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Too many banks are doing the bare minimum to stop money laundering

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While many financial institutions are able avoid fines by meeting minimum know-your-customer standards, they are paying a price.

Highly manual KYC processes and fragmented systems are costly to maintain, inefficient and inflexible, making the task of gaining a 360-degree view of the bank customer extremely difficult.

Financial services firms can use a three-pronged approach to identify, assess, monitor and mitigate risk and enhance the KYC foundation: improve data quality, use advanced analytics to reduce false positives and automate manual functions.
The first step toward enhancing KYC efforts is to assess the completeness and quality of data used to evaluate customers. However, NTT DATA research recently found 44 percent of FSIs identify data quality as a tremendous challenge.

Performing an audit of customer information files will help identify corrupt data and missing elements that impact an FSI’s ability to risk rank customers. This exercise should take place across each business line to establish basic customer data necessary for execution of due diligence (CDD) functions, as well as enhanced due diligence (EDD) for customers ranked at a heightened risk level.

False positives contribute the most to high operational costs of alert investigation, but firms that employ advanced analytics can reduce the volume of false positives.

Artificial intelligence, machine learning and other analytics models can receive a wealth of customer information, which allows FSIs to build a customer profile based on past behavior so systems can generate alerts based on suspicious activities and policy violations, therefore reducing the occurrence of false positives that require investigation.

As firms have started looking at how they can improve efficiency and processing time of onboarding new customers, robotic process automation has gained more appeal. RPA can automate highly manual, repetitive tasks, with a high degree of accuracy at a low cost, enabling banks to redirect resources to higher-value functions.

Enhancing know-your-customer processes will allow financial institutions to reduce the risk of security breaches, meet regulatory and compliance expectations and defend against reputational risk.

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