How does one balance the KYC Considerations in Digital Account Opening Transformation? It is evident that financial services firms need to up their digital game and transforming account opening capability is one of the essential items in this digital age where customer experience reigns as the supreme challenge facing enterprises.

Even as the banks, credit unions, insurance companies, and asset/wealth managers try to digital transformation of account opening capability, they also need to pay heed to the need to conform to a myriad of regulations and compliance mandates.

The alphabet soup of regulations and sub-regulations – KYC (Know your Customer), AML (Anti-money Laundering), OFAC (Office of Foreign Assets Control), FATCA (Foreign Account Tax Compliance Act), Dodd-Frank, MiFID, SARBOX, et al. – is onerous, complicated and confusing.

Ensuring complying to all the regulatory mandates is essential, even as the financial services firms embark on transforming the account opening capability. While the concrete steps and the flow may vary from firm to firm, broadly, the following essential items need to be considered as a part of the program to transform the account opening capability.

KYC Considerations in Digital Account Opening Transformation:

Of course, KYC is broader, and some of the regulations encompass the entire client account opening, funding, trading and deposit/withdrawal activities. So we do not want to claim that complete KYC can be satisfied by just incorporating it into the account opening flow. However, account opening is an important and integral part of the KYC flow.

  • Customer Identification
  • Due Diligence
  • Risk Assessment
  • Regulatory Compliance
  • Ongoing Monitoring and Reporting

These are not some bells and whistles, but go to the heart of legal and regulatory compliance, and the consequences of broken processes and mistakes are severe and devastating to the financial services firm franchise.

Transforming account opening capability for the digital age offers up a slew of opportunities to comply with the regulations with minimal burden on the end customer, which while satisfying legal mandates, also help improve the user experience. KYC Considerations in Digital Account Opening Transformation should not be an afterthought, but an integral part of process design and capability enablement.

Even as the banks, credit unions, insurance companies, and asset/wealth managers try to digital transformation of account opening capability, they also need to pay heed to the need to conform to a myriad of regulations and compliance mandates.

  • Reading the barcode on the back of the driver’s license to help populate data will help a great deal.
  • Through LBS (location based services), one can identify the location and fill the address.
  • Link to known customer identification, risk reduction, and fraud prevention databases with the information made available to conduct due diligence in real time.
  • Through account aggregation technology, filling in data about other financial accounts elsewhere will provide a more holistic picture of clients’ finances which helps both from a compliance perspective and offering other products and services.
  • Leverage third party digital services to get a full picture to risk rate the customer.
  • In addition to the burdens of knowing your customer, there is also the issue of fair practices, truth in advertising, accurate disclosures and consents to electronic communications.
  • After obtaining the approval, ensuring that disclaimers, disclosures, and other collateral delivery to the client are an essential part of fulfilling the compliance promise and the customer agreement. To be sure, you can assign a specific code with an expiry which the customer has to enter to confirm that she/he received the electronic disclosures.
  • For e-signature, the financial services firms must take affirmative consent and have the client sign it with a stylus or a finger. Noting down the device registry information will help the companies against any future disputes.

Understand the limitations of the form factor and help leverage other channels to ensure compliance as well as a seamless customer experience. Whatever you do, don’t force the client to abandon a channel/device they are using and contact the bank or financial institution by other means.

Harnessing the power of digital services and the device is the optimal path to achieving both compliance and experience outcomes. KYC Considerations in Digital Account Opening Transformation is not an either or proposition.

For additional information, check out Finantrix Account Opening Digital Transformation resources page.
Also, consider these resources for e-KYC practices –PWC, Wikipedia, and Grobanking.