Looking for a loan? Want to send money abroad? How about a credit card? Hardly a few years ago, you’d be more likely to visit your local bank or bureau de change for such services.

Thanks to the FinTech revolution, this has now changed. The ongoing proliferation of digital FinTechs is constantly redefining User eXperience (UX) and acquainting consumers to better products and services. Customer onboarding is key to designing such a frictionless customer UX whilst ensuring compliance with the prevailing laws and regulations. Thus, businesses are continuously looking to improve their customer onboarding processes and the cost-effectiveness of their AML KYC framework.

This article illustrates a simple conceptual flow of a cost-effective KYC AML framework for an FX remittance business.

The landscape

The exponential growth and innovative advances demonstrated by the global financial services industry, especially over the past 5 years, has digitalised the banking landscape around the globe. This has predominantly been driven by disruptive FinTechs and RegTechs that put the customer journey at the heart of their service offerings. This has led to a paradigm shift in the way incumbents and new start-ups view customer onboarding.

However, in the age of regulations and the plethora of requirements they bring in, a careful design for such a process is required to ensure regulatory compliance and a smooth experience. In effect, the financial sector is tightly regulated and imposes stringent policies around day-to-day operations. Financial ecosystems must be equipped with adequate protection against financial crime activities, such as money laundering and terrorism financing. A number of competent authorities such as the FCA, BaFin, MAS, SFC and SEC, have been proactive in keeping up with FinTech trends and incrementally evolving their regulations, especially around KYC AML and capital management.

At SwiftDil, we know how painful it can be for FinTechs, especially start-ups, to comply with AML and KYC regulations. So much so that we set our vision to become a one-stop AML and KYC solution, enabling our users to comply with regulations with ease whilst substantially reducing costs. However, a truly cost-effective AML strategy requires thorough thought by our users, as it will require an effective risk-based framework that doesn’t hinder a smooth user experience.

Cost-Effective Customer Onboarding

Say you’re an FX remittance business. In several parts of the world, this has now become a digitalised industry where consumers expect a pleasant onboarding experience with minimal friction.

With such businesses, it’s key to define a tiered onboarding approach, or what’s also known as clearance levels. This simply means, based on your target clientele (demography, market segment, etc.), the transaction amount, and potentially other factors, you should establish various onboarding levels that you can apply to your customers during their journey. Varying AML KYC checks are typically applied to each of those levels. The diagram below illustrates a simple flow:

The approach illustrated above allows businesses to spread their AML compliance costs throughout the customer journey, whilst achieving a streamlined process. Furthermore, customers are expected to provide their details as and when it is necessary. Not only does this enhance the user experience, but also improves business compliance with data protection regulations such as the General Data Protection Regulation (GDPR), which set out obligations that prohibits businesses from holding customer data that is not needed.

Additionally, by automating the most common AML KYC tasks, the onboarding time for cleared customers has been trimmed down to a matter of seconds. This ultimately reduces the burden on your Money Laundering Reporting Officers (MRLOs) and the operational human capital, freeing them up for other important tasks. It goes without saying, further clearance level and checks should be added to the flow illustrated above to improve customer due diligence.

The conceptual flow described here is for demonstration purposes only. We always advise our users to establish a continuously evolving risk-based approach and corresponding AML KYC flow that’s fit-for-purpose.

Summary

There isn’t a single way to establish a cost-effective AML KYC framework. It depends on your risk-based approach, which in turn is based on multiple factors (e.g. type of business, clientele, geographies). However, as illustrated in the provided example, there are means to significantly reduce and spread costs throughout your customer journey by keeping your onboarding process lean.

It is imperative to identify an AML KYC compliance vendor that not only meets your current requirements, but one with a roadmap that aligns with your business’ vision, and is continuously evolving. SwiftDil offers a suite of services that aim to automate your KYC AML compliance and customer onboarding. Get in touch with us to find out how we can help your business.