In my previous blog post, Better KYC Processes for Banks in 3 Steps, I wrote about the hefty operational costs financial institutions are paying for their highly manual KYC processes and fragmented systems—the most important being the inability to capture the necessary customer data to identify, rank-order and manage risk efficiently or effectively.
In this follow-up post, I look at how we helped one European bank assess, automate and shore up its KYC process, improving onboarding rates by more than 90%.
The problem: siloed, manual processes and complex regulations
A European bank’s onboarding and KYC processes had become siloed under the control of each line of business. Relationship managers were primarily responsible for completing the bank’s onboarding and KYC tasks as part of the customer acquisition process—manually collecting documents and performing customer correspondence, identification, verification, screening and risk assessment from high-cost locations. The process was inconsistent across the Lines of Business (LOBs), customer segments and products. Moreover, the risk assessment was dependent on the relationship manager’s appraisal of the customer.
In 2018, the U.S.’s FinCEN (Financial Crimes Enforcement Network) rule strengthened Customer Due Diligence (CDD) mandates. It required financial institutions to dig deeper into their customer data and examine their customer base through a variety of lenses to risk-rank them effectively. The new directive further complicated things for the bank. Relationship managers and compliance teams scrambled to wade through external databases to verify customer information to identify Ultimate Beneficial Ownership (UBO) of corporate entities and sources of funds. These activities were tedious, time consuming and often redundant, creating long onboarding times and less-than-stellar customer experiences.
The bank’s leadership team knew it needed an automated approach to onboarding, CDD and Know Your Customer (KYC) processes if it were to meet the new regulation’s guidelines. But the solution also needed to be complete and consistent across all LOBs within the entire enterprise.
The client invested in a major Anti-Money Laundering Transformation Program that would not only help remediate the backlog of existing customers and comply with the new directive’s requirements, but also ensure the appropriate levels of discovery and risk assessment at the outset of every new and existing customer relationship.
The solution: KYC solution secure, automated enterprise-scale KYC
The bank chose NTT DATA to design, develop and manage an end-to-end onboarding and KYC solution to be delivered as a service to all lines of business at the bank. This included the selection and integration of best-in-class partner components.
The NTT DATA team included our business and IT consultants with deep banking, KYC, financial crime, and security experience as well as solution architects and Six Sigma business process experts working collaboratively with the bank’s business, compliance and technology teams.
In terms of data quality, our client was doing well. The bank had the right pieces in place and required only modest enhancements to their data, such as completing risk profiles, using external registries.
Next, the team defined a new target operating model and new business processes. Together, we configured a cloud-hosted KYC platform that met the requirements of the bank’s information security policies. Our team used Robotic Process Automation (RPA) to automate the populating and risk-ranking of customer information. With a standardized format, bots could extract the required client/entity information from multiple data sources, populate the necessary fields for UBO development and fill in customer information in seconds (rather than days), to perform the required CDD and Enhanced Due Diligence (EDD) tasks.
The team then applied advanced analytics to identify and address the patterns that were creating false positives and enormous backlogs of alerts, impacting customer satisfaction. Artificial Intelligence (AI) is allowing the use of a much wider variety of data and use models to adjust more quickly to patterns of “good,” as behaviors change over time. This reduces false positives without reducing sensitivity to true problems.
We also worked with the client to establish a robust global delivery and technology support model, providing onboarding and KYC operations in the most cost-effective and efficient manner possible. Basic due diligence activities were performed in India, while enhanced due diligence was handled in Europe near the client.
Data—whether in transit or at rest—was secured via encryption and access controls. Offshore analyst used VDI-based solution to ensure adherence to data privacy and security requirements.
The results: faster onboarding, better due diligence and compliance
The NTT DATA team executed in 18 months and enabled our client to meet required guidelines and timelines. The bank now has a complete, flexible, secure and enterprise-scale KYC utility—delivered as an efficient service for quick onboarding while supporting automated risk assessment, due diligence and remediation of the existing customer back-book.
The bank has been able to remediate the regulatory compliance deficiencies and reports the following results:
- 40% reduction in onboarding costs
- 30% improvement in relationship managers bandwidth
- 90%+ STP rates for onboarding
Find out more
Learn more about NTT DATA’s Regulatory Compliance practice, including our end-to-end Customer Onboarding and KYC Solution.
Post Date: 1/16/2019