Revolutionising KYC: Insights from 1LoD’s Onboarding and KYC Deep Dive Event 

In an era of increasing financial complexity and regulatory scrutiny, Know Your Customer (KYC) processes have become more critical than ever.

The recent 1LoD Onboarding and KYC Deep Dive virtual event, proudly sponsored by smartKYC, brought together industry leaders to explore cutting-edge approaches to enhance KYC efficiency and effectiveness. Michael Byrne, smartKYC’s Business Development Director was among the industry-leading speakers who shared valuable insights on the future of KYC practices. 

The event set out to address several pressing issues in the KYC landscape. With financial institutions facing hefty fines—totalling almost $5 billion USD in 2022 alone—and fraud costing an estimated €990 billion annually according to a European Parliament study, the need for robust KYC standards has never been more apparent. However, traditional KYC checks often involve manual, labour-intensive processes that can hinder efficiency and customer experience. 

To tackle these challenges, the event focused on several key areas: 

  • The evolving threat landscape: how criminals are leveraging technological advancements and how banks are responding to emerging threats. 
  • Perpetual KYC (pKYC): utilising pKYC to boost operational efficiencies and enhance customer experience. 
  • Industry benchmarking: comparing practices against peers to identify areas for improvement. 
  • Technological integration: understanding how banks are incorporating new technologies such as AI and machine learning for effective onboarding. 
  • Efficiency maximisation: identifying ways to streamline processes within financial institutions. 

Key takeaways 

The event yielded several crucial insights that are shaping the future of KYC practices: 

Risk-based approach (RBA): financial institutions are increasingly adopting RBA when onboarding new customers. This approach allows banks to tailor their due diligence processes according to each client’s risk profile, striking a balance between regulatory compliance and customer experience. By focusing resources on higher-risk clients, banks can improve overall efficiency while maintaining robust risk management. 

Perpetual KYC (pKYC): the concept of pKYC is gaining traction as a means to streamline client due diligence (CDD) and enhanced due diligence (EDD) processes. pKYC involves continuous monitoring and updating of customer information, reducing the need for periodic, disruptive reviews. As Michael Byrne of smartKYC noted: 

“Automating the client due diligence and enhanced due diligence processes not only reduces the time and effort required for customers but also enhances their overall satisfaction. By streamlining these processes, banks can offer a smoother, more efficient onboarding experience, which is key to retaining clients and fostering long-term relationships.” 

Documentation and transparency: banks must maintain clear and comprehensive documentation of their risk assessment processes. This transparency is crucial for demonstrating to regulators that all appropriate risks have been considered and addressed. 

Emerging technologies: the integration of blockchain technology is being explored to enhance CDD and EDD processes. Blockchain has the potential to offer more secure, transparent, and efficient KYC frameworks, revolutionising how customer information is verified and shared. 

Employee training and awareness: financial institutions are placing greater emphasis on improving employee awareness and training programs. These initiatives focus on recognising and mitigating emerging threats, fostering a culture of accountability, and integrating risk ownership into daily responsibilities. 

Hybrid technology approach: banks are increasingly adopting a hybrid approach to KYC and onboarding technologies, combining in-house development with third-party solutions. This strategy allows institutions to address specific needs while automating low value-added tasks such as data entry and document verification. 

AI and machine learning: advanced AI and ML technologies are being leveraged to enhance client risk assessment. These tools can analyse complex data sets, identifying patterns and potential risks that might be missed by traditional methods. 

Explainable AI: as AI becomes more prevalent in KYC processes, the need for explainability to regulators has grown. Robust AI and ML governance frameworks are essential to ensure transparency, accountability, and regulatory compliance. 

The insights shared at the 1LoD Onboarding and KYC Deep Dive event underscore the rapid evolution of KYC practices. As financial institutions strive to balance regulatory compliance with operational efficiency and customer satisfaction, innovative solutions like those offered by smartKYC are becoming increasingly valuable. Download the full report here.  

smartEYE: real-time adverse media monitoring 

smartKYC’s latest product, smartEYE, exemplifies the event’s focus on technological innovation in KYC processes. A cutting-edge solution, smartEYE addresses one of the most challenging aspects of KYC: monitoring thousands of sources, in multiple languages, to identify new adverse media reporting about clients in real-time, globally.  

Through advanced multilingual AI technology, smartEYE provides precise, risk relevant, real-time risk alerts concerning your client and about the topics that matter to you—financial criminality, non-financial crime, integrity and reputational issues, even ESG misdeeds. 

So, rather than wait for the next re-screening cycle, you can now receive trigger-based adverse media alerts so that emerging threats can be assessed and mitigated immediately rather than develop into a full-blown crisis. 

Key features of smartEYE include: 

  • Comprehensive coverage – monitor hundreds of thousands of news sources and social media commentary 
  • Multilingual – monitor sources in all the main Indo-European languages and non-Latin scripts such as Arabic, Cyrillic and traditional and simplified Chinese 
  • Semantic precision – receive alerts with semantic precision rather than irrelevant keyword-based hits 
  • Noise reduction – smartEYE automatically removes filters out irrelevant information 
  • Subject-relevance scoring – all hits are scored for subject-relevance, ensuring high-quality alerts 

With smartEYE, financial institutions can now receive trigger-based adverse media alerts, allowing them to assess and mitigate emerging threats immediately. This proactive approach helps prevent potential issues from developing into a full-blown crisis, significantly enhancing risk management capabilities. 

As the KYC landscape continues to evolve, smartKYC remains at the forefront of innovation, providing solutions that address the complex challenges faced by financial institutions. By combining cutting-edge technology with deep industry expertise, smartKYC is helping to shape the future of KYC practices, enabling more efficient, effective, and customer-friendly processes. 
 
The insights shared at the 1LoD Onboarding and KYC Deep Dive event, coupled with innovative solutions like smartEYE, demonstrate that the future of KYC lies in embracing risk-based approaches, leveraging emerging technologies, and adopting continuous compliance models.