Success factors for KYC processes
No one wants to be connected with corruption, money-laundering or the financing of terrorism? All of these result in an irreparable loss of image and trust as well as immense financial damage. These days, KYC (Know Your Customer) is therefore a "must" for private companies – but it can only be successful if the key factors have been taken care of: automated processes and good customer master data.
Necessary, but complex
The problem with KYC is that it does not create any direct added value and at first it only uses up resources. The primary target must therefore be to reduce the necessary costs and to achieve the highest possible level of automation. "No KYC" is also no solution: the risk of becoming a victim of fraud is too great – and this is not so improbable, as many cases in the past have shown.
Automation is only possible with technical support. A well-thought-out system that includes interfaces to the necessary external data sources (e.g. business information agencies as well as sanctions, block and PEP lists) makes it possible, almost at the push of a button, to investigate new and existing business relationships and to process all the necessary information centrally.
And that is the second challenge: which data is available for checking and how good is it?
Nothing works without high-quality master-data
Especially not KYC. On the basis of incomplete or incorrect master data it is, for example, impossible to align your own data with external information reliably or it may even be impossible to obtain further relevant information at all.
The causes of poor data can usually be found in the upstream processes. Manual data compilation opens the door for errors, and media discontinuities make automatic data transfer impossible so that here also manual processing is necessary. In this way, errors also creep in that are not immediately recognizable as such: is the Gernam name "Müller", for example, written with "ü", "u" or with "ue"?
There is also a big problem with redundancy of data. This is especially the case in companies whose system landscape consists of a large number of individual systems that are more or (usually) less connected one with another. And when there is no "leading" system ("single point of truth"), chaos is inevitable: whenever data have to be updated in different systems by different people, mistakes will happen.
The lack of a "single point of truth" will lead to
- incomplete data
- incorrect data
- out-of-date data
- a large time input
Good master data enable secure KYC processes
Well-thought-through software supports companies in carrying out efficient master data processes and establishing secure KYC procedures on this basis.
IT solutions can automate rectification and consolidation processes for master data as far as possible. As leading systems they also ensure data consistency – duplicates and redundancy are things of the past. Compilation, validation, rectification and supplementation of existing information through external data are performed automatically. This is made possible through interfaces to external information agencies and services, which also offer the investigation and presentation of company relationships.
The optimized data that is then obtained forms the basis for the reliable comparison of the data with lists in KYC processes – also fully automated and in a continuous monitoring process. This makes sure that changes to master data are recognized automatically, which can trigger certain processes to stop or to be re-initiated
A flexible master data checking or leading software can easily be embedded into company processes through integration into the relevant peripheral systems. At SCHUMANN we support companies in designing workflows and embedding them in their system architecture. Our expertise makes us a valuable partner and adviser in getting the best out of master data management and KYC.
What is investigated in the KYC process?
KYC (Know Your Customer) is a risk management method for the evaluation of business partners and investments with the aim of protecting one's own company from fraud and criminal activities. The basic aim is to establish with as much certainty as possible with whom you are starting a business relationship and whether they comply with all the legal regulations.
There are various stages in the framework of a KYC check:
- Clear verification of the identity
- Determination of financial beneficiaries, exposure of participation structures
- Elimination of risks through comparison with sanction and PEP lists
Furthermore, in certain cases all the stages of these checks must be verifiably documented. It is also important to continually monitor existing business relationships