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Innovation in KYC: 5 tools for strategic advantage

Innovation in KYC goes beyond just controlling costs. With the help of technologies such as AI, blockchain and PermID, we look at five ways that compliance teams can secure competitive advantage.


  1. Innovation in KYC can help to deliver lower costs, streamlined operations and a better client experience.

  2. Blockchain has several potential advantages, including the immutability of records, enhanced privacy and a shared ledger.
  3. The right technology can free compliance professionals from performing tasks that are often low value, repetitive or overly time consuming.

KYC has always been a costly business, with financial institutions (FIs) spending on average US$150 million a year on KYC. Some of the largest banks reportedly spend up to $370 million, excluding remediation spending, which can drive the figure up to $670 million.

Innovation in KYC has, however, been prolific and has spawned a plethora of new partnerships that are successfully leveraging emerging technologies to transform KYC from a straight cost to a strategic differentiator.

KYC and the fight against financial crime

Financial crime affects millions of organizations across the globe. Research commissioned by Refinitiv in early 2018 revealed that 47 percent of those surveyed had fallen victim to some form of financial crime during the year preceding the survey.

Respondents also estimated that they spent an average of 3.1 percent of annual turnover trying to prevent financial crime in their global operations during the same year, but nevertheless significant gaps in formal compliance procedures were evident.

For example, 41 percent of respondents have never screened third-party vendors, suppliers or partners. Just 36 percent are screened on an ongoing basis.

Robust due diligence remains the best defense against financial crime, and therefore plugging these gaps in compliance is crucial if organizations are to fully understand the risk landscape in which they operate.

This is no easy task, given the vast volumes of available data that must be analyzed on a continual basis.

Compliance departments often find themselves stretched as they constantly need to sift through significant amounts of web and print content, breaking news and unfolding information that may or may not be relevant to an individual client. The result: inefficiency and rising costs.

Watch video: KYC innovation

Technologies to transform KYC

Emerging technologies have many practical applications that can offer immediate impact to stretched compliance teams by reducing uncertainty, increasing flexibility and stemming the tide of rising costs.

Ongoing innovation in KYC has led to new solutions to the most common pain points encountered when fulfilling KYC and onboarding obligations.

These include innovative applications that simplify and accelerate customer and third party risk due diligence processes that help comply with KYC and Anti-Money Laundering (AML) regulations faster and more efficiently.

Watch video: World-Check Customer Risk Screener Salesforce partnership demo

Here are five examples of such innovation, where emerging technology is applied in the KYC space:

  1. Artificial intelligence (AI) and machine learning to unlock value in volumes of content

When assessing vast international third-party networks, it is necessary to connect all relevant data and build a comprehensive, 360-degree view of risk. Ways that machine learning and/or AI can be applied in this space include:

  • Intelligent tagging of people, places, facts and events across millions of documents at speed to create enriched content that can be searched with ease and precision.
  • Information deduplication to identify and cluster duplicate or similar content.
  • Identification of entity to risk relationship mapping — creating a link between a specified entity and any potential risk.
  • Event based deduplication to separate content into event clusters, allowing users to focus only on the combination of the entity and event they are interested in.
  1. The use of permanent identifiers

A permanent identifier, such as Refinitiv’s Perm ID, is a machine readable, unique identifier allocated to every piece of information, individual, entity and transaction that enables clear mapping of data across content sets.

  1. Cloud-based API technology

This technology has the power to deliver industry leading data and intelligence directly to in-house compliance workflow systems to help compliance professionals make informed decisions about risk.

  1. Blockchain

Blockchain has several inherent characteristics that make it a theoretically advantageous technology to leverage in the KYC space. These include the immutability of records, enhanced privacy, a shared ledger (which improves access to accurate information across the industry) and greater transparency.

Conceptually, blockchain provides the perfect platform to deliver an automated, secure, trustworthy KYC solution that improves the client experience, streamlines operational processes and enhances regulatory compliance.

  1. Digital identity solutions

These combine advanced algorithms with proprietary and third-party data to deliver confidence flags that can increase the likelihood of completing successful transactions, decrease fraud and enable retail onboarding.

Of course, technology is no substitute for human ability, which brings nuance, ethics and judgement to the table, but advances in technology provide valuable new tools to enable skilled professionals to assess risk more quickly and more intelligently.

Benefits of innovation in KYC

The result of this recent and ongoing innovation is that KYC has undergone a complete metamorphosis and should no longer be viewed as simply a cost that organizations have to bear.

Robust KYC is crucial to identifying risk as early as possible, but more than this, it has become a strategic tool that can deliver a competitive advantage.

The right technology can free compliance professionals from performing tasks that are often low value, repetitive or overly time-consuming so that they can concentrate on higher value-add tasks.

By harnessing the power of emerging technologies, organizations can ensure that their KYC procedures deliver a host of benefits in the form of lower costs, streamlined operations and, ultimately, a better client experience.

Discover more about innovation in Know Your Customer