SwanBitcoin445X250

AML/KYC Innovation – The foundation of regulatory compliance

Between 2009 and the end of 2017, regulators in the US and Europe have imposed $342 billion[1] of fines on banks for misconduct, including violation of AML rules. Estimates suggest that is likely to top $400 billion by 2020. Responsible for monitoring money laundering or theft, and detection of any potential financing of terrorism (CFT), FIs must perform KYC procedures for every customer to verify their identity. This complex task today requires RegTech tools to understand data patterns, and to assess, flag & notify every suspicious transaction. Large FIs spend $150+ million on KYC with an average of 32 days to onboard business clients.

Introduced in 2001 as part of the Patriot Act, KYC laws are obligating FIs to deliver on two requirements: Customer Identification Program (CIP[2]) and Customer Due Diligence (CDD). CIP is a particularly important element of performing KYC for any FI in relation to onboarding and CX/UX/UI. To help the government fight the funding of terrorism and money laundering activities, federal law requires FIs to obtain, verify and record information that identifies each person who opens an account.

Our study on 38 banks[3] across the globe analyzing their third-party RegTech implementations found that the RegTech solutions in the space of eKYC/real-time AML screening, AI/ML-based fraud prevention, and real-time compliance monitoring had the highest level of adoption by banks. More than 15 banks had implemented eKYC/advanced AML and sanction screening solutions. Solutions in the space of real-time compliance monitoring and AI/ML-based fraud detection were implemented by eight banks each.

A number of FIs that are in close collaboration with RegTech startups

Read more from our friends at Let's Talk Payments: