Financial institutions spend about $500 million annually to manage and update various know your customer (KYC) procedures in an attempt to stay in compliance with industry regulations, according to Thomson Reuters. These practices, which focus on identifying customers while assessing risk, are the front line of defense against fraud and money laundering.
Despite these efforts, banking, financial services, and insurance (BFSI) institutions around the globe have been fined $27 billion since 2008 for non-compliance, reports Fenergo. Robotic Process Automation (RPA) eliminates these problems, ensuring businesses not only know their customers, but they also stay compliant and avoid fines.
RPA is software that performs manual, repeatable tasks, such as sorting through regulatory changes, identifying compliance revisions, and flagging a human to make the necessary updates and stay within guidelines. Automation can help banks improve their KYC processes in four key ways:
AML systems are built to detect suspicious business dealings and directly influence KYC processes. They look for transactions that involve counterfeit money or legitimate funds for dubious activities. Because many of these systems are out of date, they identify a lot of false positives, creating a massive challenge for bank compliance teams.
Reinforcing an alert process with RPA enables a compliance team to update its AML system and reduce the number of false positives. RPA is able to collect data while linking it to an alert to provide an accurate representation of potentially fraudulent behavior.
RPA can also run a quick check of what actions have been performed thus far and, based on those actions, recommend an investigation approach.
When a financial institution captures and validates a customer’s basic information, such as their name, job, or home address, it creates a customer identification profile (CIP), as required by the federal government. CIPs also help financial organizations assess a potential client’s risk level.
A customer service representative usually captures the information directly from the customer while gathering additional data from multiple systems to manually fill out a form. Once everything is entered correctly, representatives can reach out to third-party vendors for validation. If any changes are needed to account for a new employer or home address, the cycle is repeated.
With RPA, you can perform all of those processes in a fraction of the time it would take otherwise. Rather than manually sending a CIP to be externally validated, an automated bot can handle it on your behalf. You can assign bots to track documents or to identify any incomplete or inconsistent information. RPA also creates an audit trail, ensuring compliance throughout an entire CIP lifecycle.
Compliance teams are typically tasked with weaving through complex webs of data to confirm a person is who they say they are — for example, verifying public information on shareholders. The amount of documentation that needs to be sorted through to draw accurate conclusions in order to complete the CDD process can be intimidating and time-consuming.
RPA can do all that in a matter of minutes. It’s able to process vast amounts of data from all the various sources (including unstructured text) a compliance team needs to consider. More importantly, it can create a comprehensive, auditable, and accurate risk profile. This helps ensure a more thorough risk-based approach from which to draw conclusions.
You can combine RPA with artificial intelligence (AI) to detect patterns in large volumes of data. This kind of intelligent automation is able to understand the constantly changing financial regulations, monitor for any changes to program requirements, and inform teams of necessary updates. It could also identify elements of a CIP that are impacted by compliance updates.
Non-compliance is an expensive mistake to make. Knowing your customers and keeping up with regulatory compliance in financial services doesn’t have to be complicated. Adopting RPA will help your financial institution develop a more proactive compliance program to prepare for stricter regulations while staying ahead of audits and avoiding fines.
With more than 25 years of experience, Steve Gold serves as the global industry leader for financial services. He customizes RPA and intelligent automation solutions to help banking and financial services customers increase productivity and reduce operating expenses.