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Financial Systems and KYC - A Step-by-Step Guide to Automating Client Onboarding

Financial Systems and KYC - A Step-by-Step Guide to Automating Client Onboarding

In the financial sector, onboarding new clients as a regulated company can be complex. Verifying the identities and financial circumstances of your prospective clients are vital — and compulsory — to ensure compliance with AML (Anti-Money Laundering) legislation and Customer Due Diligence (DCC) requirements. Conducting KYC, or Know Your Customer, checks are essential, not only when you onboard new clients, but also during regular intervals to ensure their situation hasn’t changed.

However, KYC and client onboarding are becoming increasingly complex, with those most affected — notably FinTech and Financial Services firms — spending growing amounts of time manually processing checks. So how can KYC compliance checks be conducted accurately, efficiently, and without overburdening already stretched teams? We look at the advantages of an automated client onboarding solution over a manual one and show you how you can implement the process within your organisation.

You Can Automate Client Onboarding in a Few Simple Steps

Step 1: Decide between automated KYC and manual KYC checks for new client onboarding.

Step 2: If operating a manual KYC check, ensure that you thoroughly vet the client’s contact and financial information, performing a full credit check of the company.

Step 3: Conduct regular maintenance of your client database, re-checking contact and credit details.


Step 1: Select an automated, API-led solution that lets you conduct a thorough KYC check in just a few quick clicks. The API gives you secure access to all the data you need and does all the hard work for you, so it’s a simple, one-step process.

Want to know more about how KYC impacts new client onboarding? Read the handy guide below, provided by our legal and data experts.

Does My Financial Services Firm Need To Perform a KYC Compliance Check When Onboarding New Clients?

All regulated companies in the UK across every industry now need to demonstrate Know Your Customer, or KYC, compliance for newly onboarded clients.

Part of the Anti-Money Laundering (AML) requirements, a KYC check ensures that you know who you are dealing with and that you have assessed all the risks of dealing with them before undertaking any business.

It’s an essential part of secure client onboarding that should be performed whenever you take on a new client, and should also occur at regular intervals during your relationship with them.

You Will Need to Ensure KYC Compliance If:

  • You are operating a regulated UK business that sells services to clients
  • You are onboarding a new client, regardless of the scope of work
  • You have concerns about the financial viability or financial dealings of your existing client base
  • You have not performed a recent KYC check on your existing client database.

Watch This Handy Video from NorthRow Chief Executive Officer Adrian Black for an Easy Way to Understand KYC

Why Is an Ongoing KYC Compliance Check so Important to My Financial Services Firm?

Unless you conduct thorough and regular KYC checks, your company is not protected from penalties or fines that could be caused by missed regulatory compliance requirements and you cannot ensure compliance with Anti-Money Laundering regulations.

KYC involves verifying the identity of every new customer you onboard and then continuing to monitor them so that you can quickly identify any changes in company structure, Beneficial Owners and Directors.

When it comes to KYC onboarding of companies and entities, the burden of proof is much higher and the type of checks that need to be undertaken are more complicated.

A KYC Compliance Check Involves (for Regulated Firms):

  1. Verification of address.
  2. Verification of ID.
  3. PEPs and Sanctions Screening.
  4. Identification of Beneficial Owners (BO) and Directors.
  5. Monitoring for changes in BO or director in a company.
  6. Audit Trail and secure archive of checks and docs (encrypted at transit and rest). 

With ever-increasing regulatory pressures from AML, MiFID II, CRS, PSD2, FATCA, GDPR and regular policy changes, organisations across financial services industries are now facing an increasingly complex challenge when it comes to demonstrating compliance. If your business is, or is likely to come, under scrutiny from external regulators, don’t leave it up to chance as to whether or not you will pass compliance checks.

What Happens If My Company Fails to Complete a Regulatory Compliance Check?

If you are a regulated company, and you fail to undertake a regular KYC and wider AML compliance check, you could be facing significant penalties. These may include fines, damage to your company’s reputation or even, in extreme cases, imprisonment for senior company executives. That’s why it is so important not to take any risks when it comes to compliance.

Although you need to complete regular KYC and AML compliance checks, there is no reason why the process should be slow or arduous. Rather than a painstaking manual KYC check, opt for an automated check, which is more efficient, secure and reliable.

An automated KYC check takes much of the hard work out of meeting your compliance requirements, especially if you select one that utilises the power of a single API to aggregate multiple data sets. Some also offer an additional managed service capability to support those with enhanced due diligence requirements.

How Do I Undertake a KYC Compliance Check When Onboarding My Clients?

There are two main ways for your financial services company to conduct a KYC compliance check. You can perform a manual KYC check or an automatic KYC check.

Manual KYC Checks

A manual KYC check requires you, or a member of your staff, to manually

  • ensure you have full contact and financial details for every customer at the time of onboarding and
  • undertake regular monitoring of client behaviour and be on the lookout for any suspicious activity that could be an indicator of financial crime.

This type of KYC check is expensive, both in terms of man hours and the potential for human error, for example, missed red flags. We don’t recommend that you attempt AML checks yourself — it’s always better to enlist the help of an independent expert.97

Automatic KYC Checks

An automated KYC check ensures that your clients meet regulatory requirements, without the need for significant internal regulatory management resources being used.

If you find that managing and demonstrating compliance internally is becoming increasingly costly, an automatic KYC check is the optimum way to move forward.

Can an Automated KYC Solution Help Me with Client Onboarding?

Having to input data multiple times into separate databases can be a time-consuming activity, one that will ultimately slow the client onboarding process.

A single API-led KYC solution aggregates data from multiple suppliers, so you only need to input the data once to perform an in-depth KYC check. This means less time spent onboarding clients and more time spent delivering your services.

This type of automatic KYC solution can help you manage the complexity of onboarding and monitoring your customers in the simplest way possible, ensuring that your business is constantly protected from money laundering schemes and the implication of involvement in financial crime.

Key Benefits of using an Automated KYC Solution with Managed Service Capabilities

Automated KYC solutions eliminate the need for time-consuming manual regulatory compliance checks, helping to improve operational efficiency and client experience. When there is a need for enhanced client due diligence, a managed service solution will identify increased risks and flag potentially suspicious customer documentation, whether that’s an ID document or a legal file. 

The key benefits of using an automated KYC solution with managed service capabilities are as follows:

  • Streamlined onboarding — whenever you take on a new client, a single, API-based solution makes it easy to onboard them, while ensuring their data is stored securely and to regulatory standards.
  • Enhanced client due diligence via a managed service — in cases when enhanced due diligence is required to onboard a client, a fully-managed service can be provided, from enhanced address verification and vitality checks to in-person screening calls, or even an expert document review, to ensure all documents provided are genuine.
  • Ongoing monitoring of beneficial owners and company directors — automated KYC solutions will continually monitor your client information for changes in company structures and beneficial owners, helping to ensure compliance with AML regulation.
  • Ongoing AML updates — you’ll always meet even the newest of regulatory requirements.
  • Ease of use — using a single API solution can be easily integrated into your client onboarding workflow.
  • Fast, safe and secure — there’s no need to worry about the impact an API will have on your client data if it is developed in collaboration with leading data suppliers and law enforcement agencies to ensure that your data is encrypted and secure.

About the Author

Adrian Black is Chief Executive Officer of Northrow. An innovative CEO with over 30 years’ software industry experience, Adrian has occupied multiple senior positions with leading UK corporates. He has also undertaken strategic consultancy roles with global companies including Experian, eBay and Autotrader. Driven by his passion for and expertise in fraud detection, data and intelligence sharing, Adrian founded NorthRow (formerly Contego) in 2010 to enable organisations to combat fraud and financial crime.

Note: This blog article was written by a guest contributor for the purpose of offering a wider variety of content for our readers. The opinions expressed in this guest author article are solely those of the contributor and do not necessarily reflect those of GlobalSign.

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