The role of AI and RegTech in enhancing perpetual KYC practices

The role of AI and RegTech in enhancing perpetual KYC practices

In the latest episode of the Fenergo FinTalks podcast, host Dhanum Nursigadoo engages in a thought-provoking conversation with Rory Doyle, Fenergo’s Head of Financial Crime Policy. The focus of this discussion is on a key term in AML compliance: perpetual KYC (pKYC).

Doyle notes that Financial Institutions (FIs) are adept at transaction monitoring and customer onboarding, activities deeply ingrained in their operations. However, they show less confidence in KYC reviews, often hesitating to deviate from traditional practices. Traditionally, KYC reviews are scheduled periodically, based on a client’s risk level assessed during onboarding. pKYC offers a contrasting approach, either replacing or complementing the chronological or trigger-based review cycles, where reviews are prompted by changes in a client’s transaction behavior or risk profile.

The question posed is whether pKYC is the best practice for AML compliance in banks. Doyle discusses how advancements in technology, like AI and automation, can aid compliance teams in achieving effective, ongoing risk monitoring.

A major challenge in compliance today, as highlighted by Doyle, is the issue of resources. He reflects on the impact of geopolitical events, like the Ukraine invasion in 2022, on pKYC and review processes. Compliance teams need to be quick and reactive to new risks, which cannot always be addressed in trigger-based reviews without exposing banks to financial crime risks, such as sanctions breaches.

Doyle also points out the scarcity of fincrime professionals and the constant struggle against time and resources to address all necessary tasks.

The podcast provides valuable insights into several key areas:

  • The distinction between perpetual KYC/ongoing monitoring and traditional KYC review cycles.
  • The challenge in implementing pKYC due to a lack of clear regulatory guidance.
  • The tendency of banks to mimic their peers’ compliance practices and the implications of this approach.
  • The struggle for compliance teams in balancing onboarding and ongoing review responsibilities, along with increasing KYC review backlogs.
  • How RegTech tools like Fenergo can automate ongoing reviews and prioritize high-risk clients.
  • The potential future role of AI in improving review accuracy, efficiency, and risk detection.

This episode is a must-listen for anyone interested in understanding the complexities and evolving practices in AML compliance.

Listen to the podcast here.

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