Oonagh van den Berg, Founder and Managing Director of Virtual Risk Solutions, is an award winning compliance officer with 18 years’ experience in financial services. She is an advocate for ethical compliance leadership and framework development, with increased automation including AI and Machine Learning integration. Oonagh is the moderator of Fenergo’s APAC panel on Perpetual KYC with guests from PwC South East Asia Consulting and Commonwealth Bank and has written a guest blog on the topic.
Over the past five years, KYC compliance has seen significant change. Unfortunately, there is still a long way to go. The compliance industry is largely reactive. Regulatory action and hefty penalties show that financial institutions are still several steps behind bad actors, financial crime and money laundering. In 2020, APAC overtook the United States in regulatory enforcement actions for Anti-Money Laundering (AML) penalties and violations for the first time since 2015. On top of that, the COVID-19 pandemic has been a huge eye-opener for the industry, exposing a more urgent need for innovation and proactivity in compliance. KYC compliance needs automation and robust skill sets more than ever.
Perpetual KYC: The Future of Compliance
There is no quick fix or silver bullet solution to the challenges apparent in compliance today. It’s a common misconception that outsourcing compliance to a third party to quickly satisfy a regulator in the short term is enough to combat KYC challenges. It’s key to create a holistic approach to automation and create an innovative ecosystem rather than relying on a one size fits all mentality.
The Elements of Successful Perpetual KYC
1. Highly Skilled Staff
First and foremost, the correct mindset and skills in the organization are a pre-requisite for any automation initiative. As the compliance landscape changes, so too should the internal requirements and resources within financial institutions.
The human element to automation is two-fold – hiring and training the right people to keep pace with the evolving skill standard and having the technology in place to enable those skilled resources to spend their time on areas that add real value. Thousands of KYC analysts are employed and spend the majority of their efforts gathering data for reviews. Automating this process allows those skilled employees to be re-allocated to less onerous tasks and make better use of their expertise.
2. A Culture of Compliance
Without the mindset for change, compliance will remain a reactive and ineffective process. Expecting the old ways of working to be able to combat emerging methods of financial crime is a losing game. Regulators are putting a greater emphasis on personal accountability for senior leaders to uphold the culture of compliance in their firms to create good outcomes for customers. The new standards for compliance staff won’t make an impact if those involved in dictating the compliance frameworks don’t advocate for an automated approach to risk detection internally.
For the best chance at success, compliance organizations need to return to the beginning and rebuild their approach from the ground up before implementing technology solutions.
3. Automation and Technology
It is no secret that technology is essential for a holistic approach to KYC compliance. Managed services firms can be a good way for newer firms to get up and running with a robust compliance resource. Digital identity verification, intelligent data protection, centralized document repositories and registries are becoming solidified technology solutions to automate compliance processes. Reducing the manual, error-prone methods will enable compliance teams to be more proactive in fighting financial crime.
To hear from industry experts and Oonagh about Perpetual KYC, you can watch our webinar, Perpetual KYC: Debunking the Myths on demand.
Or visit Virtual Risk Solutions.