There’s a great Dilbert cartoon in which Wally says to the Pointy-Haired Boss, “I decided to be proactive and push back my deliverable deadline by a year.”
“That’s not being proactive. That’s the opposite of proactive!” the Boss yells.
When it comes to compliance—both mitigating the risks of noncompliance and controlling the ever-escalating costs of staying compliant—being proactive is critical for your financial institution’s long-term health and profitability. And I don’t mean “proactive” the way Wally meant it in the Dilbert cartoon.
We talked about some of the staggering costs of compliance in a previous post, but to recap: Compliance is costly, whether you pay to meet regulations now or pay fines for non-compliance later. The average firm spends $60 million a year on KYC and Customer Due Diligence (CDD), and since 2008, banks have collectively paid more than $300 billion in fines for non-compliance.
A recent Celent report notes that a sea of regulations have put unprecedented demands on risk and compliance operations at financial institutions since 2001. The result of these regulations is dual: 1) Exploding compliance costs in operations and 2) Heavy fines due to inadequate controls.
So what’s the magic bullet for controlling compliance costs? Robotic process automation. RPA uses intelligent software robots to perform compliance tasks your employees are currently performing manually—neither a sustainable nor scalable option for controlling costs.
Let’s take a look at three ways you can bank on robotic process automation for KYC and AML customer due diligence compliance when opening new accounts or approving loans.
May I see your ID, please?
Many financial organizations still use manual labor to check an applicant’s identity information against public records and watchlists. Then, they collect the data they’ve uncovered and add it to an internal system.
This process is incredibly time-consuming, which has the double financial effect of driving up labor costs and slowing customer onboarding and revenue realization. According to a Thompson Reuters survey, financial institutions took an average of 24 days to onboard new clients in 2015, up 22 percent from the previous year. Onboarding times are only expected to increase.
There’s also the issue of errors and missing information: Remember that $300 billion in non-compliance fines figure above?
Robots to the rescue: RPA can automatically check an individual’s background against thousands of sites, including monitoring sanctions lists from sources like the U.S. Treasury and Immigration and Customs Enforcement. Unlike humans, robots follow business rules and compliance regulations every time, reducing your risk for errors and missing information that lead to fines with 100% data accuracy and a complete audit trail.
Keep calm and stop reacting
Unlike Wally in the Dilbert cartoon, you can’t afford to simply react to never-ending regulatory updates. Data aggregation robots are proactive, automatically monitoring and extracting external data from regulatory sites. All of this data can then be passed to a complete 360° customer profile. Automated monitoring for changes to the profile like address or name changes could be run to ensure compliance to KYC and AML regulations.
Data, data everywhere but not a drop to use
One of the biggest pain points we see in organizations, particularly large financial organizations with many and disparate legacy systems, is that you probably already have data on an applicant, but it’s inaccessible or inconvenient. Maybe it’s housed in another department’s system, requires a lengthy login process or someone else’s credentials, or the database is messy and the search function isn’t reliable.
Whatever the reason, robots come to the rescue again: they’re fabulous at not just getting into all those systems and extracting the data, but delivering it wherever you need it to swiftly check an individual’s background and make a decision to move forward.
Learn more about how robotic process automation and other technologies can help your organization transform compliance in the latest report from financial services research firm Celent. Get your copy of Innovation in Compliance Technology: Emerging Themes and Vendor Solutions today.