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The Signicat Blog
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Clare MacNaughton

Content Manager

What’s the cost of ignoring identity, fraud and AML regulations?

Navigating the complex fraud and risk landscape can be daunting. With regulatory and financial authorities continuously tightening the rules, and only getting stricter, here’s why you should ignore compliance at your peril.

Launching and growing digital products is an extremely exciting process but it doesn’t come without its challenges. Identity, fraud and anti-money laundering (AML) compliance can be a massive headache, especially if you are new to dealing with these regulatory requirements. Managing fraud prevention and online risks is a key part of business today. Risks can appear at any stage during onboarding and managing your customer relationships.

# Avoid hefty fines

Across Europe, the EU is often the defining source of legislations and directives, which member states are legally required to implement e.g. 6AMLD, the 6th Anti Money Laundering directive, where the EU has tightened and removed loopholes with further rules against money laundering. 

On top of this, member states often implement their own national laws and regulations. This includes financial authorities, who can further define laws, such as fraud or AML laws. It’s worth noting that even non-EU countries, such as Norway and the UK adhere to the same rules and legislations.

Handling regulatory compliance cannot be an afterthought so be prepared and plan your risk compliance measures from day one. If, or rather when, your company is subject to an audit, and you have missed even a small detail, the consequences are likely to be severe. If you are left vulnerable and exposed, hefty fines will ensue, and the coverage that comes with it is likely to affect your company’s reputation.

# Keeping up to speed with strict regulations

As technology advances and the authorities gain more intelligence, regulations are getting stricter. In the last few years alone, security measures have been tightened more than ever. With this, the cost of non-compliance has significantly escalated.

Accept genuine customers - and clear away the rest.

# Early warning signs during onboarding

Planning means that you will be prepared to onboard new customers and manage your Know Your Customer (KYC) and Customer Due Diligence (CDD) checks.

This includes, but is not limited to, vetting the following:

  • identity verification
  • checking sanction and PEP lists
  • credit checks
  • document verification.

The list of checks can be extensive. Compliant onboarding done correctly can uncover financial crime, fraud prevention and other risks, keeping your business safe. This is especially vital in regulated industries i.e. companies that are legally obliged by law to conduct regulatory checks. The early warning signs flagged by doing these checks will help you eliminate threats, ensure that you only onboard genuine customers, and remove the possibilities for criminals and dubious individuals to be onboarded.

# Remaining compliant once customers have been onboarded

New technologies make it possible to automate regulatory compliance and when done successfully, the end user does not know that there is a complex process happening. Not only is it important to have a good process for onboarding your customers, but it’s also essential to keep up to date with any changes in regulations that may apply to your business.

# Manual processes leave room for human error

Identity, financial and AML checks need to be carried out whether you do this manually or through an automated process. Investing in compliance is costly, but not complying poses a much greater risk to your organisation. 

Customers expect to be onboarded online, 24/7 via web or an app. Providers that do not live up to this expectation, will see their prospective customers move to competitors who do. 

Designing your KYC-process means finding the right balance between compliance and user experience, whilst making sure that one doesn’t compromise the other.

Investing in RegTech (Regulatory Technology) allows you to automate your risk compliance. Risk Orchestration is Signicat’s modular KYC, AML and risk management platform, which can be integrated into any existing system or business process. Instead of investing a great deal of time and effort into ensuring that you check everything off the list, while potentially leaving your company exposed, the automated platform can be customised to carry out only the checks you need in a matter of seconds, not days or weeks.

# Dealing with multiple vendors

Customers expect a quick and flawless digital experience and onboarding flow. Dealing with multiple vendors to pull the information you need also adds unnecessary cost and time. As well as needing to manage several vendor relationships, you also risk creating bottlenecks in your onboarding flow and leaving gaps in your identity, fraud, and AML compliance.

Choosing one vendor pays off. You don’t just gain an all-in-one solution to match your risk compliance needs; you gain real-time data, a thorough audit trail and access to a team of fraud and risk experts who will not compromise on compliance.

One vendor, one platform, and an abundance of possibilities.