How are banks supposed to comply with the regulations of Know-your-customer?

Banks are suffering tremendous financial losses as a penalty to the government if they cannot guarantee compliance with KYC regulations. For example, in between 2010 and 2016, banks of USA had to pay a penalty of around $160 billion to the government of USA as they couldn’t keep up with the compliance checks. So, when such massive financial loss, the banks are trying very hard to find ways that can minimize the compliance risks.

Manually dealing with these compliances is tough for a bank

Manual recordkeeping is time-consuming and cannot be precise because of human errors, and that can lead to banks being fined huge penalties. So, now you can see how tough it is to keep compliance for banks. Also, if you talk about foreign customers, USA banks have a huge number of foreign accounts, and the Foreign Account Tax Compliance Act requires each bank keep all the records ready every time for foreign accounts which the US customers hold. So, to keep compliance and to authenticate the accounts, they always have to keep their social security number and date of birth ready, with a few other personal information of the account holders all the time. This is not a small thing to do, as the number of customers is hundreds of thousands. And not only should they have to keep the records ready, but also, they have to look that that information is never gone missing or stolen, else they will incur a huge fine.

Also, the banks face another challenge with the Anti-Money Laundering Act. They are to stop any suspicious activities linked to their customer’s accounts.

Compliance with KYC regulations is not only a problem for banks operating in the USA, but the European Union Market also has their own directives that the financial institutions should record as well as collect information from a trading portfolio of their clients.

There are already solutions in place for banks to aid with the compliance

Building compliance activities is one of the ways of the banking industry to run smoothly. So, everyday interaction with the customers will be recorded by the banks. They should now give up manual account checking system or verifying the accounts independently. The process will be automated by streamlining from one bank teller to the other teller who is interacting with the customer. So, this will narrow down the compliance gaps. Smarter banks are also streamlining many other functions too, such as the productivity of employees, sales, and marketing. So, the relationship manager instead of focusing on overall operation can concentrate on the customer engagements. There are other conversation solutions smart banks are coming up with very soon which will eliminate the gaps in compliance with KYC.