Discover how automation can help you adjust to the new regulatory environment

A Fintech business operation operates in a highly sophisticated compliance environment. This involves interactions with government agencies, other businesses and customers. Since the business is obliged to function within the legal frameworks in order to continue trading, regulation compliances are sacrosanct.

Most of these regulations involve the financial and operational aspect of the business. There are tax returns, compliance papers, verification reports, KYC/KYB, Anti Money Laundering Protocols and much more.

Therefore, Fintechs are required to expend a lot of their precious resources – such as time and effort –  in ensuring compliance with all the regulations. They are meant to isolate and discourage illegal activities which take place through this system.

Automation can be effectively utilised in such circumstances, and it has the dual benefit of cuttings cutting costs and time. This article will explore how automation will help businesses to navigate the rough regulatory environment. 

KYC/KYB refers to the process by which a financial entity gets documented evidence of identity and then verifies them. It’s also used to ensure that the customer is not barred from doing specific business activities, particularly when it comes to local or international laws.

It can also be done in an attempt to identify potential money laundering or other illegal activities like identity theft, terror funding or any other fraudulent activity.

The traditional modes of KYC are perhaps outdated. Why? They are costly in terms of effort, time and even security. In addition, they are also responsible for losing customers during onboarding.

KYC automation uses various technologies to do this, without all the cons of the traditional system. As a result, it makes this process more efficient, whilst reducing the risk and labour involved. At the end of the day, KYC helps to improve the customer experience by leaps and bounds.

Intelligent Process Automation carries out the verification tasks, using machine learning to do replace the actions of traditional processes. Some of the other technologies that are used in IPA are:

AI – Artificial Intelligence

This is used to recognise details and patterns. It shows anything unusual and can do it faster than human beings.

IDP – Intelligent Document Processing

It can scan many documents which is impossible in a manual mode. It uses NLP (Natural Language Processing) and ICR (Intelligent Character Recognition) to process the voluminous data.

RPA - Robotic Process Automation

RPA is used to carry out monotonous tasks which are repetitive and mechanical in nature. 

AML is a set of rules, best practices and protocols which discourage and prevent money laundering within the Fintech industry. KYC is just one part of this. AML is a continuous process, which takes place throughout the relationship with the customer.

AML compliance has actually become very strict under the new 6AMLD and FinCEN CDD regulations. Failure to comply with these can invite a lot of problems, some of which may even jeopardise business continuity.

Anti Money Laundering measures are also part of various treaties which mandate compliance by all Fintech companies.

KYC and AML are not exactly the same, though they are part of customer due diligence. AML, for example, is a much comprehensive and ongoing process to monitor a customer during and after onboarding.

KYC, on the other hand, is done periodically as a part of the broader AML measures. Working in a very similar way to a background check, it’s also part of the process of identifying the customer in order to obtain more information about any existing issues.

Time and resources spent during manual onboarding can make it a tedious process. Even worse, it can have a negative impact on the customer’s experience. In some cases, KYC/KYB is entrusted to outside agencies. Whilst this can save time, they are not always the most cost-effective option. They can also overlook discrepancies in data. This is where automated KYB/KYC onboarding can be particularly helpful.

The automation works on carrying out virtual identification, and also by checking this information against authentic business registries and that of the list of sanctioned entities or PEPs (Politically Exposed People).

The scope of automation can also be extended to cover the post-onboarding relationship. This continuous monitoring can therefore avoid unnecessary hassles in AML compliance. Overall, this can act as a centralised process to make verification quite easy.