KYC regulations require a flexible technology solution – here’s why

With KYC regulations changing, we look at how how KYC technology can help your business to be compliant in 2024

Technology will help to manage changing KYC regulations

There is no dearth of solutions available in the market to help businesses streamline their Know Your Customer (KYC) compliance, in response to the changing KYC regulations. They all provide a variety of standardised processes for AML and KYC compliance, broadly based on common industry-specific best practice.

Herein lies the problem. To comply with KYC regulations,  all organisations need to convincingly demonstrate that they have made every effort to determine where their customers’ funds come from, yet the way they do so can differ greatly firm to firm – and within individual firms too. 

The KYC process cannot be standardised

Take KYC compliance. Every firm’s KYC process for compliance is different and based on the individual businesses focus, practice area and personalities involved – even on the same professional services sector, i.e., legal, accountancy, finance and so forth. For argument’s sake, say, a 50-man law firm has three practice areas – commercial law, tax and audit, and environment – with 20 lawyers, 10 lawyers and 5 lawyers respectively in each of these departments. Whilst at a high level, the KYC process across these three practice areas will be similar, yet they will be different as the legal sectors, and the individuals involved are different. 

Even within a single legal or accountancy firm, the KYC process cannot be standardised, and automated! 

Furthermore, demonstrating KYC isn’t a static process, but a dynamic one . Foremost, organisations have to prove to auditors that they believed they were complying with Know Your Customer guidance standards because at different points in time during their professional relationship or transaction, they knew what they knew. There are some customary data points but potentially during the course of the transaction or relationship, other types of information may also be needed to prove a robust  KYC process – that potentially weren’t required or known before. Consequently, any attempts at standardising processes will likely be adequate only for a limited period, after which procedures and data points may need to be revised.

Secondly, the KYC regulations themselves are continually evolving. In the last 10 years, the whole AML landscape (including KYC process) has changed dramatically, and newer KYC regulations – the Economic Crime and Corporate Transparency Act 2023 (ECCTA) that comes into force in March 2024, as an example – are routinely being introduced. Even though ECCTA isn’t part of AML and the KYC process, it impacts organisations’ AML compliance endeavours. 

Manual KYC compliance is onerous

Consequently, AML and KYC compliance are a manual, risky and extremely burdensome process for firms.

The KYC in 2022 research report by Fenergo found that in the banking sector, KYC compliance for a single corporate client takes from 31 to 60 days for 40% of banks to complete, one fifth say it takes up to 150 days and 8% take up to 210 days to complete a single review. For banks that have dedicated KYC employees and budgets, that’s all well and good.

However, typically time-poor, lawyers and accountants undertake AML and KYC compliance themselves and in their own time – i.e., outside of billable hours. Routinely, these professionals document AML and KYC related data while travelling, on weekends and such, because otherwise the time spent on this activity eats into their billable hours.

It’s no mean feat. They must accurately record personal details, pertinent emails, correspondence, bank details and many other types of data, so that in the event of an investigation they can show a clear audit trail.

Visit our Know Your Customer workflow solution page for all the benefits KYC automation can deliver.

Low-code workflow-based KYC solutions are the answer for compliance 

Sure, there are AML and KYC solutions available in the market, but due to the nature of compliance, there is no system that can meet the needs of a law firm or accountancy practice a 100 percent. Typically, about 80 percent of the information that needs to be processed is standard, but it is the balance 20 percent “edge” processes that need custom KYC solutions  as that’s where the risk of non-compliance lies. 

This is where low-code KYC solutions, such as the Sysero platform, provides value and helps to minimise and mitigate risk. This platform is designed to enable professional services firms to automate tasks, and easily build digital workflows in tune with changing requirements with minimal technical expertise. In fact, with Sysero, lawyers and firms’ staff need absolutely no knowledge of coding to create workflows and automated processes. They can use the visual interfaces with basic logic alongside drag-and-drop functionality to create custom applications for those edge cases. 

Additionally, the platform allows firms to easily integrate with any number of third-party systems such as CRM, onboarding, document management, accounting, Bureau van Dijk, Companies House, and even Google to help align and speed up the overall compliance process end-to-end, completely supported by an evidencable audit trail. 

Sysero’s low-code platform can be implemented within weeks. A full-service law firm with 300 users across 10 practice areas, was able to go live on Sysero in six weeks flat. The best part? Users needed no user training on go-live – the system is intuitive and easy to use. Six years on today, the firm continues to improve the system with new features and functionality, accommodating changing regulation, but also purses a more refined way of ensuring AML and KYC compliance. Most of all, the law firm isn’t reliant on Sysero for platform development, they do it completely independently in-house. 

Low-code KYC solutions eliminate the need for legal and accountancy professional services firms to spend thousands of pounds to purchase, maintain and enhance their compliance solutions. By design, AML and KYC compliance isn’t prescriptive – regulators want firms to think out-of-the-box, and take ownership of the activity. Adopting a prescriptive compliance solution simply can’t cut the mustard. 

In the legal sector, regulators such as the Solicitors Regulation Authority (SRA) often enforce their right to close down law firms, if found to be not satisfactorily complying with the AML directive. The regulators in the finance and accountancy sectors have the same authority too. 

With such strong consequences for organisations that get their KYC process wrong, one question springs to mind; Know Your Customer, do you?

See also

• Understanding AML Regulations and how they will impact KYC in 2024

Visit our Know Your Customer workflow solution page for all the benefits KYC automation can deliver.

FAQ

What are KYC requirements UK?

KYC (Know Your Customer) requirements in the UK pertain to the regulatory obligations imposed on businesses to verify the identity and assess the risk associated with their customers. The specific requirements may vary depending on the sector and nature of the business, but generally involve obtaining and verifying customer identification documents, conducting risk assessments, and implementing ongoing monitoring and due diligence practices to prevent money laundering, terrorist financing, and other illicit activities. Compliance with KYC requirements is crucial for businesses operating in the UK to maintain regulatory and legal compliance.

What are the KYC stages?

KYC (Know Your Customer) consists of several stages. The first stage is customer identification, which involves collecting basic information such as name, date of birth, and address. The second stage is risk assessment, which involves analyzing and evaluating the customer's risk level to determine the extent of due diligence required. The third stage is customer due diligence, which involves verifying the information provided by the customer through various documents and checks. The final stage is transaction monitoring, where customer activities are continuously monitored for any suspicious or unusual transactions.

What is low code?

Low-code, also commonly referred to as no-code technology, is a visual software development environment that allows citizen developers – i.e., individual users, non-IT trained people – to drag and drop existing components of software, and connect them together to create their own applications and workflows. 

What is the benefit of low-code technology?