State of Financial Crime 2023 Report

AML Compliance Without Compromising Onboarding Experience

AML Compliance Knowledge & Training

How Fintechs Can Comply With eKYC and AML Laws (Without Compromising the Onboarding Experience)

AML without compromising onboardingOn the surface, there seems to be tension between Anti-Money Laundering (AML) compliance and user experience. Compliance is often seen as a tedious process—the opposite of the speed and seamlessness that people have come to expect from digital platforms. But fintech players recommend viewing this disconnect as “friendly friction” instead. 

By considering user experience, a firm is motivated to improve not just the speed of onboarding, but also the accuracy of their customer due diligence results. And by improving compliance, fintechs can assure customers that their data and assets are safe, giving them peace of mind as they use the platform.

Besides, compliance with AML and Combating the Financing of Terrorism (CFT) laws isn’t a “nice to have”. Fintechs are receiving increased scrutiny from regulators, and with good reason. The ease of use of fintech platforms—along with their relatively lower barriers to entry and focus on financial inclusion—makes them vulnerable to exploitation by financial criminals.

Here are ways to achieve AML/CFT compliance without compromising the onboarding experience. 

Make it as Painless as Possible for Customers to Give You Their Information

This ease of user experience is especially important for extended onboarding processes, such as those that require enhanced due diligence. Requiring the customer to submit more documents or to establish the source of their funds or wealth adds another step to the onboarding process and raises the barrier to entry—and therefore increases the chances of the user dropping out.

To make this process less painful for the customer, try to keep it all within the platform. For instance, the customer can upload documents on the platform or do a video call within your app, instead of having to email you or wait for you to schedule a video call using a different chat tool. 

Adopt Automated and Targeted Screening

Use big data algorithms and machine learning to automate the process of screening for sanctions, watchlists, PEP status, and adverse media. This helps you save a tremendous amount of time during onboarding. 

Make sure your screening tool can perform monitoring in real-time, too. For example, it should be alerted when a person is removed from or added to a watchlist, as this will help determine the person’s risk level more accurately. Similarly, adverse media—not just from major publications, but also local news sources—can affect a customer’s risk level within minutes. Major events like elections can also trigger PEP and RCA (Relatives and Close Associates) status changes.

The key here is to perform real-time monitoring of a variety of trustworthy sources—a tedious, time-consuming task that smart automated systems can perform. For example, during the 2020 general election in Singapore, ComplyAdvantage was able to update PEP and RCA lists in record time after the election results appeared on the Singapore Parliament site.

Manually performing this process consumes significant time, effort, and money. Automation, however, reaps concrete rewards. As part of its digital proposition, Santander, a European bank, cut onboarding time from 12 days to two by using ComplyAdvantage’s automated adverse media screening tool.

More accurate screening and monitoring can improve not just the speed, but also the quality of onboarding. By maintaining up-to-date and accurate information, fintechs can control their hit rate, avoid being overwhelmed by false positives, and reduce onboarding errors and man-hours.

Curve, a banking platform, reduced hit rates from 3.5% in January 2019 to 0.91% by January 2020 with the use of ComplyAdvantage’s automated AML screening and ongoing monitoring tool. As a result, they were able to speed up their onboarding process, which was crucial to allowing the company to grow its customer base.

Contextualize According to Each Market

It’s crucial to contextualize your AML compliance processes according to each market. As more fintechs aspire to grow their operations regionally, they need to keep an eye out for customers who come from jurisdictions with inadequate AML/CFT standards. Some countries also present a higher risk due to factors such as the prevalence of corruption, a low level of press freedom, or reliance on certain industries, such as the mining of gems. 

You can make onboarding faster by configuring your eKYC and screening tools to account for different markets. For example, you could add a parameter country code for PEPs in your automated screening tool.

You should also consider country-specific regulations that affect your onboarding process. For example, in May 2020, the Australian Transaction Reports and Analysis Centre (AUSTRAC) announced a change to the country’s AML/CTF customer ID and verification rule in order to help victims of domestic violence access bank accounts. Under the new rule, bank staff may use alternative identity verification methods for said victims.

Embrace the “Friendly Friction”

AML/CFT compliance doesn’t have to be at odds with positive user experience. In fact, by enhancing the onboarding experience, you make it easier for customers to provide proof of their identities and explain possible risk factors.

Automating the onboarding process can reduce administrative burden and improve customer service. It also allows fintechs to save time and money even while growing their customer base. 

AML Compliance and Good Onboarding Experience?

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Originally published August 7, 2020, updated November 15, 2022

Disclaimer: This is for general information only. The information presented does not constitute legal advice. ComplyAdvantage accepts no responsibility for any information contained herein and disclaims and excludes any liability in respect of the contents or for action taken based on this information.

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