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Is KYC Automation a Must for CIOs to Consider?

Capital Markets CIO Outlook | Wednesday, September 16, 2020

Automation could be the key to improving and streamlining the KYC in capital market firms.

FREMONT, CA: The immense value of Know Your Customer (KYC) in safeguarding capital market firms is well-known. Risks associated with intermediaries and clients are evolving along with the global expansion of markets and increasing volumes of trade. To keep the vulnerabilities from impacting their companies, CIOs in capital market firms must be prepared to make risk management more reliable by automating KYC. The traditional approach to KYC involves manual evaluation of client information by leveraging the vast amounts of unstructured data available with the firms. With automation, the time required for processing KYC applications and the dependence on manual analysts can both be reduced, creating opportunities for better efficiency and accuracy. Here are a few automation-related insights that can empower CIOs to understand tech-driven KYC.

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• Meeting Security Challenges

There are several ways in which capital market firms, investment banks, and asset management companies can safeguard themselves from frauds. Though KYC has proved useful in helping companies mitigate risks, the process in itself has proved complicated and time-consuming. In a bid to improve KYC, companies can adopt automation. Automation makes it easier for firms to regulate and implement KYC, thereby enabling companies to meet security challenges more effectively. The number of regulations has increased steadily, and many of them make KYC mandatory to protect the interest of stakeholders, traders, and trading firms. Non-adherence to these norms is not an option since it invites penalties and harms reputation. Automation-backed solutions can guarantee KYC compliance by means of advanced features like auditing, alerting, and reporting.

• Streamlining Data and Deriving Insights

KYC involves the aggregation of customer data for identity authentication. Digitalization has given rise to several internal and external sources of data that can be leveraged to make KYC better. When done manually, it is difficult to acquire data and process it to generate information. With automation, the process of accumulating data from disparate sources becomes easier. Coupled with artificial intelligence, technology-backed solutions can quickly derive useful insights from data and identify metrics to classify customers based on KYC-related parameters. Technology has advanced to levels where capital market firms can depend on computers to generate contextual information and drive end-to-end automation of KYC.

• Enhancing Investor Experience with Hassle-Free On-boarding

Although the process of KYC is essential to ensure safety against frauds and compliance with regulations, it must not impact investor experience. However, the delay that is caused due to time-taking, manual KYC processes often acts as an irritant. The on-boarding process also becomes slow as a consequence of KYC requirements. Automating KYC can help capital market firms to overcome this challenge. Automation makes KYC verifications faster with the help of streamlined checks that generate reports in no time. Every attribute related to an investor can be checked and background information sourced and processed to build risk reports. Thereafter, analysts can go through the documents to facilitate KYC.

KYC regulations have become stringent while trading and communications have become faster, owing to the better network and system architecture. To comply with KYC while not disturbing the other variables, it is essential that CIOs in capital market firms adopt automated KYC that enhances screening, and optimizes risk management while making sure that investors don't face friction in dealing with their firms.

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