Step-by-Step Guide to Automating Client Onboarding and KYC checks
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Step-by-Step Guide to Automating Client Onboarding and KYC checks

All businesses engaged in online financial interactions with their customers have to comply with external regulations to avoid paying non-compliance fees and fines. Know Your Customer or KYC is a crucial part of the Customer Due Diligence (CDD) check every fintech, online gambling, booking, or dating business must perform before onboarding a new customer — and repeat regularly throughout the whole contract term. This article explains the benefits of automated client onboarding and KYC checks to ensure regulatory anti-money laundering (AML) compliance and avoid fines.

What is the business value and meaning of KYC?

Let’s start with the KYC definition:

KYC processes is an umbrella term for all the data gathering workflows and checks a business must perform before onboarding a new customer to guarantee you know whom you are dealing with and you have properly assessed all the risks involved. 

KYC verification helps ensure your customer is not under sanctions or is not on the Politically Exposed Persons (PEP) list, so having business with them will not cause damage to your company. Most importantly, regular and automated KYC procedures help mitigate risks and prevent various types of fraud: account takeover, card-not-present fraud, friendly and affiliate fraud, merchant fraud, bot attacks, synthetic identity theft, etc.

Thus, KYC anti-money laundering assessment should be an integral part of your customer onboarding, and automating this process will lead to increased customer satisfaction while saving precious time and effort for your team. How to do it right then?

Customer onboarding with Covery

Onboarding is the key aspect of partnership with any customer. The goal of this process is to kick off your collaboration on a positive note, help the customer get value out of your products and services faster and bolster their confidence in the correctness of the choice made. Otherwise, they might experience the customer’s remorse, regret the decision to work with you, and end their partnership in the very beginning. How to avoid such an outcome and ensure positive customer onboarding results?

First of all, your customer onboarding does not start when a new prospect agrees to talk to you and becomes a lead. It starts when a lead signs a contract and pays for your products or services. Therefore, with fintech and other online companies, the initial KYC procedure must happen at the point of user account registration. You can enable this in two ways only:

  1. Manual KYC, where the customer submits all the legally required details and has to wait while your risk management analysts check their validity through various databases and PEP lists, which can take quite some time.
  2. Automated KYC, where all anti-money laundering KYC checks are done in the background by an anti-fraud platform you use, like Covery. This way, the process is done in under one second.

Most importantly, to ensure regulatory compliance, such checks should be performed from time to time for existing customers too, ideally — every time they log into your system. Doing this manually is literally impossible, and in such a heavily regulated industry like fintech, you risk suffering significant noncompliance fines if your business comes under scrutiny from the external regulator. Thus, using automated KYC checks with tools like Covery is the best choice.

Covery KYC flow

What is the KYC workflow with Covery?

  1. User account registration. Covery uses the device fingerprinting technology to start forming the user profile and ensure the user meets the restrictions by the country of registration and others. The checks are done against more than 300, 000 000 reputation records of devices, phone numbers, email and IP addresses, etc. — the Trustchain methodology.

    This prevents synthetic identity theft, bot attacks, phishing and affiliate fraud.
  2. Bank account opening or connecting. If you are a licensed Electronic Money Institution, you can open IBAN accounts. If you are not — your customers have to connect their existing bank accounts to be able to perform financial interactions with your company. Doing so enables a wide range of fraudulent activities, from synthetic identity theft, spoofing and social engineering to users from PEP lists, people under sanctions and other undesirable user categories.

    Thus, this step requires the most diligent KYC procedure:
    – fake image detection
    – anti-spoofing checks
    – automated data collection from documents
    – checks against worldwide PEP/RCA/SAN sanctions lists

    Due to direct integration with Dow Jones databases, Covery performs all these checks in under 1 second.
  3. User login. Ongoing KYC procedures must be performed during every user login, as the PEP and other watchlists are updated daily. Besides, using signing up from a new device or acting not as usual might be a sign of account takeover, phishing or other fraudulent actions,

    Covery monitors this by using device fingerprinting technology and user behavioral analysis to issue timely alerts and mitigate risks.
  4. Money transfer. It is no secret fintech operations are often used as a cover-up for payment fraud and money laundering by cyberterrorists. To prevent this, Covery offers сonfigurable limits on size and quantity of transactions per account, recipient checks against more than 300 million reputation records in the Trustchain database, as well as user behavior analysis and recipient checks against PEP/RCA/SAN watchlists.
  5. Card issuing. If your EMI can issue credit/debit cards, you need to perform another round of KYC verifications to prevent payment fraud and synthetic identity theft.
  6. ATM and land-based card operations. Consequently, you need to be able to track your cards at ATMs to prevent lost/stolen card fraud, skimming, payment and merchant fraud, etc. Covery helps achieve this through ongoing user behavior analysis and configurable limits on the size and quantity of operations per user.
  1. Merchant payments processing. If your business allows users to run merchant accounts, you need to track various types of merchant fraud, friendly fraud and payment fraud.

    Covery enables this by recipient checks against Trustchain, using device fingerprinting technology, and providing configurable risk logic scenarios for every merchant group, industry and domain, which work in a defined hierarchy.

Thus, Covery provides an end-to-end user onboarding journey while ensuring regulatory compliance for your business. 

Conclusions

The onboarding success depends largely upon how much effort and attention you dedicate to helping your customers master the functionality of your product to get the most value out of using it. Detailed knowledgebase, friendly support and personalized email/messenger/chat communication make a huge difference here.
However, while doing your best to satisfy the customers, it is crucial to ensure your own safety and compliance with regulatory requirements. Automated KYC procedure performed with Covery helps minimize the transaction monitoring complexity for legitimate customers while safeguarding you from various types of fraud.