How to Automate KYC and AML Processes with Low-code Systems

According to a 2011 UN study, criminal proceeds from drug trafficking and organized crime amounted to 3.6% of global GDP, and 2.7% (~$1.6 trillion) of this money was laundered. The FATF regulations were established in 1989 to counter money laundering and coordinate an international response.

Low-code platforms enable the acceleration of a business’s digital transformation by enabling the quick creation of apps for various business needs for the implementation of process automation. Low-code also allows businesses to adapt and evolve with evolving business needs and regulatory requirements. More and more businesses are adopting low-code development platforms to build custom applications. A study forecasts that the market size for low-code platforms, which stood at $4.32 billion in 2017, will grow to $27.23 billion by 2022 – a CAGR of 44.49%.

The emergence of hyperautomation, a key component of digital transformation, further enhances the capabilities of low-code platforms. Hyperautomation combines artificial intelligence (AI), machine learning (ML), robotic process automation (RPA), and other technologies to automate and optimize business processes across the organization. By leveraging hyperautomation, businesses can achieve higher levels of efficiency, accuracy, and scalability in their operations.

The role of KYC and AML in financial services

The role of hyperautomation in KYC and AML processes is crucial for financial services institutions. Intense competition in the industry necessitates the delivery of a differentiated customer experience, while complying with stringent regulatory requirements. Hyperautomation enables financial institutions to streamline and automate their KYC and AML workflows, leading to improved operational efficiency and reduced costs.

With hyperautomation, the onboarding process for new customers can be accelerated through the use of AI and ML technologies. These technologies can analyze and verify customer information more quickly and accurately, reducing the time-to-revenue and enhancing the overall customer experience. Hyperautomation also enables continuous monitoring of customer transactions and risk assessment, helping to detect and prevent money laundering activities in real-time.

KYC and AML in different industries and their challenges

Regulators insist on strict compliance with KYC and AML regulations to maintain secure operations in financial institutions. The challenges of AML and KYC compliance in different industries are enumerated below.

Banking

In the banking industry, hyperautomation addresses the challenges faced in KYC compliance. By automating the investigation processes and leveraging analytical approaches for customer risk assessment and transaction monitoring, banks can minimize false positives and ensure more effective AML compliance. Hyperautomation also helps banks integrate disparate systems and eliminate manual tasks, improving data accuracy and overall efficiency.  

Typically, banks face four major challenges in KYC compliance:

• Extended time-to-revenue due to lengthy customer onboarding. Banks now use KYC automation to leverage AI/ML technologies to speed up the process.
• Cost of large compliance teams to monitor ongoing issues and clear remediation backlogs.
• Friction in the onboarding process leads to poor customer experience.
• Hefty AML fines levied for non-compliance with AML regulations.
• KYC software can integrate disconnected systems and replace inefficient manual processes to help deliver frictionless client onboarding and strong compliance.

The challenges in complying with AML regulations include:

• Complex and tedious bank processes for investigation.
• Inaccurate and incomplete client information.
• Analytical approaches to customer risk assessment and transaction monitoring lead to high rates of false positives.
• The proliferation of new banking products/services complicates real-time detection and prevention.

Capital Markets

Capital markets also benefit from hyperautomation in their KYC and AML processes. The complex nature of client relationships and transactions in the capital markets requires advanced monitoring and reporting capabilities. Hyperautomation enables comprehensive AML screening and monitoring of all customers, while also managing counterparty risk and complying with legislative requirements.Key AML and KYC challenges for capital markets include:

• Compliance with broker-dealer monitoring requirements.
• Delivery versus payment(DVP) and receive versus payment(RVP) requirements.
• Post-trade reporting.
• Complying with legislative requirements (example: MiFID II in the EU).
• Managing counterparty risk. 

AML software enables comprehensive and ongoing AML screening of all customers to instantly raise an alert on any changes in the risk profile.

Insurance

Insurance companies leverage hyperautomation to meet their industry-specific KYC and AML regulations. The stringent customer acceptance policies and lengthy identification procedures can be streamlined through automation, reducing manual effort and enhancing compliance. Hyperautomation facilitates diligent monitoring of client transactions and effective risk assessment, enabling insurance firms to mitigate the risks associated with money laundering and financial fraud.

The KYC and AML challenges for the insurance sector include:

• Stringent customer acceptance policies.
• Lengthy customer identification procedures.
• Diligent monitoring requirements for client transactions.
• Assessing and managing risk.

Retail

Retail businesses, both traditional and online, can benefit from hyperautomation in their KYC and AML processes. By automating the verification of business data and registration documents of multiple business counterparties, retail businesses can ensure transparency in their relationships and reduce the risk of fraudulent activities. Hyperautomation also aids in screening global watchlists and raising alerts on suspicious activity, helping to maintain a risk-free customer portfolio. The KYC/AML challenges for the retail industry include:

• Verification of business data and registration documents of multiple business counterparties.
• Background AML screening by examining global watchlists, sanctioned entities by local government/international enforcement agencies. Anti-money laundering software can help ease this process and raise alerts on suspicious activity.
• Verification/screening of the ultimate beneficiary.

Public Sector

The public sector utilizes hyperautomation to protect against money laundering activities associated with criminal proceeds. By automating AML and fraud detection processes, hyperautomation accelerates the identification of suspicious transactions and enables the generation of suspicious transaction reports. This contributes to maintaining the integrity and stability of the international financial system, ultimately helping to combat crime.

How can low-code systems automate KYC and AML processes?

Low-code applications are built using visual processes, enabling easy collaboration between the end-users and the application developers. Also, low-code does not require a data migration to a new proprietary data model. Data can be accessed in its current format and brought onto the platform for users and AI to run processes to complete tasks. 

Detecting financial crimes involves monitoring sanctioned screenings, examining suspicious activity reports, alerts from detection engines for transactions/processing, and customer risk assessments.

These connected processes can be managed efficiently only if they are all on the same platform. Elements built for a particular application – for example, suspicious activity reporting – can be used on any project in the organization. The organization can derive greater business value through collaborative functioning. 

A low-code platform can transform the KYC and AML processes by:

• Enabling the quick design of applications to manage KYC workflows.
• Help identify portions of the KYC workflow that can be eliminated or improved.
• Automation of processes with AI/ML, RPA, BPM, IDP, and other technologies. 
• Low-code automation platforms can be used in the cloud, on-premise, or hybrid mode – providing businesses with flexibility in planning their deployment model.

Hyperautomation, the use of advanced technologies like artificial intelligence (AI), machine learning (ML), robotic process automation (RPA), and business process management (BPM), plays a crucial role in enhancing the automation capabilities of low-code systems. Hyperautomation enables the intelligent automation of complex KYC and AML processes, making them faster, more accurate, and efficient.

By leveraging AI and ML algorithms, hyperautomation can analyze large volumes of data to detect patterns, anomalies, and potential money laundering activities. It can automate the screening of customer information against global watchlists and identify suspicious transactions in real-time, reducing the reliance on manual efforts and improving the accuracy of risk assessments.

Furthermore, hyperautomation can integrate with existing systems and data sources, enabling seamless data exchange and eliminating the need for manual data entry and reconciliation. It can also automate the generation of reports and documentation required for compliance purposes, ensuring consistent and auditable processes.

With hyperautomation, organizations can achieve end-to-end automation of their KYC and AML processes, from customer onboarding to ongoing monitoring and risk assessment. This not only improves operational efficiency but also strengthens compliance efforts, reduces the risk of financial crimes, and enhances the overall customer experience.

summary

Hyperautomation, when combined with low-code platforms, empowers financial institutions and other industries to automate and streamline their KYC and AML processes, mitigating risks, improving compliance, and delivering a superior customer experience.

We can help!

The competitive nature of the banking sector enjoins the banks to deliver a world-class customer experience. The first step in achieving this is the automation of banking workflow processes. 

Autonom8’s workflow automation solution for banks and other industries is nimble and enhances operational efficiency, enables compliance, and helps gain a greater understanding of client needs for delivering a superior customer experience. 

You can build your end-to-end customer workflows visually – on our A8Flow platform. Click here to schedule a demo.

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