Assessing Customer Risk with Automated KYC and AML Software

by Apr 21, 2023

Assessing Customer Risk with Automated KYC and AML Software

Apr 21, 2023 | Blog, Human Trafficking, KYC, News & Events

With financial crime, fraud, and money laundering quickly taking precedence as some of the most aggressively expanding forms of crime across the globe, having a risk-based approach to monitoring your current customer base, as well as verifying the identities of new entities is essential to circumventing criminal activity and providing safeguards that allow users to navigate your institution with peace of mind.

A risk-based approach, as defined by the Financial Action Task Force (FATF) focuses on the identification, assessment, and understanding of money laundering and other types of financial crime through Customer Due Diligence (CDD) as well as Know Your Customer (KYC) protocols. When integrated into your regular securities framework and operations, KYC procedures can reduce costs, boost AML efficiency, and help contribute to a safer global marketplace for all entities to navigate.

Below, we’ll take a closer look at some of the key elements of taking a risk-based approach to evaluating entities and circumventing fraud, as well as the benefits of using a trusted KYC software provider like iComply to streamline your procedures. Read on to learn more!

What Are the Main Steps to Implementing a Risk-Based Approach?

While there are many different factors that contribute to taking a holistic approach to circumventing fraud, there are a few main variables that make up a solid risk-based plan. These aspects include:

Assessing Risk and Value

It comes as no surprise that the backbone of adopting a risk-based approach to AML involves painting a clear picture of the risk associated with certain customers through the development of detailed profiles that allow you to carefully, and accurately, segment clients as needed. Core components that help assign a risk value include your ability to verify their identity and/or financial information, known activities and patterns of behaviors that may cause concern, geographical location, and more.

Should a prospective customer raise cause for concern, you should also have refined Enhanced Due Diligence (EDD) protocols in place that allow you to dig deeper and clarify any missing variables that would allow you to make a definitive decision before moving forward.

Efficiency and Practicality

While manual reviews can solicit valuable information about clients, they are often non-practical in fast-paced business environments that demand results as quickly as possible to avoid downtime and inconvenience for users. Automated AML and KYC platforms not only help to eliminate accidental biases and the risk of human errors, but they also streamline your operations and allow you to seamlessly conduct AML screening in a significantly faster (and much more reliable) manner.

At iComply, we believe that taking a risk-based approach to KYC and AML doesn’t have to mean long wait times and further headaches. Our innovative suite of modular risk assessment software puts compliance in your hands with ease, integrating with existing security frameworks in a matter of minutes and adopting regulations across the globe for maximum protection and compliance.

Evaluating on a Micro Level

When countering finCrime and the many risks associated with criminal activity, there is no denying that it’s important to be aware of the macro-level effect such efforts have on the global marketplace, including reducing human trafficking statistics, combatting the international drug trade, circumventing terrorist financing, and more. With that being said, it’s just as important to look at the successes garnered on a micro-level, with businesses and institutions understanding that their efforts must focus specifically on an individual customer level to stay as compliant and accurate as possible. Clearly identifying parties within your own unique database plays a key role in both micro and macro efforts to reduce the harm of finCrime, and ensure that your institution will always be on the right side of compliance laws in the process.

What About Assessing Dynamic Risk?

Risk, much like the customer data it is attached to, is not a stagnate prospect. Companies and institutions that only conduct KYC and AML measures when new accounts are opened miss one of the most important parts of crime reduction. It should always be anticipated that customer information will change regularly, with new details like new associations and behaviors directly influencing their actual level of risk. Inaccurate risk scores fuelled by outdated information pose a serious risk to AML efforts, and it is estimated that including continuous review measures like transaction monitoring and customer, screening can reduce your risk of misclassifying your risk profiles by 25-50%.

Dynamic risk assessment, that is, assessing the risk that arises from sudden events in real-time, gives your company the power to pivot as needed at the moment and deal with the very real challenges associated with handling high-profile clients like PEPs and more.

Implement a Proven Risk-Based KYC Approach with iComply

At iComply, we know that compliance with KYC and AML legislations is essential to circumventing the rise in financial crimes across the globe and avoiding fines from international legislators. Our modular suite of KYC, KYB, and AML products not only ensures you have everything you need to manage and maintain a wide range of jurisdictional AML regulations and conduct risk-based assessments but also automates your customer identification and risk screening processes more intuitively than ever before.

Book a demo with our team today to learn more about iComply’s AML solutions and discover how iComplyKYC can be customized to fit the unique risk screening needs of your organization.


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