A thorough overview of top KYC, AML, and CFT practices in 2020

7 min read >

A thorough overview of top KYC, AML, and CFT practices in 2020


KYC, also known as Know Your Customer, represents today a significant element in the banking industry, especially when it comes to security, Anti-Money Laundering (AML), and Countering of Financial Terrorism (CFT). The global AML and CFT landscape raised the stake for financial institutions worldwide, forcing them to invest in extensive KYC processes and comply with the PSD2 directive (in the European Union).

International regulations being implemented and influenced by standards similar to The Financial Action Task Force (FATF) are being executed worldwide in national and regional laws. These regulations encompass advanced AML4 and AML5 directives, together with KYC “preventative” measures for client identification.

Below, we’ll take a closer look at the KYC environment and dive deeper into the best customer onboarding practices that companies need to follow in 2020 in order to stay ahead of the curve.

What actually is KYC

KYC, as it stands for Know your Customer or Know your Client, is a mandatory banking process that involves checking the identity of a client during the onboarding process. Banks and FinTechs need to ensure that their customers are genuinely who they claim to be. If a client does not meet the minimum KYC requirements, financial institutions may halt business relationships or even remove the accounts associated with that customer.

The KYC process includes all the necessary actions that revolve around monitoring risk and ensuring their customers are real people. This process usually includes face verification, ID card verification, fingerprints, and document verification, such as proof of address or utility bills. KYC compliance rests with the banks and is enforced by strong AML regulations.

The real risks of non-compliance

Complying with KYC is mandatory all across the globe. Failure to comply usually results in huge fines from regulators. For instance, between 2008 and 2018, banks in the US, Europe, Asia Pacific, and the Middle East, have cumulated a total of $26 billion in fines because of failure to comply with the mandatory KYC and AML practices. Add to that the reputational damage is done to their PR and the total damage exceeds $50 billion in losses.

The risks of non-compliance with KYC and AML regulations are even greater in 2020. For the first time ever, we have been able to notice that the value of penalties these institutions received actually exceed their net profit. Additionally, failure to comply with AML and CTF requirements makes financial institutions face even bigger financial sanctions related to GDPR and MiFID II.

With the rise of financial crime and the costs associated with compliance, as well as the growing threat of digital disruption, it has never been more important for financial institutions to embrace technologies that streamline compliance processes. One of the technologies banks can use in 2020 to enforce the AML, KYC, and CTF compliance layer of their digital onboarding processes is TORP. This powerful solution developed by Tremend aims to streamline and automate the onboarding and origination processes, enabling banks and FinTechs to stay safe from any potential fines associated with AML and KYC non-compliance.

The first impression always counts

KYC is an integral part of customer onboarding. Basically, onboarding means creating a digital identity for a new customer and enabling that identity to access a pre-definite set of services. Customer onboarding is mainly used in the Banking sector, but it’s slowly becoming mainstream.

The level of service offered to customers is often coupled with the drive to innovate new products, based on the latest technologies in place. Banks use strong branding and rely on the first impression in order to attract and retain customers. New players in the financial market like Neo-Banks and FinTechs have influenced this business reorganization, by reshaping the financial landscape and accelerating the digitalization of many services and processes.

All customers expect a seamless experience from their banks, along with personalized communication, a high level of customer service, and outstanding onboarding services. Banks that realize the importance of the first impression and enable their customers to enjoy a smooth onboarding process can definitely get an edge on the market.

Digital Onboarding – a key differentiator for financial services

The process of digital onboarding begins the moment a customer wants to use the services and products of a company. The essential ingredient of digital onboarding is digital identity management. This is a key differentiator for modern financial services.

The experience of opening accounts with traditional institutions leads to many common friction points like being re-routed to different channels, the need to provide physical identification, answering the same questions multiple times, and long delays to access the account. This only turns people away and makes them migrate over to FinTechs or other financial institutions that have a clear digital onboarding process in place.

More than often, companies and service providers focus on only one aspect of a customer’s digital lifecycle, whether that is onboarding or electronic signing, and fail to capitalize on a customer’s full digital engagement potential. Successful companies will always focus on the entire deployment process and not just on sections of it.

KYC & Customer Onboarding best practices

Financial institutions aiming to improve their customer account opening experience are advised to think across all steps in the process, starting with discovery and data capture and continuing to give customers clear value from the new account. These strategies could reduce the abandonment rates and increase the number of people that become customers.

Let’s explore below some of the best KYC & customer onboarding practices in 2020:

  • Focus on the factors that matter to your customers: fee transparency, ease of communication, reliable customer service, and the ability to track the actual status of the onboarding, are those factors that really matter to your customers. Bring improvements to these factors and you’ll be able to reap the benefits of proper KYC.
  • Make it less time-consuming: simplifying the onboarding process and cutting down the time it takes to apply for an account have deep effects on customer satisfaction.
  • Master the digital-first journey: customer onboarding should solely rely on digital interaction as digital-first and digital-focused journeys usually lead to higher customer-satisfaction scores and to more leads.
  • Focus on branding & perception: inspiring your customers with the power and appeal of your brand or generating word of mouth via advertising can dramatically boost satisfaction rates among new customers. Increase your brand image among new customers and you’ll be able to enhance the customer onboarding process.

Get in touch

We are always happy to talk






165 Splaiul Unirii, Timpuri Noi Square,
TN Office 2 building, 4th floor,
District 3, Bucharest, Romania, 030134