KYB due diligence: from weeks to minutes

It can take weeks – even months – to complete customer due diligence (CDD) when onboarding new business customers. However, with the right technologies in place, CDD takes only minutes to complete. Trulioo’s Zac Cohen explains how access to data, advanced technologies, and changes in legislation, have helped automate and streamline business workflows.

The regulatory environment around the world continues to change and shows no signs of slowing down. Just this year, two major regulatory directives have been updated to reflect the heavily digitized age in which we live. The 2nd Payment Services Directive (PSD2) requires banks to make certain elements of data available to third parties through Application Programming Interfaces (APIs). The 4th Anti-Money Laundering Directive (4AMLD) insists banks and financial institutions (FIs) deliver tighter controls on personal information online.

As a result, businesses – from banks to FIs and payment providers to merchants – are facing increasingly stringent verification requirements and desperately need to adjust the way due diligence is conducted. Many of these regulatory changes – including the aforementioned PSD2 and 4AMLD, as well as the likes of the General Data Protection Regulation (GDPR) directive – require companies to be able to verify the businesses and Ultimate Beneficial Owners (UBOs) they interact with – a process commonly referred to as Know(ing) Your Business or KYB. In particular, 4AMLD places onus on European Union member states to house all legal documentation regarding company incorporation and ownership in a central registry. This database must be accessible to all entities required to perform business and UBO verification.

Previously, organisations and banks performed due diligence on businesses manually, which translated to staff conducting individual searches on multiple registers and then importing, analysing and reviewing the data sets. Added complexity is further introduced with the increase in small businesses and micro-merchants that naturally have a less defined history. Not only can manual Customer Due Diligence (CDD) processes be arduous and time-consuming, but the inconsistent procedures and preference for online account creation instead of face-to-face can also be heavily impacted by human-error. Ensuring appropriate CDD becomes a monumental task.

Verifying business entities and the overarching ownership structure is now an AML compliance requirement, necessitating Enhanced Due Diligence (EDD). EDD requires securing additional information about a business client, such as identifying the intended nature of the business relationship, the source of funds, and enhanced monitoring of the business relationship.

On completion of EDD, organisations can establish that the business is real and identify the stakeholders and UBOs. The next step involves running Know Your Customer (KYC) and watchlist checks on the UBOs to verify their identities and ensure they are not included in sanctions lists.

However, KYC processes are still a paint point for many organisations, especially banks.

In order to better understand how financial institutions in the US are responding to regulatory disruption and other technological threats, Thomson Reuters surveyed more than 430 AML compliance leaders and reported that 58 percent of financial institutions (FI) cited the inability to access UBO data as their greatest challenge.

The survey also highlighted that the average annual spend on global customer due diligence (CDD) and Know Your Business (KYB) is approximately USD $48 million, but banks say they are spending around US $70 million. FIs also reported rising onboarding costs as an issue, whereas corporates referred to excessive contact from FIs, inconsistent requests, and security concerns as their biggest pet peeves.

Today, solutions that leverage automation and artificial intelligence are the way forward to help reduce costs, increase efficiencies, and eliminate fraud. To help businesses and organisations adhere to new and existing AML/KYC and CDD requirements, Trulioo launched its Global Business Verification solution.

Global Business Verification provides businesses and organisations around the world with an automated and digital way to perform CDD. The platform is a gateway to access information for 250 million businesses in more than 80 countries. With instant access to over 180 government registers and public records, including the ability to retrieve official company documents, Trulioo clients are able to instantly verify a business and its UBO through one seamless workflow.

Businesses must adapt to today’s consumers, who expect and demand real-time access to products and services online, otherwise they risk losing business to competitors who do. Trulioo’s Global Business Verification provides businesses and organisations with a scalable solution to onboard customers quickly, cost-effectively and efficiently. Verifying businesses and individuals in real-time helps automate workflows, increase revenue, decrease fraud, and protect the bottom line.

The error-riddled, time-consuming, manual due diligence ways of the past have now given way to solutions that not only automate workflows and ensure compliance requirements are met, but also aid in seamless onboarding, thanks to increased pressure from regulators and an increasingly digital landscape.

Related reading