Client onboarding means going through a step-by-step process to understand new customers, so you know who you are doing business with and the risks of doing business with them. An onboarding or know your client (KYC) process is designed to uncover potential risks associated with individuals or entities before they become part of a business network.
To meet compliance obligations related to anti-money laundering (AML) and counter-terrorist financing (CTF), and to prevent fraud or other types of financial crime, banks, fintechs, and other financial service providers conduct a series of identity and verification checks. Sometimes the onboarding flow is low-touch, sometimes it requires in-depth due diligence, this will be determined by factors like the product being offered, the institution's risk appetite, and the subject of the compliance process.
However, at the heart of it a client onboarding process involves data checks to verify someone is who they say they are. This helps create a picture of risk associated with an individuals or it can create transparency around ownership structures in corporate entities. KYC processes are designed to meet appropriate and relevant compliance standards to help firms mitigate risks.
Business to consumer (B2C) onboarding usually aims to be swift and efficient with minimal friction and client engagement. The KYC process can be highly automated with multiple data checks to verify information such as name, date of birth, and address details using straight-through-processing (STP). Access to online datasets can help verify an individual is who they claim to be using digital ID documents. This process often aims for full automation to deliver compliance with digital-only or digital-first customer experiences.
The business to business (B2B) onboarding process can be much more complex and involve uncovering information about corporate ownership structures and ultimate business owners (UBOs) across a potentially broad and varied global network.
The know your business (KYB) process aims to create a robust risk profile, with transparency around ownership structures through checks against national databases and corporate registries for entity verification. It can also involve sanctions screening, identifying politically exposed persons (PEPs), and reviewing other watchlists to enhance the picture of risk.
KYB is often about collecting information that will then be reviewed by a compliance professional during initial and then enhanced due diligence (EDD). While the data collection may be automated and leverage AI-enabled solutions, the compliance team will usually be needed to make the final onboarding decision.
With B2B or KYB onboarding, the aim isn’t to do straight-through-processing, or make the whole thing as fast as possible, it’s to create as true and accurate a picture of risk as possible, so better decisions can be made about who to work with.
To drive greater customer success through the onboarding journey, while managing risk at scale and for the long-term throughout a client lifecycle, these 5 points can be considered for supporting best practice:
Access to trusted sources of individual or entity data can often be a challenge for financial institutions throughout the onboarding process. Then collating that data in on place is another.
There can also be issues with managing regulation across jurisdictions. And client expectations will vary depending on the product or service being offered.
There isn't a one-size-fits-all option for client onboarding. A fintech client applying for an online banking app may be expecting straight-through-processing, whereas an entity applying for a business loan may be prepared for enhanced due diligence (EDD).
Managing client onboarding based on location, product, and the target customer are important considerations. The right approach can help prevent churn during an onboarding journey and support customer retention.
During any client onboarding process data is crucial to completing a risk assessment. With KYC and onboarding individuals, automating access to real-time identify and verification (ID&V) data is often important to the customer experience. According to estimates by Forrester Consulting, a customer is contacted an average of ten times throughout the onboarding process. They are also asked to submit a series of documents. Rather than going to the customer multiple times and asking them to provide documentation, KYC solutions, like Moody’s Maxsight™ can automate integration of different datasets to target STP and drive faster results. This also results in a better customer experience and faster onboarding times.
Access to high quality, accurate, and timely data is the key to onboarding individuals or entities.
When it comes to the data needed for KYB checks – some data is structured but much of it is unstructured. Structured and unstructured data is stored, sourced, and collected in different ways. Structured data is organized - for example in spreadsheets or databases - and can be easily deciphered. Unstructured data - or qualitative data - is unformatted and harder to analyze. But whether the data is structured or unstructured, if it is unavailable, inaccurate, or incomplete, then the process becomes unreliable, which can impact compliance and effective decision-making.
Moody’s combines data from regulatory and other sources, such as M&A deals or corporate structure information, to help financial institutions better determine the legitimacy of a customer, the risks they pose, and things like the ownership of a company - which can be challenging when ownership of a single company may extend across multiple layers or jurisdictions.
Using Moody’s Maxsight™ unified risk platform for digital onboarding supports risk and compliance teams to determine ownership and control structures, gaining clarity on who the ultimate beneficial owners (UBOs) of a business are, as well as supporting them with EDD and other forms of screening.
For unstructured data, such as negative news screening, Moody’s database can search for references across media networks, including hundreds of newspapers and articles. This is particularly useful when it comes to onboarding international customers who may come from a jurisdiction with strict regulatory enforcement policies.
Compliance isn’t a process that begins and ends at onboarding – knowing your customer and controlling risk is something that must be managed throughout the lifecycle of a relationship. A customer might trade with you for the next five, ten or 15 years, so customer due diligence needs to be an ongoing process.
After onboarding, a customer’s data can quickly become stale, especially when it comes to corporate customers. Ownership structures can change overnight, and risks associated with UBOs need to be continually monitored.
Perpetual KYC means constant digital monitoring of ongoing changes to risk relevant factors take place in near real-time. Always-on data checks provide event-based triggers, so if a sanctions list is updated or a UBO becomes politically exposed or the subject of a negative news story, this is flagged to a compliance team for investigation.
At Moody’s, our technology is an important enabler to the process of pKYC, as is access to high-quality data, which is at the core of our solutions.
Customer onboarding is a regulatory requirement for financial institutions, it helps prevent bad actors working through legitimate businesses, and it’s also an important part of the customer experience that can’t be overlooked.
Moody’s KYC solutions help banks and other financial services businesses with their compliance processes by automating workflows and integrating global datasets via a flexible, configurable platform.
We can help our customers to establish a best practice approach to client onboarding, based around the desired journey or experience, regulation in different jurisdictions, and for any type of financial product.
Customers can orchestrate an automated workflow of KYC and KYB checks, integrated with leading dataset, which means risks are better understood and decisions can be made with confidence.
We can also support ongoing risk monitoring through a perpetual KYC process, which looks at risk in near real-time, rather than at a point in time.
Visit Maxsight™ to see how unified risk management can maximize efficiency during a digital onboarding process or get in touch to book a meeting.
Maxsight™ unified risk platform – Digital onboarding | Sanctions compliance | Supply chain risk management | Third-party risk management and more