How to be compliant with “Know-your-customer” regulations
Between 2010 and 2016, banks paid over $160B in penalties to the U.S. government[1] because they failed to pass compliance checks. With these massive penalties constantly hanging over their heads, banks are scrambling to find new ways to minimize their compliance risks.
Compliance is getting too difficult to deal with manually
Regulated recordkeeping is often manual, time-consuming, and imprecise, leaving banks at risk of non-compliance and huge fines. “Know-your-customer” (KYC) regulations—laws that require banks to know more about their customers and their risks—is a great example of how painful compliance is for banks.
For example, the Foreign Account Tax Compliance Act (FATCA)[2] requires financial institutions to have a record of and report all foreign accounts that their US customers hold. To pass compliance and authenticate these accounts, personal information such as social security number and date of birth must be on hand at all times. With hundreds of thousands of accounts, this is no small feat. Not only must banks have this data at the ready, they have to keep all the information secure —since even one stolen or missing document incurs large fines.
Banks also face KYC challenges from another regulation, the Anti-Money Laundering (AML)[3] rule, intended to detect, report, and stop suspicious financial activities—such as securities fraud—from occurring in the US. The law requires that they regularly inform their customers on what constitutes as an illicit money activity in addition to performing extra due-diligence procedures on every client who opens an account. If even one client’s information is out of date, the entire bank faces potential non-compliance—which leads to harsh penalties and an increased risk of a widespread audit.
KYC compliance is not just an issue for banks operating in the United States. The European Union’s Markets in Financial Instruments Directive (MiFID)[4] requires financial institutions to collect and record information about their client’s trading portfolios. Because of MiFID, all EU banks must meet stricter requirements, such as pre- and post-trade transparency, to remain compliant.
Banks already use solutions that could aid in compliance
Imagine a solution that could help alleviate KYC compliance woes by building compliance activities in to the everyday interaction with customers. No more manual account checks or independent verifications, just a streamlined automated process that surfaces compliance gaps automatically to the next bank teller who interacts with the customer. For forward-thinking banks, the key to KYC compliance is actually something they already use—a next best conversation solution.
Next best conversation solutions streamline many different functions that help with banking overall –marketing, sales and employee productivity. They help relationship managers focus their customer engagements instead of having to make sure everything is operationally accurate. With a next best conversation solution, relationship managers will always know the right way to engage any given customer because analytics and data modeling provide the management insight for them. This way they don’t have to memorize the bank’s portfolio of offers or every little detail about their customer accounts. Next best conversation solutions facilitate banks to have personalized, timely conversations and offers, rather than generic promotions and spam. While this, in and of itself, provides a huge service to banks, the underlying technology in these solutions can also serve compliance efforts and reduce the risk of fines around KYC regulation. Once compliance is built into the data model, next best conversation solutions will ensure that every bank employee can proactively eliminate potential KYC compliance gaps.
VeriPark can help
VeriPark’s Next Best Action solution, built on Microsoft Cloud Technology, delivers compliance assistance in addition to all the other next best conversation functionality. And, unlike all other solutions on the market, VeriPark provides this assistance for both outbound and inbound channels. Through the proactive alert system, Next Best Action will automatically surface compliance gaps to employees who reach out to customers, and even when the customer calls into the bank. For example, if a client calls about their mortgage application, the relationship manager who handles the call will also receive a notification that a piece of vital compliance information is missing. In a single interaction, the bank resolves two issues and frees up time to focus on other efforts.
Next Best Action gives banks the modeling they need to strengthen their compliance efforts while simultaneously creating a better experience for customers. And because Next Best Action is a cloud solution, VeriPark automatically updates new compliance functionality as new regulations come into effect. Learn more about how VeriPark turns compliance into a hassle-free task for both customers and bankers on Microsoft Appsource.
Learn more by visiting the Next Best Action solution page.
[1] http://www.goodjobsfirst.org/blog/160-billion-bank-fee
[2] https://www.irs.gov/businesses/corporations/foreign-account-tax-compliance-act-fatca
[3] http://www.finra.org/industry/aml
[4] https://www.fca.org.uk/markets/mifid-ii
