Let In the Good, Keep Out the Bad: A Guide to Customer Screening

Let In the Good, Keep Out the Bad: A Guide to Customer Screening

The most straightforward way to prevent financial criminals from using your bank as a vessel for conducting their illegal activities is to prevent them from accessing your products and services in the first place. This is why many financial institutions choose to work with anti-money laundering (AML) and financial crime and compliance (FCC) solutions that make use of exemplary know your customer (KYC) and customer due diligence (CDD) programs. By conducting a stringent customer screening process prior to onboarding, your bank is able to reduce the cost of compliance and accurately appraise the level of risk that each new customer brings into your bank.

Coming up with an effective customer screening process, however, is easier said than done. One of the most convenient ways to go about it would be to get the services of a third-party provider that has a track record of supplying financial institutions with effective KYC and CDD programs, but even these services require customization so that they can effectively contribute to meeting your organization’s compliance goals. Then, there’s the challenge of balancing thoroughness and timeliness. If you leave prospective and existing clients in the screening pipeline for too long, then there’s a good chance that they’ll try to find another establishment that offers the same financial products and is capable of meeting their schedules.

Quick and Effective Customer Screening Process Aided by Modern Solutions

How can your financial institution comply with the rigorous rules set by regulatory bodies without sacrificing customer experience? The key is getting a modern customer screening solution that’s designed to do both. The newest KYC and CDD solutions in the market can carry out the following screening requirements in a short amount of time:

Identify clusters that present the highest level of threat. To expedite the screening process, banks can group applicants first, then prioritize screening demographics that present the highest level of threat to the organization. This will enable the bank to subject more high-risk groups to a more stringent screening process without putting less risky customers through excessive scrutiny.

Prepare the data that will be used as the basis for screening. The data sets against which the customers will be screened should come from a wide variety of reliable sources, and as such, they will likely come in different file types, formats, and even scripts. Preparing the data by standardizing formatting and correcting inconsistencies will help speed up the screening process and improve its level of accuracy.

Make use of exact and inexact matching. On top of exact matching, inexact matching through the use of algorithms should also be done to catch possible misspellings and inconsistencies in the customer’s information. Doing so allows banks to identify obscured similarities, if any, between a prospective customer and the entities that have been sanctioned by regulatory bodies.

Customize workflows and rules to determine matches. Financial organizations have different goals, and their screening workflows should be customizable enough to meet their particular compliance challenges. At the same time, the processes and rules that banks use to evaluate their prospective and existing customers can change drastically over a given period. A customizable screening system allows banks to easily modify their screening rules and processes depending on their needs and the changing requirements of the agencies that govern their operations. 

Reduce false positive matches. False-positive matches will require further evaluation and thus take up more of the bank’s resources for no extra gain. To cut down unnecessary costs, it’s essential to improve the accuracy of the screening system and whittle down the number of false-positive results. This way, the bank can focus its efforts on analyzing entities that present genuine risks to the organization.

Eliminate repetitive work. Modern customer KYC and CDD solutions should not only compare data; these programs should also remember the rules that the reviewer has set during the course of the screening and checking process. If the reviewer has decided to clear a particular connection or similarity between two entities, for example, then the system should not bring up that match unless there’s a change in the data. 

Scale with the business. Financial institutions come in all sizes, and it’s not unheard of for banks to experience phenomenal growth in a short span of time. Modern KYC and CDD solutions should be able to keep up with the growing demand for a bank’s business without sacrificing accuracy and timeliness. 

When choosing an effective KYC and CDD solution, it’s imperative to consider whether or not your options are compatible with the legacy systems that your company is still using. Remember that existing clients should be screened throughout the customer lifecycle, and using modern customer screening processes to do this would be quite a conundrum if the two systems are not capable of meeting each other halfway. Fortunately, the biggest AML and FCC solutions providers in the market understand that financial institutions go through the digitalization process in different ways. As such, it’s not too difficult to find customer screening options that can be integrated into legacy systems as a modular component while also working seamlessly within a fully digitalized AML and FCC system.