How do banks prepare themselves to evade constantly rising costs and complexity in onboarding while remaining compliant?
Customer acquisition is becoming increasingly difficult, and many clients are frustrated by the ever-growing compliance requirements. On one hand, they wonder why all this information is necessary, given that they themselves have nothing to do with money laundering and the like. On the other hand, there are the regulators, who are constantly tightening the rules of the game.
Before the first cent is transferred to the bank, contractual partners must first be identified (ID), beneficial owners verified (Form A, etc.) and, if necessary, further checks are carried out as part of «Know your client/customer» (KYC), FATCA or suitability. Depending on the bank and risk level, at least three people are included in this process. However, in many cases, five or more employees may need to be involved.
In reality, though, the process is rarely completed on the first attempt. There is a back-and-forth between internal teams, as well as between the bank and its customers. In the best-case scenario, only a few additional signatures are required. In the worst case, the opening process is massively delayed and customer satisfaction diminishes, thereby increasing the bank’s costs.
At finalix, we believe this to be problematic for the following reasons:
- Service quality is suffering, and the bank’s image is beginning to look increasingly unprofessional
- There is little to no understanding of why a particular bit of information must be obtained
- Processes often run in parallel or independently of each other, causing customers to be contacted several times within a short period
- The quality of the content is also failing. For many banks, the number of initially rejected openings is in the high double-digits
For financial institutions, this is cumbersome. But it also raises concerns from a regulatory standpoint, whether effective monitoring can be guaranteed. So, what can banks do to improve their situation?
Take the Client’s Perspective
In the engine room of a financial institution, it is unfortunately often the case that the left-hand doesn’t know what the right hand is doing. Separate teams process related issues independently and customers are, for example, requested to submit and provide general contract documents and other regulatory information such as Form A and FATCA in multiple stand-alone interactions.
Instead, banks should emphasize channeling interactions more to make communication more effective and altogether more positive.
Avoid Redundancy
However, efficiency is not only about reducing uncoordinated communication. It is equally important that processes are harmonized and in sync. Open tasks should be triggered in parallel to avoid different deadlines, for example.
Relationship managers rarely have a complete overview of all due dates and processes. Therefore, it is even more essential that this coordination is supported and guaranteed by the system.
Know Your Data
In many companies, data pools have been built up over the years without anyone paying attention to where and how often information is stored. As a result, data structures have become increasingly complex, making it more challenging to tidy up the data.
Finalix advises banks to act now and establish transparency and structure in their data. Proper oversight is key. Stop looking at related topics in siloes.
Understand the Risks, Understand the Story
Lastly, onboarding and compliance are also about understanding the client’s story in the context of their potential risks. The term «KYC», for example, often causes unease among financial professionals. KYC is often reduced to a mere completeness check and the fact that it is ultimately about the customer’s story as a whole is completely forgotten.
Instead of focusing solely on gathering information, it would be much more important to obtain the right information depending on the associated risk.
Are you struggling with efficiency and quality issues in your onboarding process? Are you stuck in an AML limbo? Our finalix experts are ready to get you back on track. Contact us today.
