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Tag: KYC

KYC stands for Know Your Customer. It is a financial term used to describe the process of a business verifying the identity of its clients and assessing their risk levels.

InvestGlass helps banks by automating the KYC process. This helps to reduce turnaround time and ensure that all required information is collected. Banks can also use InvestGlass to monitor their clients’ risk levels and to keep track of any changes.

man using MacBook

How a KYC risk rating can help your company?

How a KYC risk rating can help your company?

If you’re working in the financial business you obviously know what KYC means KYC means Know Your Customer. This is an important process that allows financial institutions and any business to verify the reputation of their prospects and customers.

This type of process is extremely important to make sure that the parties you’re working with. It is also a way to reduce high-risk prospects and terrorist financing. Terrorist groups need money to sustain themselves and to carry out terrorist acts. Terrorist financing encompasses the means and methods used by terrorist organizations to finance their activities.  Institutions gather as much data as they can about their customers, and they then compile this into a portfolio.

Medium Risk (CDD – Customer due diligence) or CDD is the key part of anti-money laundering requirements. 

man using MacBook

What is KYC Risk Rating? It’s not for financial institutions only!

KYC risk rating is a way to calculate the business risk. Each question will find an answer with a number of points. By adding or multiplying those points, you will measure the prospect risk level. This process is obviously used for politically exposed persons, dangerous customer activity, transaction monitoring and electronic identity verification. We have been working also with ScoreChain affect that measured reputation of digital wallets.

Once the portfolio is completed, they closely analyze the information that they have obtained, and they determine the KYC risk rating of that specific client. 

InvestGlass digital onboarding forms are fully customizable to adapt your process with your KYC compliance regulations and any global regulations. We work with your legal department or external consultants to help you adapt those forms to your diligence program.

With the new European directive on anti-money laundering, most companies should check financial transactions above a threshold of €10,000. A risk-based approach will vary based on your industry but we believe that anti-money laundering screening will be a common process in most industries.

woman in gray hoodie wearing white face mask

How KYC Risk Rating Works

Anyone in your company from your senior management to fresh interns should understand financial crime basics. Financial institutions are required to closely monitor clients’ activities. Obviously, it’s not that easy to measure ongoing monitoring, and risk rating is a smart way to prevent a discriminative approach. Risk factors should be identified with a scoring. Each country has its own risk assessment and KYC risk rating. A deep understanding of the risk identified might not be needed by all your colleagues. Therefore we suggest you digitalize as much as possible with InvestGlass. The customers’ risk profile will then be stored directly into InvestGlass CRM. If you’re using a third-party solution such as ARDIS POLIXIS, the CRM will also store automated risk assessments by this third-party contact. Customer data and then stored into a banking grade CRM.

KYC Risk Rating: Automation vs. Manual – make customer due diligence affordable

Financial crime is not only about the reputation of your customer. Financial crime it’s also enhanced due diligence on transactions. KYC risk rating allows for financial institutions and your business to quickly and efficiently lower risk. Only automation can filter risk for vast amounts of data.

The entire process should be as automated as possible. Having no tomato process it’s also a way to reduce the financial action task force. I remember Bank telling me that they included assets in the management by X10 and their compliance staff the same. Spotting abnormal transactions is quite easy as the InvestGlass portfolio management tool can measure abnormal transactions.

If a client’s transactions begin to diverge significantly from the institution’s predictions, the institution will be notified and they will be able to further analyze the transactions for suspicious behavior.

The portfolio management monitoring looks into financial institution feeds collected and processes the information with threshold filtering. Thanks to this collection of feeds, Investglass can automate customer screening. Artificial intelligence automatically features customers by high-risk, medium risk, low risk. All your customers are automatically reviewed by the machine. Based on a routine that you can set up on a monthly or annual basis, clients’ accounts are closely monitored. Obviously, there might be some money launderers that will not be visible. Therefore, a randomized manual check will always be priceless to make sure that automated KYC procedures are effective.

KYC Reasonable Reassurance and customer risk

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Compliance officers and ledges straighter’s will always push for a deeper understanding of national governments intentions. Checking accounts should be seen as a cost and if a KYC rating is too complex the prospect, nowadays, would obviously know that it’s going to be complex to proceed with an account opening. Diligence measures will be applied to what cost?

Financial crimes will definitely be spotted as easily as a politically exposed person. Understanding the entire client portfolio and transaction will also be easy to access. But there will be some risk levels too difficult to spot. And your business should quickly reject high-risk customers to reduce the cost to reporting entities. This can be an ongoing process, as existing customers have the potential to transition into higher-risk categories over time; in that context, conducting periodic due diligence assessments on existing customers can be beneficial. 

Making Predictions with KYC Risk Rating and money laundering

KYC risk rating once properly used with InvestGlass tour will help you to predict prospects’ quality. Financial crimes-related prospects Will automatically reach your maximum risk ratings thresholds. And then compliance professionals will help you to find an average risk tolerance that will be suitable.

Financial institutions will therefore future customer risk based on the origin of the assets and risk factors that are unusual or suspicious will automatically receive a higher risk. As you’re collecting customer data, enhanced due diligence will be possible and you will adapt your digital onboarding forms.

The transaction monitoring as well as the digital onboarding forms have configurable rules engine to monitor patterns of suspicious behavior. InvestGlass compliance solution is made for early-stage companies and large institutions.

automation, CRM, KYC

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What problem does digitalization solve? Myth, Cost, Adoption

What problem does digitalization solve? We are looking forward to seeing you at this unique presentation organize with Investglass CEO Alexander.

During this presentation, we will highlight our latest findings in digitization trends what are the cost of digitalization and most importantly how to get your digitalization implemented right.

What problem does digitalisation solve? Myth, Cost, Adoption

What is the impact of digitalization?

Why is digitalization necessary?

Is transparency the magical cure to trust?

What are the challenges of digitalization?

How does digitalization affect banking, insurance and sales?

Digitalization is not only for client-facing as you might think it’s also inside your organization. You will discover that building a robot advisor means getting a plan B ready for those reluctant to this type of onboarding.

Therefore we will illustrate this presentation with specific use cases in the banking, insurance and sales brokerage industry. We will see how automation and approval processes can effectively enhance your productivity. We will look into the setup patterns to make sure that you are automation and digitization will reduce any type of friction. We will debunk the known and unknown apprehension in this digitalization process.

The digital tools can be connected to InvestGlass CRM.

automation, Digital onboarding, fintech, KYC

blue and yellow star flag

What is the 6th Anti-Money Laundering Directive?

Wow 5MLD was nearly done and now as the EU announced a sixth directive. EU money laundering directive is more sophisticated and extend criminal liability. We summarise here the five key elements. The new 6AMLD is due to be transposed into regulated entities and national law by December 2020. The 6AML will apply to crypto too.

In the past years we have seen successive money laundering scandals on European soil where judicial supervision had troubles chasing tax crimes. 6AMLD is needed to provide greater clarity and harmonisation across EU member states and link it to UK legislation too. 6AMLD, as a new money laundering directive will also serve to increase member states’ obligations when it comes to making reports.

What are AML or requirements?

1. Dual criminality for specified offenses & greater co-operation

European member states’ competent authorities will highlight six offenses in an organized crime group and racketeering, terrorism, human trafficking and migrant smuggling, sexual exploitation, illicit trafficking in narcotics and psychotropic substances, and corruption. This will include cybercrime-related sources.

2. Harmonisation of money laundering offenses

The new 6AMLD lists 22 specific predicate offenses, which are particular criminal activities that serve to enable more serious crimes. With the introduction of 6AMLD, there is now a single definition of predicate offenses across all EU member states. To combat money laundering firms will have to collect corporate information digitally. Asking for financial proceeds and potential money laundering activity information is always a challenge for banks and asset managers. Regulated bodies of course are trying their best to prevent criminal prosecution but it’s difficult to get the real info. Perhaps gamified and financial incentives could convince potential corporate offenders to play the game!

European Union money laundering offences and criminal penalties

  • Corruption and tax crimes relating
  • Counterfeiting and piracy of products
  • Counterfeiting currency
  • Environmental crime…
  • Extortion
  • Forgery
  • Fraud in domestic legislation
  • Human trafficking and migrant smuggling
  • Illegal arms trafficking
  • Illicit trafficking in narcotics and psychotropic substances
  • Insider trading and market manipulation and public funding
  • Kidnapping and hostage-taking
  • Murder and grievous bodily harm
  • Participating in an organized crime group or racketeering
  • Piracy
  • Robbery and theft
  • Sexual exploitation
  • Smuggling
  • Tax crime relating to both direct and indirect taxes
  • Trafficking in stolen goods

Tracking – email marketing tools will be mandatory to ask more questions to prospects and clients.

The biggest change is the extension of criminal liability to legal persons for example companies. EU members state will enforce sanctions that may range from a temporary ban through to permanent closure. Consequently, individuals in key positions can also be held accountable for failings, such as inadequate supervision, control, or oversight which results in money laundering and face additional sanctions.

Cessation of funds is an example in the EU directive of sanction. The directive stipulates to end business relations with any bank or financial institution who will have willfully failed to apply due diligence in their publicly available policies for preventing money laundering or terrorist financing.

Essentially, it means is that the burden of proof now lies with the legal person to demonstrate that they took sufficient steps to prevent money laundering from taking place.

With this COVID19 and debt situation, we can also imagine that EU member state will create centralize legal proceedings database to facilitate anti-money laundering data and enforce tougher punishments.

4. A tougher punishment regime for criminal offence

These increased sanctions are in line with the ECAF ( European Council Anti-Money Laundering) recommendations from December 2017. They also fit into the new EU AML Directive which is set to come into effect this month, June 2018.

5. Additional offences such as aiding financial crime

6AMLD broadens the scope of money laundering offences. As a result of the above measures the European Commission has adopted a package of rules to criminalise money laundering and terrorist financing. The regulations implement, in principle, the existing directive by extending its scope to cover all activities which could raise concerns over their criminal purpose and increasing the maximum penalty for money laundering and terrorist financing offences from 1 to 10 years.

6AMLD contains far fewer changes than 5MLD. It requires businesses to be a lot more proactive and more cooperative with financial sector. The new regulation is upgrading existing legislation.

blue and yellow star flag

Obviously, the extension of criminal liability to companies and business leaders alike makes it imperative that compliance gaps are identified and rectified fast. AML regulation is always a big topic for companies and banks as they have little flexibility on the CRM and KYC tools.

We are happy to help with InvestGlass as we are cooperating with financial institutions to tackle money laundering through systematic CRM automation for legal purposes.

Fintech Automation for Remediation is key to regulatory burden and the solution for regulated businesses

Financial institutions can now leverage pre-built templates with InvestGlass solution and connected tools such as Polixis ARDIS or Onfido directly connected to InvestGlass CRM. The bundle offers a ready-made tool to cope with 6th anti-money laundering directive for automated remediation. Further AML regulation will come and with the open – stack you will have the flexibility to extend to new directive’s measures.

5aml, 6aml, automation, finech, KYC, money laundering

passport

How to automate KYC verification? Automate and develop your game!

What is KYC?

Know your customer – KYC – is a regulatory requirement and standard in banks and the financial services industry in general. It represents a customer onboarding process that an institution needs to fulfill according to KYC and AML regulations. KYC includes customer identification, verifying financial crimes and AML lists, and clients’ knowledge and risk tolerance assessment. Gathering customer information has two goals. The first one is to protect the financial institution by proving customers’ identity and informing them about which investment and risk profile the client correlates with, allowing the advisors to correctly serve the client. The second purpose is to protect the client by providing the necessary knowledge and limiting clients’ responsibility via due diligence. 

All institutions need to comply with KYC identity checks and money laundering and terrorist financing lists checks as important fines and penalties are ruled against banks and institutions that neglect their customer identification program and KYC compliance. Indeed, besides the huge penalty costs, the impact of such events on reputation and trust is not directly measurable.

What is a KYC process? 

How can financial institutions, banks, and other businesses perform a complete and compliant KYC process during the account opening and customer onboarding? The KYC process can be simplified into 5 steps enhancing compliance and avoiding fraud:

  1. Collect information
  2. Check documents
  3. Validate information
  4. Start remediation
  5. Approval processes

1 – Collect information

The collection of information regroups two main events. 

First, you should collect personal information and data on the customer activities. This can be done via a personal meeting, forms, or digital forms. The goal is to receive enough information to be able to identify the prospect personally and without a doubt. This includes manual entry of personal data as well as uploading files such as ID, passport, proof of residence, debit/credit card, and corporation documents. Yet, the customer experience and engagement should remain positive and the speed of the process should remain as fast as possible.

Second, especially for account opening, you should inform your prospect and pursue a risk assessment base on a multitude of risk factors. This step is crucial as it protects both the investors and the financial institution. Digital forms and specific questions are usually used to assess the different risk levels and the matching customer risk. 

2 – Check documents

Once the data collection is made, you need to check the identity of the customers and the validity of their documents. In order to compare the data, Artificial Intelligence should extract the data from the documents (ID, passport, debit/credit card, proof of residence, corporation documents, etc.) and double-cross it against the information manually entered. This comparison check is a basic, yet useful, pre-verification.

Another due diligence is to process the identity verification via video identification or digital signatures. Specialists in the fields will ask you to take real-life pictures to guarantee the truthfulness of your identity. Digital Signatures also enhance your security by demanding a 2-factor authentication.

3 – Validate information

The third step is typically when the KYC process checks the customers’ links to AML – anti-money laundering – list, and other mandatory regulated lists. Regulators in all countries are considering this step closely when assessing banks’ and companies’ customer due diligence.

For example, in the United States, since 2001 and the Patriot Act, neglecting checks on potential terrorist funding is extremely problematic for financial companies.

4 – Start remediation

The remediation is a core stage of the KYC process. It automates checking your customers’ data and updating outdated information. The remediation can be based on specific events, such as address change, nationality change, and becoming 18 years old, or on periodic reviews (quarterly, monthly, …).

Remediation embodies sending to your clients’ similar forms or questions as in the first step, in order to check and update the information. The best CRMs and KYC automation can automate these procedures.

5 – Approval processes

Last but not least, once all information is entered and recorded, companies need to be able to accept or reject customers base on their answers, identity verification, and name check. Banking institutions usually use solutions that provide approval processes for account opening and customer onboarding.

Where does InvestGlass come into play?

InvestGlass, as an all-in-one CRM, possesses solutions ranging from PMS to OMS. We also possess best in class KYC digital forms and onboarding process coupled with an automation feature. Use pre-built onboarding forms to collect data via emails or the client portal. With the DM profiler forms, you can define your customers’ investment profile and tailor investment propositions accordingly. 

Besides a complete onboarding feature, we also provide the remediation and approval processes build in-house. Automatic remediation can be launch from the audit trail depending on specific events or periodically. The approval process is also customizable as well as the logic for approval. For specific identity verification and customers’ name checks, we integrate our partners’ solutions.

How to automate customer due diligence and anti-money laundering checks?

Indeed, for part of the second stage and the third one, InvestGlass connects with Regtech partners to provide seamless integration and complete KYC compliance. We also connect with fintech companies providing additional depth.

For additional insights during the onboarding process, Neuroprofiler provides you with the ESG preferences of your customers via behavioral analysis of a gamified process.

For ID verification, Onfido and Lexis Nexis produce complete software with video and ID analysis, confirming or disconfirming identity.

For name checks, Polixis integrate a report on the money laundering risks of each customer and their relation to any financial crime or terrorism financing.

Besides, combining KYC and cryptocurrencies is possible using software like Scorechain that checks in a comprehensive database of 700+ VASPs to assess the credibility of counterparts, assess and edit Risk-AML Scoring for extra due diligence.

Additional advice for financial institutions

KYC regulations are usually cumbersome and complex. Therefore a complete knowledge and understanding of these laws are necessary to conduct your business. Much of this risk can be mitigated using a solution like InvestGlass to automate your KYC and remediation.

Additional care should be direct towards your business relationship and your service providers depending on how interconnected your business relationship is. A bank combining different third-party solutions might face charges if one relationship is not KYC compliant. Be aware of your country’s specific compliance requirements, and use InvestGlass to automate your KYC remediation!

Start your free trial of InvestGlass today!

KYC, KYC process


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