The stricter requirements of the EU Anti-Money Laundering Directive and the extension of the Money Laundering Act require banks and financial institutions to take the issue of money laundering very seriously and to become more involved in combating it. In concrete terms, this means better monitoring and documentation as well as identification and verification – because the very beginning of a customer relationship is fraught with risks. Accordingly, legitimacy checks when onboarding new customers are part and parcel of compliance management.
That doesn’t sound very conducive to successful customer relationships, does it? After all, customer friendliness has been a priority in the banking sector for some years now. PSD2 aims to bring customer centricity into the financial sector. Open Banking enables unprecedented innovations and technological advances that guarantee user-friendliness. As a result, internal pressure is also increasing when it comes to customer-oriented fraud prevention.
However, can this really work when it comes to risk, fraud and money laundering? In this blog post, we explain how Open Banking enables you to optimise anti-money laundering within the context of customer onboarding in a legally compliant manner, in order to better meet your and your customers’ individual needs while simultaneously increasing your security standards.
Innovative AML: Maximum Security and Maximum Customer Centricity
How do customer requirements for convenience and high security standards fit together? You have to walk a fine line here. The primary task of a money laundering reporting officer and compliance manager is to protect the institution against fraud and money laundering attempts. However, you also have to strike a balance between customer-centric product management priorities and the current legal situation. In short, you’re trying to ensure an optimal customer experience alongside maximum legal security.
The onboarding process for new customers can be a good starting point. Onboarding is as important for the customer relationship as it is relevant for security. First contact with a new customer is always contact with an unknown identity – for both parties. Convenient, innovative fraud prevention inspires customers while secure, AML-compliant fraud prevention protects them.
The Right Measure: Optimal Implementation of AML Requirements
The banking sector alone has paid over $321 billion in fines worldwide since 2009 for failing to combat or prevent fraud. Add to this the reputational costs incurred for banks involved in money laundering scandals and it quickly becomes clear why no one should take the legal requirements lightly.
For this reason, at the top of your list should be maximum security in the form of legal certainty, operational reliability and customer security. As part of the onboarding process, the Know Your Customer (KYC) principle protects banks and all their customers by ensuring that they do business legally and with legitimate parties. For you, the KYC principle, also known as the AML (Anti-Money Laundering) process, is the set of rules on which all further processes and methods should be based.
To ensure a secure KYC process, the Money Laundering Act requires adequate identification of all customers or account holders. As the obligated party, your bank is responsible for compliance while implementation is in your hands.
A Secure Environment for Strengthening the Fight Against Money Laundering
You are aware of the minimum requirements that secure and legally compliant fraud prevention must meet from the outset. So, which areas can you optimise? How do you make the process more customer-friendly? And how can you make onboarding even safer?
With innovative identification procedures, Open Banking presents you with opportunities to set new standards in terms of fraud prevention and customer experience. AML-compliant ID solutions offer particularly high optimisation potential in this regard.
1. Convenience for bank and customer
Does fraud prevention have to be complicated? After all, bureaucracy is not one of the requirements of the Money Laundering Act. On the contrary, a lack of transparency and complicated processes will increase the susceptibility to errors. You can avoid this by relying exclusively on digital methods. These are interconnected in a logical manner, prevent media disruptions and simplify the fight against fraud.
2. Maximum speed
Fraud prevention always follows the same patterns in identification. Why does it still waste so much time for banks and customers and lead to added stress though? The process is not lengthy and complex in order to ensure maximum security. Rather, the many steps simply slow down your onboarding. Moreover, you are dependent on the provider’s capacity in terms of efficiency and speed. 24-hour services, procedures without waiting times and a fast process that you can easily follow solve this problem for you.
3. Minimal error rate
Lots of identification processes date back to the last decade. The partly digital, partly analogue data and the different places where they are processed make for a lengthy, non-transparent process. Every manual processing and verification procedure constitutes another potential source of error. Automated processes help you to avoid these stumbling blocks and minimise the error rate.
4. Three secure steps
2-factor authentication (2FA) has already become widely accepted in many areas. The new AML-compliant ID solutions go one step further! For identification with an integrated account check, the model of security steps is applied in three different ways, without customers having to initiate three different processes. From the customer’s perspective, this is only one simple and logical process; for you it means three times the security.