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Perpetual KYC: Risky Business or Best Practice AML Compliance?

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In this episode of the Fenergo FinTalks podcast our host, Dhanum Nursigadoo, sits down with Rory Doyle, Fenergo’s Head of Financial Crime Policy, to dig into one of AML compliance’s biggest buzzwords: perpetual KYC (pKYC).

Financial institutions (FIs) are better at transaction monitoring and at onboarding than they are at pKYC – these are things they've been doing for decades to where it’s become compliance teams' bread and butter. But when it comes to Know Your Customer (KYC) reviews, FIs are much less confident in their approach – banks are habitually averse to being the 'lone wolf' or the only one doing it a certain way.

KYC reviews of banking customers have traditionally been conducted on a periodic, pre-determined schedule – depending on the risk level assigned to a client at onboarding. pKYC is an approach to KYC reviews that differs from this one (sometimes referred to as chronological) or to a trigger-based review cycle, where KYC reviews are triggered by changes to a client’s transaction behaviour or risk level.

But is perpetual KYC best practice for anti-money laundering (AML) compliance for banks? How do technological developments like artificial intelligence (AI) and automation help compliance teams to achieve perpetual, ongoing monitoring of risk?

One of the biggest crises facing compliance today is resourcing. In this interview, Rory reflects on the effect that geopolitical events, like the invasion of Ukraine in February of 2022, have on pKYC processes and reviews processes. Compliance teams must respond both rapidly and reactively to new risks – it can’t be worked into trigger-based reviews or banks are left wide open to fincrime risks like sanctions breaches.

Hampering the need to be constantly alert and ready to adapt is the fact that fincrime professionals are a finite resource. There's only so many qualified people in the world, and there’s never enough time or resource to do all the work that needs to be done.

Listen to the episode to gain insights into:

  • The definition of perpetual KYC/ongoing monitoring and what distinguishes it from chronological and trigger-based KYC review cycles
  • Why a lack of regulatory prescriptiveness makes it challenging to implement perpetual KYC 
  • What drives banks to want to copy their peers’ compliance practices – is this a good way to inform compliance decisions?
  • The difficulties faced by compliance teams in balancing onboarding needs versus ongoing review responsibilities and mounting KYC review backlogs
  • How RegTech tools like Fenergo help to automate ongoing reviews and ensure risk-based focus on high-risk clients
  • What potential role AI will play in enhancing ongoing review accuracy, efficiency, and risk detection over time

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