$11 billion is an almost unimaginable amount of money to owe, it’s probably even more upsetting a number if you owe it due to KYC fines. Yet that’s exactly what happened to financial institutions globally in 2020.
Have an efficient compliance system
It’s an obvious suggestion, but most of these fines were associated with financial institutions that did not invest properly in compliance. Commerzbank was given a $50 million fine for KYC failures; the London branch of the German bank had not conducted sufficient KYC checks for years. The bank had chosen to ignore warnings from the FCA since 2012, resulting in a well-deserved fine.
As of 2017, Commerzbank’s London branch had only three people conducting Anti-Money Laundering (AML) checks, of which KYC is an integral part. Had the bank invested in compliance with a properly staffed compliance team it may have been able to avoid the fine.
But your team is only as good as the tools you give them. Your customer onboarding journey is not only a place to quickly bring customers onto your platform so they can use your products.
The journey is where you can conduct KYC checks to meet your compliance obligations and make sure that your potential customers are right for your business. Your KYC checks should be configured properly to account for your customer needs but also to make sure they’re compliant customers as swiftly as they give you their information.
It also helps if you have a compliance team of more than three people. Luckily, if you use HooYu then you have access to a huge team of Identity Verification Analysts who can assist with checking documents and verifying customers.
Don’t get hit with scandals to avoid KYC fines
This one is easier said than done. Deutsche Bank was fined $150 million and suffered reputational damage thanks to its relationship with convicted sex offender and financier Jeffrey Epstein, who took his life while awaiting trial for human trafficking charges.
Deutsche Bank had ignored Epstein’s publicised criminal history according to US regulators. Presumably this was done for access to his significant wealth and network, but this also is a prime reason why compliance should be built into the customer onboarding process at all levels.
Despite the wealth potential that Epstein represented to Deutsche they ended up losing out by having to pay such a significant fine. And that’s not to mention that the bank has suffered several losses in the preceding years, having paid out over $18 billion to various offences since 2000.
Of course, the bank wasn’t purposefully trying to get involved in scandal. But by allowing compliance process to be ignored it was a foregone conclusion. Integrate compliance into every stage of your customer’s interactions with your product and you won’t need to suffer regulatory penalties.
How to improve your compliance
Fines cannot be approached as a cost-benefit analysis. It appears that regulators are increasing their fines on a yearly basis and any profit from ignoring compliance demands are being outstripped by the fines when businesses are caught out.
Your business needs to integrate compliance with the customer onboarding journey in a way that makes it as low impact as possible on the customer while still meeting compliance demands.
You can do this with HooYu, let us show you how.
