News & Blog

The Future of KYC Compliance — Insights From Chris Siddons

Future of Compliance
February 26, 2021

This article is part of Kyckr’s new Future of KYC Compliance series, which interviews leading industry professionals and thought leaders to learn more about the trends that will shape the future of KYC compliance.

The following is an interview we recently had with Chris Siddons, Senior Director of Financial Crime Compliance at LexisNexis Risk Solutions.

What’s the current state of KYC compliance?

Know Your Customer (KYC) compliance is the practice of performing due diligence on your clients to determine whether engaging in a business relationship with them will create legal risk for your business. Financial firms in particular and regulated firms in general are required to perform this type of due diligence activity on their clients. Although all corporations are required to comply with sanctions and other kinds of restrictions, not all companies use KYC methods to administer those internal controls.

The kind of regulatory information that clients screen against in the KYC process can vary widely. All companies are required to screen their clients against sanctions lists at a base level, as these present legal restrictions against whether a firm can transact with sanctioned parties. Beyond sanctions, regulated financial institutions will screen against politically exposed persons (PEP) lists and a range of other lists to comply with anti-money laundering (AML) requirements.

How has KYC compliance evolved over the past 5 years?

Adoption of KYC processes exploded in the early 2000s in the wake of 9/11, the USA PATRIOT Act and the broader movement against terrorism globally. Initially KYC processes were done on paper by checking against external databases, but more recently we’ve seen significant adoption of automated methods for performing KYC checks. Purchasing KYC datasets has eliminated the need to pull unformatted data from various ever-changing sources to keep up to date with the regulatory environment. By employing automated KYC screening solutions, businesses can perform compliance checks at scale, in a regular fashion and in a manner that produces results that are demonstrable to regulators, auditors and internal executives alike.

How has KYC compliance changed in the midst of COVID?

COVID has accelerated the adoption of managed cloud (also known as ‘Software-as-a-Service’) and private cloud solutions to digitise compliance processes. Digital compliance processes are more scalable than locally hosted alternatives, as computational resources can be scaled up and down according to needs. Staff no longer need to be collocated to facilitate screening, opening up a wider labor pool. COVID has introduced the real possibility of interruptions to business continuity and digitisation of operational processes is seen as an important step towards eliminating that operational risk for clients. Additionally, KYC activities are strained, causing delays in customer onboarding. In fact, financial institutions in the U.S. reported a 7% increase in costs related to KYC activity in 2020*, largely due to the impact of the pandemic. (*True Cost of Financial Crime Compliance, U.S. and Canada, October 2020)

What are the top trends shaping the future of KYC compliance?

While the past 10 to 15 years has seen the continued bundling of KYC solutions with other related tools and datasets, we anticipate the future of KYC will come with providing specialised solutions that enable businesses to accurately perform KYC checks on a particular kind of process. KYC checks on consumers for example require different data inputs than those same checks on corporate clients; these different categories of clients will also manifest different kinds of risk to financial and regulated firms.

In addition to KYC technology, regulations are an important factor in the adoption and transformation of KYC programs. The AML Act of 2020 in the US is expanding the definition of financial institutions to antiquities dealers, crypto asset providers and other financial intermediaries to adopt KYC and AML screening requirements. Increasing penalties for enabling PEPs to conceal source of assets and funds, and introducing regulation for the internal technology processes for development, implementation and use of internal and 3rd Party KYC technologies will also drive heightened focus on identifying these clients

What’s the future of KYC compliance?

The future of KYC compliance comes not from recontextualising how KYC checks fit into the overarching legal and ethical obligations that firms have to their stakeholders. KYC intersects with a number of broader trends concerning the role that companies should play and the factors they must consider when shaping their business strategy and operations, including Environmental Social and Governance (ESG) factors, safe and legitimate supply chains and third-party risk, as well as Environmental Health and Safety (EHS) obligations firms have to their employees.

Future of Compliance
February 26, 2021

This article is part of Kyckr’s new Future of KYC Compliance series, which interviews leading industry professionals and thought leaders to learn more about the trends that will shape the future of KYC compliance.

The following is an interview we recently had with Chris Siddons, Senior Director of Financial Crime Compliance at LexisNexis Risk Solutions.

What’s the current state of KYC compliance?

Know Your Customer (KYC) compliance is the practice of performing due diligence on your clients to determine whether engaging in a business relationship with them will create legal risk for your business. Financial firms in particular and regulated firms in general are required to perform this type of due diligence activity on their clients. Although all corporations are required to comply with sanctions and other kinds of restrictions, not all companies use KYC methods to administer those internal controls.

The kind of regulatory information that clients screen against in the KYC process can vary widely. All companies are required to screen their clients against sanctions lists at a base level, as these present legal restrictions against whether a firm can transact with sanctioned parties. Beyond sanctions, regulated financial institutions will screen against politically exposed persons (PEP) lists and a range of other lists to comply with anti-money laundering (AML) requirements.

How has KYC compliance evolved over the past 5 years?

Adoption of KYC processes exploded in the early 2000s in the wake of 9/11, the USA PATRIOT Act and the broader movement against terrorism globally. Initially KYC processes were done on paper by checking against external databases, but more recently we’ve seen significant adoption of automated methods for performing KYC checks. Purchasing KYC datasets has eliminated the need to pull unformatted data from various ever-changing sources to keep up to date with the regulatory environment. By employing automated KYC screening solutions, businesses can perform compliance checks at scale, in a regular fashion and in a manner that produces results that are demonstrable to regulators, auditors and internal executives alike.

How has KYC compliance changed in the midst of COVID?

COVID has accelerated the adoption of managed cloud (also known as ‘Software-as-a-Service’) and private cloud solutions to digitise compliance processes. Digital compliance processes are more scalable than locally hosted alternatives, as computational resources can be scaled up and down according to needs. Staff no longer need to be collocated to facilitate screening, opening up a wider labor pool. COVID has introduced the real possibility of interruptions to business continuity and digitisation of operational processes is seen as an important step towards eliminating that operational risk for clients. Additionally, KYC activities are strained, causing delays in customer onboarding. In fact, financial institutions in the U.S. reported a 7% increase in costs related to KYC activity in 2020*, largely due to the impact of the pandemic. (*True Cost of Financial Crime Compliance, U.S. and Canada, October 2020)

What are the top trends shaping the future of KYC compliance?

While the past 10 to 15 years has seen the continued bundling of KYC solutions with other related tools and datasets, we anticipate the future of KYC will come with providing specialised solutions that enable businesses to accurately perform KYC checks on a particular kind of process. KYC checks on consumers for example require different data inputs than those same checks on corporate clients; these different categories of clients will also manifest different kinds of risk to financial and regulated firms.

In addition to KYC technology, regulations are an important factor in the adoption and transformation of KYC programs. The AML Act of 2020 in the US is expanding the definition of financial institutions to antiquities dealers, crypto asset providers and other financial intermediaries to adopt KYC and AML screening requirements. Increasing penalties for enabling PEPs to conceal source of assets and funds, and introducing regulation for the internal technology processes for development, implementation and use of internal and 3rd Party KYC technologies will also drive heightened focus on identifying these clients

What’s the future of KYC compliance?

The future of KYC compliance comes not from recontextualising how KYC checks fit into the overarching legal and ethical obligations that firms have to their stakeholders. KYC intersects with a number of broader trends concerning the role that companies should play and the factors they must consider when shaping their business strategy and operations, including Environmental Social and Governance (ESG) factors, safe and legitimate supply chains and third-party risk, as well as Environmental Health and Safety (EHS) obligations firms have to their employees.

Build your Customer Due Diligence and KYC processes on a robust foundation with Kyckr.

Make data work smarter, not harder.

Request a Demo
Newsletter Sign Up
Book a Demo
Talk to us
LinkedIninfo@kyckr.com
Close
24Q1_ALL_WEB_27.09_UBOVerify_SIGNUP_FORM
24Q1_ALL_WEB_27.07_UBOMaze_ReplayRequest_FORM
24Q1_GatedCON_GuideToUBOVerification_RequestWP_FORM
24Q1_ALL_WEB_27.07_UBOMaze_Signup_FORM
23Q4_ALL_WEB_22.06_Alloy_KYC_ReplayRequest_Form
23Q4_ALL_WEB_22.06_Alloy_KYC
23Q4_ALL_WEB_DigitalTransformation_WebinarReplay_Request
23Q4_ALL_CONF_06.06_Money2020_EU_MeetingForm
23Q4_ALL_WEB_18.05_AML_Digital_Transformation
23Q4_GatedCON_AMLFines2022_RoundupReport_FORM
23Q3_ALL_WEB_20.04_AMLSolutions_WebinarReplay
23Q3_ALL_WEB_20.04_AMLSolutions_Signup_FORM
23Q3_ALL_CONF_21.03_AML_ABC_Forum
23Q3_ALL_WEB_23.02_Signup_FORM
23Q2_ALL_WEB_14.12_KYC_VS_KYB_Webinar_Replay_FORM
23Q2_ALL_CONF_07.12_AFCSummit_BookAMeeting
23Q2_ALL_WEB_14.12_KYC_VS_KYB_SIGNUP_FORM
Webinar: Spotlight on KYC vs KYB - Why The Difference Is Increasingly Important For Verification
23Q2_ALL_WEB_17.11_Corporate_KYC_Landscape_ReplayRequest
23Q2_ALL_WEB_27.10_Corporate_KYC_Landscape_FINAL_FORM
Whitepaper: AML Bank Fines 2022 Mid-Year Report
Research Paper: The State of Customer Onboarding in Corporate Banking in Australia 2022
Registry Portal Pro
Registry Portal Basic
Registry Portal Essentials
Request API Key
Newsletter Signup
Whitepaper: AML Fines Report 2021
Ebook: The Future Of Financial Crime
Research Paper: Voice of the KYC Compliance Professional
Whitepaper: Corporate Onboarding: will it become a competitive differentiator for banks in a real-time world?
Research Paper: The State of Customer Onboarding in Corporate Banking
Whitepaper: Overcoming the Limitations of Company Registries to Enhance KYC Efficiency
Whitepaper: AML Bank Fines 2020 Report
Whitepaper: Impact of the European Union’s 5th AML Directive
Leverage cutting edge technology to automate customer onboarding
Moving from Periodic to Perpetual KYC
Unleash the power of primary source data & automate customer onboarding
Primary source data, the true foundation of regulatory compliance for Legal Firms
Primary-source data, the backbone of streamlined, “zero-touch” onboarding for Payment Providers
Spotlight on company registries in the wake of the FinCen Papers
Spotlight on US Company Registries
Spotlight on Ultimate Beneficial Ownership
Spotlight on APAC Company Registries
Spotlight on Company Registries in Offshore Jurisdictions
How can automation enhance your KYC and Onboarding Process?
Perpetual KYC – a myth or a must?
Spotlight on 2021 AML Fines
How to Future-Proof your AML/KYC processes with the help of RegTechs?
Webinar Replay: How to overcome the challenges associated with UBOs?
Spotlight On Entry Verification
Registry Portal Enterprise
AMLFines_ReplayRequest_FORM
Replay
Webinar Replay
Book A Demo