Perpetual KYC and the use of Artificial Intelligence (AI)
A comprehensive Know Your Customer (KYC) process can and should be an integral part of a customer's risk assessment. It ensures that banks and other money laundering obliged entities verify and document the identity of their customers in order to prevent money laundering and terrorist financing at an early stage.
The concept of perpetual KYC (pKYC), i.e. the continuous KYC process, goes one step further. It includes a partially automated and continuous review of customer data to enable financial institutions to react immediately to any changes that occur.
Why Perpetual KYC?
A one-off or periodic KYC review carries risks as key customer data may change between review dates, e.g. due to change of residence or business location, new or one-off business activities, new owners or negative news about the customer in the media. Perpetual KYC enables continuous monitoring and, if necessary, automated adjustment of risk assessments.
How does Perpetual KYC work?
Perpetual KYC (Know Your Customer), also known as pKYC or event-based KYC, is an advanced approach to continuously review and update customer information in the financial sector. In contrast to the traditional KYC process, which is carried out at fixed intervals, pKYC works as a dynamic, ongoing process.
Perpetual KYC involves real-time or near-real-time monitoring of customer activity and information. Instead of using fixed review intervals, KYC updates are triggered by specific events, such as:
- Changes to contact information
- Significant transactions
- Changes in the ownership structure of the entity
Perpetual KYC uses advanced technologies such as artificial intelligence and machine learning to automate the process of event detection and data updating.
AI-powered KYC tools enable continuous and efficient analysis of customer data through automated workflows. New information is used as the basis for dynamic risk adjustment. For example, an originally low-risk customer can be quickly classified in a higher risk category based on new information. AI automates many manual processes and immediately informs employees and managers of any actual anomalies or deviations. The associated cost efficiency is considerable, as banks can reduce the high work and cost expenditure of regular KYC checks through continuous monitoring and updating.
A continuous KYC approach, especially in an automated form, can be less disruptive for customers. Instead of having to go through extensive checks on a regular basis, customers are only contacted when specific discrepancies are identified.
Fully or partially automated KYC tools provide an efficient solution for ongoing and real-time verification of customers, avoiding potential reputational damage or fines. However, these intelligent tools must be carefully implemented and tailored to the specific requirements of each business area.
Do you want to know more about KYC, pKYC, AI based KYC tools? Ask us, we are happy to answer your questions comprehensively.
