Listen to How Banks Can Improve the Customer Screening Process (7 min):
When you think about it, the customer screening process for banks is a lot like a blind date. Banks don’t really know who they're meeting, and the provided picture ID might be as fake as a Photoshopped online dating profile. If banks aren’t careful, they could give money launders a safe haven. And the fallout will be much more serious than the awkward question of who picks up the check. Here’s how banks can enhance customer screening and onboarding workflows and stop criminal enterprises from accessing financial services.
The Trouble with Customer Screening
To better understand why customer screening is so vulnerable, it first helps to delve into the different components of the customer screening process. This process involves checking customers against sanctions lists, politically exposed persons (PEPs), relative or close associate (RCA) status, and for adverse media.
Banks understand that for every 100 customers screened during onboarding, only a small share (one or two) will raise red flags and could be blocked entirely from accessing the bank’s services. But banks could lose revenue from growing their business if legitimate customers experience too much friction during the screening process. For example, it can take between 20 to 90 days to onboard a new client. Banks can lose $25,000 in revenue per client because of these delays. According to recent research, the process can take even longer (up to 120 days) for corporate clients. Meanwhile, a separate study of major global banks found it can take between 24 to 120 clicks for a client to open an account.
Too many false positives after customers are onboarded can also be a headache. By some estimates, 95% of anti-money laundering (AML) system-generated alerts are deemed false positives after their initial review. These false positives cause AML teams to chase false leads – and help criminals remain undetected.
How Banks Can Upgrade Customer Screening Operations
These problems can carry serious consequences for banks. Banks can face significant fines if regulators discover that customers with links to organized crime, terrorism, and other crimes gained a safe haven in their organization. What’s more, a bank’s public reputation is at stake if these revelations are brought to light. The bank can lose customers who do not want to be associated with an FI that does business with criminal organizations or infamous figures.
Avoiding these outcomes begins with addressing the problems that plague a bank’s customer screening process. Here’s what banks can do.
Invest in a Flexible System
The first step for banks to enhance their customer screening capabilities is to ensure their system is flexible enough to handle new data types and sources. In the AML compliance world, watchlists and sanctions lists are constantly in flux. New entities and individuals are always being added to sanctions lists for several different reasons. Banks need a customer screening system that is flexible enough to support new data points when they emerge, such as regions of the world that pose a greater AML compliance risk. Or if criminals find new methods to launder money. Any system banks invest in should be flexible enough to capture and score this data as it becomes available.
Work with Reliable Data Providers
Banks need access to strong, reliable, external data providers to ensure they can perform their due diligence and customer screening. When a customer initially presents their address or date of birth, external data should quickly confirm or disprove it. Investigating whether a new bank customer is who they claim to be during the account opening process is a critical step in banks’ efforts to bolster their AML compliance programs.
Look for Opportunities to Boost Efficiencies
Working with external third parties can streamline the onboarding process so banks can confidently onboard trustworthy customers. But banks should also look at their internal operations for opportunities to enhance information-sharing. Too often, organizational silos emerge within a bank’s workforce and break down communications. Aligning teams more efficiently enables automated data-sharing and insights across the organization that reduces financial crime and delivers a seamless customer journey.
Look for Automation Opportunities
Constant changes to sanctions and watch lists are challenging for any bank to monitor on a regular basis. Investing in automation can alleviate this burden. Banks need to look for solutions that automate important processes. By investing in automated solutions, banks ensure they are up to date on the latest sanctions lists, PEP and RCA data, and adverse media reports.
Focus on Reducing Customer Friction
Automated solutions are also essential for helping to reduce customer friction. Solutions that can automatically pull information during the onboarding process can help banks approve trustworthy customers faster. These same automated solutions reveal connections to high-risk actors and whether an applicant is on a sanctions list, a PEP, an RCA, or a few degrees removed from these players. Automated solutions can connect sanctioned individuals. The end result is reduced friction for trustworthy customers and additional friction for bad actors.
No bank wants to harbor sanctioned individuals or organizations or to enable money laundering activity connected to terrorism, illegal drugs, human trafficking, slavery, and other atrocities. The blowback will come in the form of regulatory investigations, heavy fines, and a badly damaged public image.
The good news is banks don’t have to endure uncomfortable blind dates anymore. It’s time to get all the facts on who is attempting to onboard with an organization from the moment an application is submitted.
Digital trust is the foundation of today’s connected economy. Watch the on-demand webinar 4 Key Elements of Digital Trust to learn how banks can trust their customers in the digital age.
Share this article:
Related Posts
0 Comments5 Minutes
Spotlight on Denmark: Fraud and Financial Crime Insights from ‘Den sorte svane’
The recent documentary mini-series "Den sorte svane" has sent shockwaves through Danish…
0 Comments9 Minutes
Enhancing AML Transparency with Smarter Data
Doesn’t it seem like new financial threats crop up in the blink of an eye? That’s why…
0 Comments10 Minutes
Enhancing Anti-money Laundering Systems Architecture
A speaker at a financial crime conference I recently attended summed up the problem with…