The Latest Artificial Intelligence Trends For KYC Compliance

A tidal wave of laws and regulations has made KYC (Know Your Customer) compliance more complex, inconvenient, and expensive than ever before. Companies that previously placed it at the bottom of their to-do list now face the challenge of a future filled with big questions regarding robust security and compliance measures.

Whether you are a KYC expert, financial executive, startup owner, fintech investor, or just a concerned reader, you need to keep an eye out on the following emerging trends in the field of artificial intelligence and KYC compliance.

Perpetual KYC is Taking Over

Remember the time when financial institutions were satisfied with reviewing end-users on a periodic basis, which took up to 20 days per customer file? Well, that is not the case anymore.

Previously, periodic KYC reviews were performed based on the risk rating assigned to each individual. For example, high-risk customers were reviewed annually, medium-risk customers were reviewed quarterly, and low-risk customers were reviewed every five years.

In the event that the low-risk customer’s PII (Personally Identifiable Information) such as their residential address or credit card number changed, a bank may never find out till the next review was performed. This leaves room for financial fraud to occur.

This is why the future of KYC compliance lies in the hands of perpetual KYC. While its implementation is not a regulatory requirement, compliance regulations are only set to rise in the forthcoming years. To avoid hefty non-compliance fines, companies need to take responsibility for securing customer data and implement perpetual KYC to build a stronger rapport with the customers.

Perpetual KYC is one step ahead of periodic KYC, as it updates the customer’s data on an event-based basis. Examples of trigger events for perpetual KYC include a change in the billing address, a high-amount transaction, or a change in a company’s UBO (Ultimate Beneficiary Owner).

Digitization Will Increase Automation Adoption

Technological advancement is not just an ongoing process, it continues to step up at a faster pace with every passing year. While artificial intelligence models and AML screening continue to take the world by storm, that is not going to change any time soon.

Financial institutions such as banks, insurance companies, stock exchanges, and FinTechs, have already initiated the adoption of machine learning and artificial intelligence technologies to assess anti-money laundering and related risks.

If some companies have not already, they will begin to abandon a huge specialized workforce to employ fully automated, artificial intelligence-backed solutions instead. For instance, perpetual KYC is commonly implemented today with the help of AI-powered identity verification solutions. These solutions use natural language processing (NLP) and artificial intelligence models to verify customers, thus leading to KYC compliance.

Blurry Structures Won’t Last

Semi-transparent structures rarely last or work out well for organizations that make their business operations complex intentionally. Whether it is to hide a criminal activity or to avoid mandatory taxes, operation concealment is unlikely to be left undetected due to the advancements being made in the field of artificial intelligence. Now that companies, customers, and regulators are armed with new and enhanced tools to detect suspicious situations, criminal organizations or companies that hide their UBO’s are in for a rough awakening.

Global Regulations Will Become More Rigid

What do law enforcers do when enhanced tools and procedures allow them to track, identify, and monitor more rule-breakers? They are rarely satisfied and stop at just that. Instead, they increase regulations and lean more on artificial intelligence technologies to weed out a situation that may pose a larger problem than initially anticipated.

Organizations that remain compliant with global AML and KYC standards cannot afford to become complacent. Changes will continue to emerge, and keeping up with them is crucial to sustaining in a highly competitive market.

In the same way as regulators arm themselves, companies too can equip themselves with artificially intelligent technologies. For example, the perpetual KYC process allows a company to stay compliant with global regulations as it verifies the users on an ongoing basis.

Financial Institutions will Release More Data

It is a common notion that communication is key for a successful war, marriage, and compliance program. As businesses learn more about international compliance standards, they will begin analyzing competitors and interacting with their partners to weed out other concerns that may have been left unnoticed.

Additionally, the adoption of new practices will be shared by companies through their content, strengthening not just the brand image but their compliance strategies as well. By sharing more information, taking advice from experts and partners, analyzing competitors, and working hand-in-hand with compliance teams, better security measures can be devised.