There are so many challenges that face start-ups, no matter what industry they are a part of. From market competition to cash flow to hiring the right candidates, the list is extensive. But, depending on what industry your start-up is in, you may also face the additional issue of overcoming regulatory hurdles as well. If this is the case, you need to make sure you practice and maintain regulatory compliance to avoid costly consequences; some start-ups have been put out of business purely through being fined for non-compliance.
Regulated businesses that undertake financial activities are required to apply risk-based customer due diligence to prevent themselves from being targeted and taken advantage of by money launderers or terrorist financiers. By conducting KYC (And AML) checks, businesses can reduce financial, reputational and regulatory risks which are vital when just starting out. If your business is onboarding customers, then KYC should be seriously considered.
The result of not performing KYC checks, when necessary, can result in huge penalties. The cost of non-compliance has increased in recent years with regulators issuing more than $10 billion in AML fines in 2020. KYC and customer due diligence (CDD) should be performed regardless of whether AML regulations are applicable to ensure that your customers are not fraudulent.
As a start-up spending wisely is critical to success and the benefits of avoiding fines and protecting your brand far outweigh the cost of being compliant. It is important to spend your money on resolutions that provide value instead of expensive solutions or unnecessary additional labour.
Relying on manual processes can eat into your onboarding budget. It requires a human element which takes more time, is prone to errors and offers low visibility, which is not ideal. Also, if customers can’t see the status of their onboarding, they will become suspicious, and it can erode trust and affect your customer relationships.
Missed or unprocessed regulations cost you time and money regardless of the size or age of your organisation, but it is a lot more detrimental to new start-ups. A combination of local and international standards, KYC law is a complex and ever-changing set of rules including AML and Anti Financial Crime schemes.
Regulators demand that customers’ profiles are continuously updated and regulated to ensure compliance with CDD. Maintaining this and ensuring the processes that allow them to stay up to date, is crucial for decreasing the risk of fraud and money laundering.
Implementing these procedures and operating compliant KYC checks can be challenging if you are a start-up. Therefore, it may be prudent to team up with a professional outfit that can support you in your KYC journey. It is estimated up to 70% of KYC processes, including ID verification and fraud detection, can be automated.
The remaining 30% of manual oversight can easily be outsourced to a third party with more expertise and better technology, whilst simultaneously providing the flexibility and scalability to support your business as it grows.
What you Need to Know
Your compliance obligations should be integrated from the very start and embedded into your onboarding process as fully automated as possible, in order to provide an optimised customer journey
This will also help to reduce regulatory and compliance risks, it’s an obligation that you cannot get out of so you must embrace it fully for the good of your business. It is also an important measure to increase the legitimacy of your business as well. KYC helps you to safeguard clients and keep yourself safe from money laundering and other financial crimes.
Gathering insightful data can also help a start-up provide its clients with a personalised experience and better serve their needs in the onboarding process. The key element here is that KYC must be seen as an opportunity, not a burden.
KYC is the first point of contact in the customer journey, and an important part of the experience overall. You need to offer your clients a frictionless and engaging customer journey. For example, identity checks can now be provided through video chat or even by uploading a recording of yourself as proof of who you are. These offer a smoother process that can be completed in minutes – sometimes even seconds – letting customers in immediately. There is data to support the importance of this is readily available. In the UK, for example, 25% of applications from new customers are abandoned due to KYC friction. You must get this right if you want a streamlined journey for customers from start to finish.
One last bonus that must not be overlooked is trust; matching customer experience and providing security will build trust for your organisation. There’s no doubt that trust is one of the most valuable assets for a business.
As a start-up, if you need to have a KYC process implemented within your business you need to take that very seriously and plan what is required to protect the company from the risks of dealing with an unreliable customer.
Offering a sleek, simple and seamless customer journey to optimise the customer experience, KYC forms the foundations of this.
By utilising technology and automation to enhance customer experience and decrease fraud you can make your business a success.
Here at Sekuritance, we provide a single platform for every compliance need within a business, including end-to-end KYC, KYB, AML, vendor management, beneficiary onboarding, investor check, blockchain wallet checks and more!
Our aim is to provide a full compliance-as-a-service solution for any and all industries to enable the identification, verification and security of all elements of regulatory reporting and transaction monitoring in a fair and transparent manner.
Whether a new start-up looking for help or an established organisation looking to upgrade its regulatory efficiency visit us at www.sekuritance.com to find the right solutions for your business.
The Sekuritance RegTech platform provides a single platform for every eGRC need, including end-to-end AML/CTF, CECL, FCPA, vendor management, beneficiary onboarding, investor check, card processing MFA checks, blockchain wallet checks, cyber-risk assessments, and other RegTech or Business Process Management requirements.
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