Financial institutions have an obligation to continuously monitor transactions and escalate suspicious matters to the Australian Transaction Reports and Analysis Centre (AUSTRAC).
This can be challenging if you have limited resources.
Further, if your organisation relies on traditional periodic Know Your Customer (KYC) reviews, you may not achieve the results you need to make key risk management decisions.
In light of this, adopting perpetual KYC can greatly improve the anti-money laundering (AML) monitoring process, as it takes a proactive rather than reactive approach to KYC.
Below are 5 ways perpetual KYC can improve AML monitoring outcomes.
1. Perpetual KYC provides up-to-date customer risk profiles
Traditional customer reviews take place according to set time intervals based on the customer’s initial risk rating. However, this approach is not always effective, as customer profiles can change frequently.
Customer risk assessments need to be dynamic in nature. With perpetual KYC, reporting institutions are able to conduct dynamic risk assessments.
2. Perpetual KYC saves analysts’ time
Reviewing alerts can take considerable time, and having an analyst spend time on a case where the KYC information is outdated can be costly.
Having regularly updated customer profiles will save time that analysts can better spend on reviewing cases that require additional scrutiny.
3. Perpetual KYC assists to prioritize alerts
Transaction monitoring solutions can generate a high number of alerts. These are dependent on factors such as number of customers, types of customers, products/services offered, transaction types, delivery channels, number of rules, etc.
It is a constant race against time and there may not be sufficient resources to review all these alerts effectively. It may not even be possible to review all the alerts.
Therefore, prioritising alerts is key. Having up-to-date customer profiles provides the extra level of security required to ensure important alerts do not miss the radar.
4. Perpetual KYC helps to timely escalate Suspicious Matter Reports (SMRs)
The value of timely reporting of an SMR to AUSTRAC is crucial, so that action can be taken promptly. However, outdated KYC information can delay the SMR escalation process, as the analyst might need that extra level of assurance, to consider whether the customer’s known profile is aligned with the transactions being conducted.
Financial institutions should also be mindful that other reporting institutions may report SMRs on a particular customer in a timelier manner, whereas your organisation could fall behind if you have failed to keep an updated profile of the customer.
5. Perpetual KYC improves SMR quality
The AUSTRAC annual report for 2021-22 states that it received 292,569 SMRs, which is a 295% increase since 2016-17.
With such a high number of SMRs to be reviewed by AUSTRAC, improving the quality of your SMRs can significantly strengthen Australia’s AML/CTF regime.
Keeping customer profiles regularly updated will help you submit quality SMRs to the regulator, in turn assisting everyone in mitigating financial crimes.
Make the move to perpetual KYC today
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