RM has a huge head start on rivals, is better informed and stands a much greater chance of success in signing up that potential client.

What’s more, we ensure that no effort is wasted in wooing unsuitable prospects. At this point, preliminary compliance checks are performed automatically to ensure that there should be no obvious reason for compliance to reject this client at the onboarding stage.

At onboarding

This is where full due diligence is completed, but not in the traditional, labour-intensive and time-consuming way. Instead, the process is automated so that all external and internal watchlist sources are screened with a high degree of identity precision and all elements of exposure risk are addressed, including to Politically Exposed Persons or sensitive countries/industries.

Our solution will automatically identify directorships and shareholding (including ultimate beneficial ownership), check legal judgment records and corroborate sources of wealth, so that all the major compliance boxes are ticked.

In addition, we leverage artificial intelligence to ensure adverse media analysis is carried out with greater precision and subtlety than ever before. Not only is risk classified in a fine-grained way (fraud, money-laundering, organised crime, ESG etc.), but nuances are picked out, such as the gravity of an offence (e.g. a parking offence versus bribery), or type of accusation (infidelity versus war crimes).

While this research heavy lifting is done by machine and presented to the compliance user in the desired fashion (e.g. via their Client Lifecycle Management system, the smartKYC user interface or in the form of a dossier), the rules by which the risk assessment is done are customised by the client organisation to accord with their risk policies. Decisions are not made on a binary basis, but rather on a risk-based one.

It is easy to see the business benefits of looking for positive developments, like a company’s international expansion, which might represent an opportunity to generate further business from the client.

Monitoring

If the potential client has indeed been taken on successfully, our software can then be set to monitoring mode.

Monitoring can be periodic, whereby a full refresh of the client file is carried out at intervals determined by risk policy. If, for instance, it has been determined at onboarding that a client has a footprint in a high-risk jurisdiction and operates in a high-risk sector, monitoring might be more frequent than would otherwise be the case.

However, the industry is now trending towards a more proactive approach whereby all clients are monitored in real time, so that the business can respond quickly to new developments. If a client is disqualified as a director, has new charges brought against them or is cited as a sanctioned individual, a rapid response may be key to a regulatory defence. Ignorance will of course be no defence at all.

Yet again though, this should not be all about risk. It is easy to see the business benefits of looking for positive developments, like a company’s international expansion, which might represent an opportunity to generate further business from the client. At the very least, having a nice reason to pick up the phone, like a marriage or positive press, can do wonders for relationships.

Recasting KYC

In today’s data economy, there are incalculable riches of relationship intelligence available to be harvested. But that of course means that this wealth of information can become a trap in itself.

The hard part in any monitoring programme is to ensure that the business is not swamped either with false positives or by seeing the same piece of information repeatedly, especially given the repetitious nature of news. A multilingual semantic search platform like ours can filter out that noise and so minimise the risk of seeing the same risk or opportunity multiple times.

Being able to harmonise all your KYC sources and run concurrent searches on all your clients daily can give you a truly holistic view of all their respective potential risks and, most importantly, their needs and requirements.

It is easy to fall into the trap of always thinking about KYC in the negative or believing that sifting all the thousands of potential information sources out there is an un-winnable battle. We believe it’s time for KYC to be recast in a far more positive, proactive light.

Dermot Corrigan

Published by

Dermot Corrigan
CEO

smartKYC

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