Effectively screening customers is one of the first steps in ensuring that you can keep financial criminals out of your organization.
Fortunately, there are plenty of modern know your customer (KYC) and customer due diligence (CDD) programs that are designed for the digital age.
By implementing these solutions, your organization can deter and detect malicious entities that are aiming to take advantage of your company’s resources and damage your brand’s reputation.
But how do you know if your customer screening process is working as it should? Is there a particular standard that these solutions should adhere to?
The Goals of Customer Screening
Customer screening, which employs know your customer and customer due diligence solutions, is an essential aspect of your financial institution’s compliance program. This process enables your company to abide by the laws and rules set by government agencies and financial regulators.
By checking an organization’s record-keeping practices, processes, procedures, and complaint management, regulators can determine if the organization has taken part in criminal activities. Such activities include fraud, money laundering, bribery and corruption, terrorist financing, market abuse, insider dealing, and breach of information security.
In addition, complying with regulatory rules means your company is doing its part in protecting its stakeholders. Not only that, but you’ll also help in ensuring the fairness and efficiency of the market, boosting consumer confidence in the financial system, and preventing the proliferation of financial crime.
The Components of an Effective Screening Program
The technology used for screening prospective and existing customers is gradually changing with the introduction of digital innovations in financial institutions. When assessing whether your screening program is suited to the digital age, see if it can provide your organization with the following capabilities:
You Can Easily Identify High-Risk Customers
Large financial organizations deal with a lot of applications. To make the onboarding process more efficient, the KYC and CDD programs that they’re using should be able to differentiate high-risk customers from low-risk ones. This feature will enable organizations to allocate their resources to the applicants that present the biggest threat.
Your Programs Provide Access to a Variety of Resources
KYC and CDD solutions should be able to use a wide range of trusted and up-to-date resources for building customer profiles. These references include lists of sanctions, prohibitions, and internal black lists and white lists, among others.
To properly carry out this step, the right screening program will need to retrieve data from various sources, with each source potentially using a wide range of different formats. The program will also have to standardize the formatting of all the collected data to allow for much easier processing.
Your Programs Can Prepare Data Sources Before Screening
As previously mentioned, customer data can come from different sources, and each source may use its own preferred formatting. Left as-is, such discrepancies in data formats can slow down screening teams, as they’ll have to manually adjust the information to ensure everything matches up.
To make more efficient use of the team’s time, the KYC and CDD programs should be capable of standardizing the format of all the collected data prior to screening. Using a standard format for presenting customer information will also enable the screening team to easily spot inaccuracies and inconsistencies in their sources.
Your Program Can Do Fuzzy Matching
Retail and corporate banking clients sometimes use multiple versions of the same name, and this can be a challenge when determining the exact identity of a person or an organization. Fuzzy or inexact name matching uses complex algorithms to overcome the difficulties posed by misspelled, missing, or inaccurate information.
You Can Customize Workflows and Rules
Financial organizations have a wide range of needs and requirements, and this can cause differences in the way they approach their screening process and compliance efforts. These differences should be accounted for when customizing workflows and rules.
KYC and CDD solutions should offer the option to create and maintain multiple workflows and match rules that are suited to the risk profiles that a financial institution is screening for.
Your Program Greatly Reduces the Number of False Positives
Reviewing false positives is a task that is usually delegated to compliance team members. If there are too many false positives, then a lot of time and manpower must be used to determine whether a customer matches the profile that they’re being categorized under.
Modern KYC and CDD solutions should be able to screen profiles and customers with greater accuracy, reducing the number of false positives that the compliance team must deal with.
You Can Scale Up or Down as Needed
The number of customers and transactions that financial institutions need to screen, track, and manage can vary greatly. There are also times when an organization needs to scale down or scale up its screening efforts to maintain efficiency and meet customer demands. A scalable screening process should provide financial institutions the means to deal with these changes without compromising their capability to follow the rules set by regulatory bodies.
Is your customer screening process able to keep financial criminals out of your organization, achieve compliance with regulatory rules, and protect your customers and the integrity of your financial institution? If so, then rest assured that your organization is taking a step in the right direction.
That said, don’t just leave your efforts at that. It’s important to always stay abreast of the latest developments in KYC and CDD and to update your infrastructure and workflows as necessary. Otherwise, your organization may fail to comply with financial regulations.
This, in turn, can cause your company to face legal issues, incur fines and penalties, or damage its reputation. It’s imperative, then, to take a proactive stance in ensuring the efficiency and effectiveness of your customer screening process early on, and to maintain these qualities along the way.