Can fully automated KYC become a reality?


Dalbir Sahota

KYC compliance is, on paper, an ideal candidate for automation. Dalbir Sahota looks at the facts and the fantasy.

Banks desperately need to meet compliance requirements without slowing down transactions or damaging customer relationships, but KYC screening still involves sorting through huge amounts of unstructured data, using manual and repetitive processes.

In fact, an Accuity survey of more than 100 senior global correspondent banking, compliance and AML professionals found that the cost of compliance is still a concern; and, 39 percent of those taking part in the survey named it as a major challenge.

Automation is, therefore, seen as essential to tackling this issue with 79 percent of those questioned saying that automating data and workflow processes to save time (and cost) was a priority for them.

We are just at the start of the automation journey and the next step is by far the most interesting and difficult.

Radical foundational shifts need to happen if we are to unlock the power of technology in counterparty KYC, and I would argue that it has to start with data infrastructure. Automation will not be fully achieved until the underlying data used for KYC is structured, digitalised and centralised.

Today, data is often still captured in email, paper and PDF formats, and siloed by product in banks’ back and middle office functions. That cannot continue in a fully automated KYC world. Banks are starting to move on this, but there is still a long way to go.

What is the answer?

In my KYC utopia, risk intelligence would be shared by a global community of banks so that risk-based decisions are not made in silos. This would require standardised formatting of data so information can be shared seamlessly, and global standards and policies would need to be harmonised.

KYC automation is possible, but it will require banks and the regtech community to work closely together. Ultimately, it is the quality of this partnership that will dictate the future path of KYC automation.

If you would like to hear more about how technology can transform KYC compliance, and the implications for risk assessment, I’ll be speaking at SIBOS on Wednesday 24th October at 10.45am, Open Theatre 2.