KYC Requirements for Regulated Fintech and Financial Services Companies: What You Need to Know
If you operate a regulated company, then you are legally required to complete KYC checks when onboarding new clients, as well as at regular intervals during your relationship with the client.
KYC, which stands for Know Your Customer, is part of the wider regulatory requirements for Customer Due Diligence (CDD) checks under AML (Anti-Money-Laundering) legislation.
These checks are becoming increasingly complex and complicated for companies to manage, with a wide range of businesses, from Fintechs to Financial Services firms, reporting that their senior management and staff are spending more time bogged down in regulatory requirements. This, in turn, is having a detrimental effect on the customer onboarding process, causing delays and increasingly in-depth information requests.
If you’re on the fence about whether to complete checks, rather than taking a non-compliance risk and putting your company in danger of regulatory penalties, why not try an automated KYC checking solution?
With far less need for manual work involved, automated KYC checks enable your business to stay compliant, while benefiting from the increased efficiencies and reduced risk such solutions offer.
Challenges to KYC Onboarding for Financial Services Firms
Alan Gleeson, Chief Marketing Officer of NorthRow, a firm that specialises in AML and KYC checks to aid compliance, discusses the challenges of KYC onboarding in this video:
Managing Multiple Data Sets
In an increasingly global economy, KYC client onboarding is more complex than ever. Financial services firms need to access an ever-increasing range of data from multiple suppliers in order to ensure that firms can validate identities of clients from different jurisdictions.
However, inputting client data into multiple data sources is an inefficient, time-consuming way of conducting KYC checks, and gives way to the possibility of human error.
How Does a Single API Solution Help Your Company Manage KYC?
Automated KYC checks are part of the single API solution delivered by identity verification companies. They work by using a single point of entry to multiple data sets, allowing you to input your customer data once and thoroughly vet client information in your records without significant manual work.
The alternative is for you, or a member of your staff, to conduct regular, manual KYC checks. These are labour-intensive and introduce extra risk, due to the increased likelihood of human error, which can threaten your company’s compliance. You would need to vet everything, from client contact details and credit history to financial dealings for every single client on your books. It’s pretty easy to see why an automated KYC solution is the preferred option.
By selecting a single API-led automatic solution, you are opting for a reliable, secure and safe way to adhere to KYC regulations, while also staying on top of any changes.
The Importance of International Data to Client Onboarding
Automated solutions understand that clients need to access an ever-increasing range of data in a global world. That’s why many platforms are built with this requirement at their core, enabling new datasets to be added easily and delivered to clients through a single API.
The ability to add new data sets increases the coverage of company data. It’s important to check that this is augmented with Legal Entity Identifier, or LEI, data. LEI data is a key requirement of MiFID II regulations. This enables financial services firms to identify the LEI number of a company and retrieve the group structure.
Automated KYC Checks
Many companies looking for a simple way to safely conduct KYC checks have turned to a single API-led automatic solution. When identifying the right solution for your business, look for a comprehensive and secure data set that is regularly updated to ensure that the complex onboarding and monitoring of customers is accurate and in line with regulatory requirements, and that you are protected from the risk of penalties and fines due to missed compliance procedures.
There are multiple benefits of using a single API solution. To ensure you don’t risk non-compliance, ensure the following:
- Automated Updates — The API you use should be constantly updated to ensure that businesses that use it to manage their KYC checks are always meeting all regulatory requirements
- Ease of Use — The API should be simple and intuitive to use when conducting thorough KYC checks, which should be able to be requested at the touch of a button
- Fast, Safe and Secure — To ensure you are accessing up-to-date, relevant data, look for firms that work with leading data suppliers and law enforcement agencies, and that ensure the data the API accesses remains highly secure and protected
- Streamlined Onboarding — The onboarding process shouldn’t be complex. An API solution should offer a streamlined way of managing your data and conducting KYC checks efficiently.
Chief Executive Officer, 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.