Financial digitalisation is advancing at lightning speed.
According to a 2021 report by research firm BAI, Gen Z and millennials now prefer to open deposit accounts via mobile technologies, while even older Gen Xers’ desire to open accounts digitally is steadily rising.
As a direct result, banks are closing branches faster than ever, with customers increasingly being onboarded by digital technologies. This has not gone unnoticed by criminals who are now actively seeking ways to exploit these new tools to launder their illicit proceeds.
While banks need far more flexible technology and structures to cater for this trend, it is crucial that they have the onboarding tools and processes that comply with the latest regulatory changes.
Failure to comply can result in huge fines for anti-money laundering and terrorist financing (AML/CTF) breaches, not to mention damage to a bank’s standing and reputation.
The implementation of technology is now an imperative
The Financial Action Task Force (FATF) has several ongoing projects aiming to improve use of technology for compliance, including in digital onboarding.
In its 2021 paper opportunities and challenges of new AML/CTF technologies, the FATF said advances in customer due diligence (CDD) tools and application programming interfaces (API) can support onboarding processes – making them faster, cheaper and more effective.
Onboarding tools that allow for fast CDD and client traits analysis – such as geolocation and credit checks – could enrich compliance processes and improve understanding of the nature and impact of business relationships.
Better use of client screening and matching technologies can significantly improve compliance, as reliance on outdated and regionally irrelevant sanctions, PEP and other lists are areas needing improvement, said the taskforce.
The FATF added that more accurate identification, monitoring, recording and information sharing could boost crime-fighting efforts, which are behind the curve in some firms. One obstacle is the low awareness of and limited expertise of these technologies among AML professionals.
What the EBA’s new guidelines entail
The EBA’s guidelines set out the ways credit and financial institutions should use remote customer onboarding in order to comply with legislation such as the Anti-Money Laundering Directives (AMLD).
The new guidelines establish common EU standards, for example, in choosing, implementing and monitoring onboarding tools. The guidelines will come into force six months after their publication in all EU languages on the EBA website.
While they apply to standard remote customer onboarding journeys, institutions may adjust elements around the nature and type of verification data and documentation using a simplified, risk-based approach.
Compliance officers should ensure remote customer onboarding policies and procedures are implemented effectively, reviewed regularly, and amended when necessary.
Compliance professionals should ensure that they:
- Oversee correct implementation of remote onboarding tools
- Assess any new tools before implementing them
- Record assessment methods and outcomes, showing appropriateness for your firm’s ML/TF risks
- Ensure you can integrate solutions with your wider internal control system
- Monitor solutions regularly to ensure effective operation
- Have processes for remediating any risks or errors
- Determine the information and processes you need to identify remote customers compliantly and reliably; and apply controls to manage any risks, such as obfuscation of device location
- Define which legal entity categories you will onboard remotely, accounting for the ML/TF risk of each, and identify any human intervention required to validate ID
- Obtain information on the purpose and nature of business relationships before onboarding completes; and understand ML/TF risks in the relationship.
The EBA guidelines also contain detailed stipulations around document authenticity and integrity; and how to handle financial inclusion and weaker or non-traditional forms of ID.
There are also sections on matching customer identity, verification, biometric data, and onboarding complex client structures.
How RiskScreen can ensure you maintain compliance when onboarding remotely
RiskScreen’s award-winning platform supports a world-leading onboarding solution that offers the flexibility to verify the details of a single individual right through to the most complex client structures.
One of the key elements of the RiskScreen onboarding solution is its electronic verification (eIDV) technology that empowers you to register, verify and screen new customers – accurately and securely – no matter where they are located. Its integrated functionality enables you to onboard individuals and entities as part of a seamless process that incorporates risk rating, screening, and advanced workflow.
Whatever your requirements, our solution delivers frictionless onboarding, improved customer experience, and remote fulfilment of all compliance requirements. Furthermore, this intelligent solution provides reporting at every stage, while automatically highlighting red flags and exceptions.
Organisations across the globe use our solution to remotely onboard individuals and entities which uses the world’s best data sources to screen for sanctions, politically exposed persons (PEPs), watch lists, and adverse media.
To discover how RiskScreen can help you meet the EBA’s new guidelines and ensure you remain compliant at all times, request a discovery call today.
