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Initial KYC checks
(or know your customer checks) are generally carried out by businesses at the
onboarding stage, in order to verify the identity of a potential customer or
client. For firms in the regulated sector, KYC and KYB checks are a crucial element of AML compliance. They help to assess the level of risk that an individual or business
poses to your company, and should flag any previous involvement with financial
Like KYC checks, pKYC checks (or perpetual know
your customer checks) verify the identity and risk status of a client or
customer. However, while a standard KYC programme might run checks annually, or
every few years after the onboarding stage, perpetual KYC involves the
continual monitoring of an individual or business.
pKYC is a more dynamic process, whereby – after
the initial checks – the status and ID of a client is consistently cross-referenced
with external databases. Rather than taking place at set intervals, perpetual
KYC checks may be triggered in response to a key event relating to the client,
or any other change in business dealings.
This sophisticated system results in an
extremely accurate digital KYC profile for every individual or business, which
is automatically updated whenever necessary. In theory, this technology could
make manual checks, and periodic (or traditional) KYC redundant, but it’s more
likely that a hybrid approach will be implemented by many firms moving forward.
While not yet available on the market, pKYC
promises to be one of the most robust compliance measures ever developed. Adopting
a perpetual KYC process has a whole host of benefits. Here are a few of the key
Ongoing KYC monitoring reduces
the risk of inadvertent involvement in financial crime, as it ensures your
company is informed of any red flags as soon as possible.
Implementing pKYC will also
strengthen your risk-based approach to AML compliance.
This process uses fewer
resources than conventional periodic KYC checks, or manual KYC checks.
Thanks to its automated triggers,
pKYC should also drive down operating costs; it could even reduce the cost of
your compliance effort overall.
Perpetual KYC makes out-of-date
records a thing of the past, so you’ll always have the most recent information
available for your customer or client at your fingertips.
pKYC is still a relatively new concept on the
AML compliance scene, and as so many businesses still rely on archaic methods of
identity verification, switching to perpetual KYC is proving challenging
throughout the industry.
Firstly, an efficient pKYC system can’t take
place in a company which is performing its initial KYC checks via the manual
examination of physical documents. With this in mind, only firms which have
already upgraded to electronic ID verification can also
adopt pKYC, as changes in customer information are impossible to detect from paper
Any organisation looking to implement pKYC will
also need to have an advanced digital record keeping system, informed by both
internal data and external public or paid-for sources.
On top of this, the compliance team of the
business in question will need to establish what type of key events they
consider significant enough to trigger pKYC checks. These could include
seemingly innocuous amendments, like an updated customer address, as well as
more serious alerts, such as a change in sanctions status.
At present, there’s no single pKYC product on
the market, but SmartSearch already offers a range of intelligent automated
software, which performs ongoing monitoring and retrospective checks for both
businesses and individuals. Using reliable global data sources, our tools perpetually
check clients against PEP and sanctions lists. With these services, so you’ll
be alerted to any change in customer status, and prompted to carry out enhanced
due diligence on any clients which are newly classified as high risk.
The implementation of pKYC will take this even
further – as companies will need to integrate information from any number of
public and private databases (like the electoral roll and utility companies)
into their screening processes. This data should enable businesses to identify
any suspicious discrepancies in customer details, and reduce the risk of money
While the SmartSearch platform already covers
several of the key components of pKYC, a more comprehensive pKYC solution is in
development, with a projected launch date in early 2022. With this industry-leading
solution, we should be able to pave the way for firms in the regulated sector
to smoothly transition from periodic KYC to pKYC, and reap all the benefits that
this AML compliance measure has to offer.