AML Meets KYC: FinTech Apps Battle the Data Cloud

AML compliance starts with the due diligence undertaken during onboarding, generally put in compliance terms as Know Your Customer (KYC). The first step to AML is KYC, says Abhishek Dwivedi, an AML consultant with AMLabc,  Amsterdam. “Some customers may be relatively riskier, not necessarily because of any terrorist links or high risk, and need to be monitored on an ongoing basis in the AML program.”

Like AML monitoring, new technologies have entered the market in the last year to make the onboarding workflow easier. At the same time, proposed regulations are expanding KYC requirements to the beneficiaries of some transactions, providing additional market impetus to the KYC utilities and compliance offerings.

On the data cloud front, large data providers, including Thompson Reuters and SWIFT, have recently launched shared KYC registries or utilities. “The utility model envisages gathering all customer information at a single space that can in turn be shared with financial institutions,” curtailing duplicated effort and costs by sharing information in a common format, reports research firm Celent.

At about the same time that the data utilities came online, a digital FinTech firm, Trunomi, launched a mobile app that customers use to maintain KYC-compliant identification. The app enables a customer to upload identification documents from their mobile device.

Trunomi is aiming to change the face of KYC due diligence by appealing to customers directly with its TruMobile personal identification data app. Through TruMobile, users manage content and permissions for their KYC and personally identifiable information using their mobile devices, changing and uploading data in real-time. To learn more, we talked with Trunomi CEO Stuart Lacey to gain perspective on what this means for financial institutions.

Over the course of last two years, the large, multi-bank registries have gained significant traction. Lacey recognizes the value and convenience of these B2B information-sharing consortiums, but adds: “We chose not to go that route. Any time you create a super-registry of data, you create a bull’s-eye, and you become a target for data breaches. Centralizing all that data adds risk, so we found a solution for decentralizing it.”

Lacey points to the evolving role of data sovereignty—particularly that being rolled out in Europe and Canada—and the move toward necessitating consumer consent to use data as a jump-off point for the development of TruMobile. He sees the app serving needs for small-to-mid-sized banks and financial institutions without the budgets for a large registry solution, and also appealing to larger firms who value customer-centric positioning.

“We need to move toward customer-provided content for which the customer gives us their consent to use,” he says. This makes it easier for customers, who no longer need to duplicate their identification materials with each new bank and product relationship.

It may also reduce risks for financial institutions. “If one bank onboards a customer and another bank relies on it, both liable and at risk in terms of reputation. Trunomi has effectively flipped this concept upside-down. In our system, a customer shares his own data set…owning it and duplicating it every time.”

When people think of firms’ relationships to their personal data, Lacey says, “all people think is that they want to collect your personal data and monetize it. When you look at KYC, the data is yours.” With the Trunomi app, banks have the comfort they need for compliance, but if they going to share it with another bank, they will need consent, which is important at a time when ID data is a hot topic.

At the same time, mobile app notifications are becoming increasingly important in reaching consumers, especially in financial services. Phishing emails have damaged trust and many legitimate emails go unread as a result. Notifications from mobile apps tend to be more trusted and read.

As Lacy puts it, “a new generation of mobile banking opening, so there does need to be technology that is mobile and links to customer data on the back end.”

The following release explains how the digital universe brings new challenges and how financial institutions are seeking to use technology to increase efficiency. Calent discusses a number of solutions in the AML/Know Your Customer space.

Emerging Solutions in Anti-Money Laundering Technology