Financial institutions are increasingly turning to advanced technology to modernize their client onboarding processes, balancing regulatory demands with customer expectations. Effective Know Your Client (KYC) and Know Your Business (KYB) procedures are fundamental for complying with anti-money laundering (AML) and counter-terrorist financing (CTF) rules, assessing risk, and preventing fraud.
While onboarding individuals (B2C) often emphasizes speed through automation and digital data, onboarding businesses (B2B) presents greater complexity. KYB requires thorough investigation into corporate structures to identify ultimate beneficial owners (UBOs), involving checks against registries, sanctions lists, and politically exposed persons (PEPs) screenings. Although AI can automate data collection, human expertise often remains vital for enhanced due diligence.
Institutions face challenges like accessing reliable data across diverse jurisdictions and meeting varied client demands for smooth experiences. To address this, firms are adopting strategies focused on digital workflows, tailored experiences, and, significantly, continuous monitoring.
A key evolution is the move towards Perpetual KYC (pKYC). This approach uses automated technology to monitor client data in near real-time, long after the initial onboarding. Systems trigger alerts for changes related to sanctions, PEP status, or negative news, enabling faster responses to emerging risks.
Success relies heavily on data quality and integration. Modern platforms, such as those highlighted by Moody’s, consolidate structured data (like official records) and unstructured data (like media reports) for more comprehensive real-time identity verification. This streamlines the process, reduces friction for customers, and helps untangle complex ownership structures, particularly crucial for KYB.
Ultimately, by leveraging smarter technology and embracing continuous risk oversight through pKYC, financial institutions aim to transform onboarding from a mere compliance exercise into a strategic advantage, fostering security while enhancing the overall customer journey.
