Know Your Customer, or KYC, is a key component of anti-money laundering regulations (AML) and requires gathering in-depth identity and transactional data on new and current clients. KYC remediation is the process of analyzing this data, identifying risks and resolving discrepancies in order to achieve regulatory compliance.
Financial institutions — including banks, fintechs and financial services institutions — as well as casinos, payments companies and other businesses that are potential targets for money laundering must follow these strict KYC guidelines to reduce financial crimes. At the same time, businesses must maximize conversions and provide positive customer outcomes. Customer remediation helps your company stay in compliance by improving your risk management efforts. This process is part of a strong KYC/AML program.
What Is KYC Remediation and Why Is It Important?
KYC efforts during customer onboarding are just the beginning of the process. Financial institutions must continually monitor customer activity and transactions to spot crimes like money laundering and synthetic identity fraud, and update customer information to make certain that the data is complete and correct. Also, AML regulations continue to change, so customer remediation is necessary to stay current with the law.
Risk assessment and risk management are pillars of KYC and customer due diligence (CDD). Any company that offers financial services has to evaluate the financial crime risk level of new and current clients. Companies will generally assign low, medium or high-risk rankings to clients and monitor their accounts accordingly. This risk management effort relies on regular re-evaluation that often takes place every 6-36 months, depending on the client’s risk level.
Effective remediation plans are the compliance backbone of many financial institutions. Customer remediation allows you to reduce business risk, enhance workflows and offer better customer service.
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Ongoing Customer Due Diligence and Remediations
4 Tips for Creating a Successful Customer Remediation Process
Treat your customer remediation plan as a core property of your business model. An effective plan will allow you to assess risk, stay KYC and AML compliant and reduce financial crimes perpetrated by bad actors.
An optimal customer remediation process should be fast and efficient for both clients and employees. The following tips will help you build a strong KYC remediation effort.
1. Create a Customer-Centric Program
Your customer remediation process should keep the needs of the client in mind. Your customers do not want to be inconvenienced or undergo lengthy onboarding and maintenance procedures. Try to develop a customer-centric program that relies on automation and biometric online ID verification using selfies, voice recognition, fingerprints, etc. These measures provide excellent security while maintaining a quality customer experience.
Remember that your business will be performing remediation on a number of customers concurrently. Adopting the latest technology will help ensure that your remediation activities are secure but not inconvenient even when working with multiple clients.
Your remediation efforts should also be transparent so that all involved parties understand the process. A customer-centric approach is thorough, efficient and open, creating an optimal user experience.
2. Perform a Root Cause Analysis
Performing a root cause analysis (RCA) is essential to a successful customer remediation process. An RCA is a problem-solving procedure that analyzes the cause or causes of the issues that triggered a remediation process. By running a root cause analysis, you will be able to explain these problems to all involved parties and hopefully avoid a number of customer complaints.
An RCA identifies what the issue is, how it occurred and why it occurred. Once these items have been identified, your company can create an action plan to resolve them. This methodology enhances transparency with all stakeholders but also lets you know when the situation calls for escalation.
3. Establish Clear Remediation Program Guidelines
Your customer remediation program will only be effective if you establish clear guidelines for your staff. Guidelines for these programs will vary depending on your company’s customer offerings, but they should all establish clear performance metrics and documentation standards. Doing so will streamline your customer remediation workflows and avoid reputational damage to your business. In short, all stakeholders will benefit from a consistent process that quickly determines if AML and KYC standards have been violated. In most instances, you and your client can return to business as usual with no harm done.
4. Learn from Past Mistakes
A successful customer remediation process also depends on your company learning from past mistakes. You should analyze your data and determine when your remediation program fell short, both with clients involved with the process and those that were not. Did you miss early indicators of AML/KYC issues? How can you remedy these weaknesses in your current program?
You should always look for ways to improve your KYC remediation program in order to reduce your company’s risks, prevent financial crimes and better protect your customers. For instance, is your onboarding process thorough enough? Have you successfully monitored your high-risk clients for signs of AML issues? You may need to improve your digital monitoring programs to bolster your customer remediation program.
Upgrade Your KYC Remediation Programs with Jumio
Customer remediation programs are key to KYC compliance. Your company must make disciplined, ongoing efforts to assess customer risk and determine if financial crimes have or are occurring. If you spot issues, you must move immediately to address them or risk serious non-compliance penalties from regulatory agencies such as FinCEN.
The expert team at Jumio can help you stay in compliance with their AML services, including a biometric identity verification program that uses a selfie to generate a biometric template, creating a high level of account security. We can streamline your customer remediation process, creating more efficient workflows that provide security and a positive customer experience.
Contact us today to talk to a specialist about your KYC and AML challenges.