Why banks need to utilize RegTech solutions

Financial crime compliance management starts with efficient Know Your Customer (KYC) processes to ensure that banks fully understand their customer relationships.

New requirements and regulations put increasing pressure on banks to update processes and ensure end-to-end compliance. Anti-money laundering (AML) software for banks eases this pressure and enables compliance teams to simplify the complex regulatory obligations.

Legacy systems can limit growth, impact customer experience and profitability, and expose banks to risk. Learn about why banks need to utilize RegTech solutions and the benefits they offer in our comprehensive guide.

Growing responsibilities for banks to comply with new AML regulations

Banks and financial institutions face an increasingly complex regulatory landscape when it comes to AML.

The growing adoption of mobile banking, innovations in payments and cryptocurrency have transformed the way individuals and organizations process transactions and created new challenges associated with compliance, risk and reporting. 

In response to this changing market, regulators are demanding more clarity and insight from banks and financial institutions regarding their customer relationships, activity and risk management processes. These processes create significant amounts of new work for already stretched compliance teams, creating a need for a more efficient approach to AML and KYC processes. 

To keep pace with the changing demands of the market, banks will need to adopt digital solutions that can deliver the detail, speed and accuracy required by regulators and consumers.

Commitment to monitoring and investigating fraudulent activity

Every development in financial processes and markets is swiftly targeted by criminals as an opportunity for fraud or to help hide illegal funds. Advances in technology have only flamed the fire - global losses from payment fraud tripled from USD$9.84 billion in 2011 to USD$32.39 billion in 2020.

Pillar page_Payment fraud data

As the risk of fraudulent activity increases, new regulations have set a higher bar for accountability and oversight from banks. This includes holding more detailed records on customer relationships, regularly refreshing client profiles and updating databases as and when regulation inevitably changes.


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New demands and keeping up with AML rules and regulations

As technology advances, new opportunities for criminals to exploit systems emerge. Regulators are putting banks under increasing pressure to apply more scrutiny to customer relationships. Recent regulations include FinCEN’s CDD “Final Rule”,  the Anti-Money Laundering Act of 2020 (AMLA 2020) and the EU’s 4th, 5th and 6th AML Directives, which require a broader view of customer activity within the financial system. This includes increased transparency about who really owns companies and other financial entities, clarifying financial structures and determining associated parties or “enablers'' of financial crime.

Falling behind on these compliance requirements leaves banks vulnerable to significant penalties, with authorities in the US, Europe, APAC, and the Middle East levying nearly USD$26 billion in penalties against financial institutions for AML, KYC, and other violations over the past decade.

The role of AML software for banks in compliance

So, what about the role of AML software for banks? Comprehensive AML compliance can be achieved faster and more effectively with RegTech solutions, and banks and financial institutions are increasingly embracing the technology. 

By using targeted solutions to streamline the more time-consuming elements of manual due diligence, banks can free up time currently spent on repetitive processes and enable teams to focus on more complex issues and end-to-end control. The ability to stay ahead of these regulations by using the right tools has a material impact on bank valuations, putting those with a fully-implemented technology strategy ahead in the market.

How banks can effectively meet anti-money laundering compliance requirements

AML and KYC processes are an essential protection for banks to manage risk and shield the organization from fines and personal liability.

A fully comprehensive AML process will usually involve:

Optimizing your AML and KYC process flow

Traditional KYC and AML compliance processes involve multiple teams working together to create a complete profile of a prospective customer at the onboarding stage. Hours of work go into manual processes and at any stage, a client could be off-boarded for any number of risk or compliance reasons.

By moving to a digital KYC process flow, powered by AML compliance software, banks can minimize time spent on manual processes and streamline data management while also increasing the accuracy and relevance of their customer information and reducing risk.

Automation is a key tool for optimizing your KYC workflow and improving efficiency. Find out the quick-wins and opportunities you can take advantage of in our blog.

Why KYC is important for banks

Efficient KYC processes and robust due diligence are the foundations of AML compliance. KYC helps banks to get the full picture of prospective customers, gathering and checking all relevant customer information to accurately assess financial risk exposure. The processes involved in KYC are also key components of AML regulations. Banks are being held to account for fulfilling their mandated obligations to help fight financial crime and identify suspicious and fraudulent activities.

Key AML & KYC requirements for banks

KYC processes cover various aspects of the AML compliance. Compliance teams build a complete picture of the customer and relevant business relationships through submitted information, third-party searches and verification. Below we outline key AML and KYC requirements for banks.

Compliant onboarding process

Compliant onboarding process | AML software solutions for banksFinancial crime compliance and management starts from the beginning of the client relationship, at onboarding. This is the stage where banks carry out preliminary checks to quantify the risk posed by the client/customer and aim to create a full view of the entity with whom they intend to do business.

Key stages include:

  • Client identification
  • Initial risk assessment
  • Identifying ownership structures
  • Identity verification
  • Risk screening
  • Report building and audit trail

Find out how leading institutions are using digital software to streamline their KYC processes at scale.

Automation-powered KYC onboarding

AML customer due diligence

The goal of customer due diligence (CDD) is to gather all of the relevant information about a prospective customer to accurately assess risk, and then updating that information at periodic intervals throughout the customer lifecycle. 

Some customers will be subject to additional enhanced due diligence (EDD). This aims for a greater level of scrutiny of potential business partnerships and highlights risks that cannot be detected by customer due diligence. EDD is specifically designed for dealing with high-risk or high-net worth customers and large transactions.

PEP, sanctions and adverse media screening

To protect the institutions from reputational damage or risk, it’s essential to verify whether potential customers are compromised by any known illegal activity. PEP, sanctions and adverse media  screening helps to identify sanctioned individuals, politically exposed persons (PEPs) and uncover any known illegal activity to which the institution may be exposed.

UBO verification in banking

UBO verification in banking | AML software solutions for banksVerifying ultimate beneficial owners (UBOs) is an essential first step in determining the risk and reliability of a new prospect by determining who ultimately owns or controls a customer and/or the natural person on whose behalf a transaction is being conducted. This may involve unpacking many layers of ownership structures and can be extremely time-consuming when performed manually.

Ongoing monitoring and AML compliance

KYC processes go beyond traditional customer onboarding, requiring a long-term view of customers’ activity and regular updating of information to ensure that banks are maintaining compliant records throughout the client lifecycle. This includes updating customer information to ensure it remains accurate, as well as updating records in line with new regulation and retaining full AML data attribution lineage for demonstrable compliance.


KYC requirements for banks

Key KYC requirements and responsibilities for customer onboarding and AML compliance in banking

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The main KYC challenges for banks

The evolving demands of KYC create a range of challenges for banks and compliance teams, especially those still working with legacy systems and manual processes. Here are some of the key KYC challenges for banks:

  • Maintaining an accurate view of customer risk in a fast changing marketplace
  • Remaining compliant with ever-changing regulation and demands
  • Providing a fast, seamless customer experience while performing necessary checks and verification
  • Managing compliance costs and resources at scale to maintain margins
  • Balancing KYC remediation for existing customer with new customer onboarding 

These challenges are leading many banks to invest in RegTech software and intelligent process automation to balance compliance costs, efficiency and customer service.

Learn more about automation-powered AML software

Anti-money laundering software solutions

The rise of RegTech in recent years has seen more anti-money laundering software solutions become available to compliance teams to streamline their KYC processes and due diligence workflow.

What AML software solutions are available to banks?

In response to the increasingly complex needs of AML compliance, more digital tools are appearing on the market to improve legacy processes and systems. Here are some of the capabilities that AML software solutions can offer banks:

The role of automation in AML compliance

Given the large amounts of data processing and repetitive tasks involved in KYC due diligence, automation software is an essential tool for managing, structuring and transferring information between systems. This is aided by connections to trusted KYC data sources to analyze and unwrap complex corporate ownership structures.

What AML & KYC processes can be automated?

RegTech automation solutions are designed to address the key issues banks and financial institutions face when trying to remain compliant in an increasingly competitive and complicated market. These tools not only improve customer experience and efficiency but reduce risk by sourcing accurate information faster with less risk of human error. 

Here are some of the key AML and KYC processes that can be automated:

Automating corporate data gathering

By integrating public and premium data sources  with software, RegTech solutions can gather customer due diligence (CDD) information based on your existing policies.

Verifying customer information and identity

By connecting to global corporate registries and electronic ID verification data, you can automate customer checks with full peace of mind.

Finding ultimate beneficial owners

With automated database searches, complex Ultimate Beneficial Ownership (UBO) structures can be collated in seconds, dramatically improving ROI.

PEP, sanctions and adverse media screening

RegTech can help organizations minimize risk exposure by screening entities against trusted suppliers of PEP, sanctions and adverse media data.

Monitoring for changes in customer risk profiles

By using smart systems to continuously monitor customer KYC profiles for material changes, banks can instantly catch opportunities for information review.

Dynamic creation of a full audit trail

Digital KYC profiles can prove end-to-end compliance to regulators with a dynamic audit trail of every KYC/AML action for real-time updates.


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Embracing AML RegTech

The growing regulatory burden placed on compliance teams is leading financial institutions to embrace AML RegTech to streamline their compliance processes.

The global RegTech market is estimated to be valued at US$7bn in 2021 and is expected to reach US$15.8bn by 2026, growing at a CAGR of 17.5%, as financial threats become more complex and widespread.

Choosing the best anti-money laundering software for your bank’s needs

Software needs will vary for different organizations, depending on the customer profile, risk appetite and existing level of software implementation. The first step in banks choosing the best anti-money laundering software is assessing the strengths and weaknesses of your existing AML and KYC process. By implementing the right software, you can enjoy a range of benefits, including reduced compliance costs, improved customer service, reduced risk and faster growth.


How banks benefit from regulation

Assessing the impact of 4AMLD

As regulations become more complex and stringent, does ensuring compliance present a burden or do regulations benefit banks? Find out in this webinar.

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Automated KYC & AML software to future-proof compliance

As the demands placed on compliance teams by regulators and risk management increase, banks working with legacy solutions are struggling to maintain growth targets while focusing on being fully compliant with AML regulations. This exposes banks to unnecessary penalties, reputational risk and inefficiencies. 

Automation software for AML can ease the burden on your teams as regulations change and enable you to continue to operate efficiently. To ensure that you can maintain compliance alongside your bank’s growth and customer experience targets, you need to embrace the benefits of KYC and AML automation to future-proof compliance.  

KYC remediation

KYC remediation and refresh | AML software solutions for banksFinancial market conditions and regulatory context surrounding AML compliance evolve rapidly, forcing banks to regularly update client information to ensure it remains relevant and accurate. Any change in customer circumstances or AML policy must be registered and updated across all existing customer profiles through the process of KYC remediation, greatly increasing workload for compliance teams.  KYC automation significantly reduces the time required for remediation.

Maintaining demonstrable compliance

When working with regulators, the safest way to demonstrate compliance is a clear, accurate and consistent audit trail. When it comes to getting the full picture on each customer during KYC onboarding tasks, the importance of a reliable audit trail – which is central to any compliance program – becomes apparent.

Audit trails compiled manually are both extremely time-consuming and can leave the process open to error, but using technology solutions can make for a much more effective process. By establishing a thorough and accurate automated process, a dynamic digital audit trail, information can be found instantly and used as proof that all required and relevant checks have been carried out.

Perpetual KYC - what is it and how can it help your bank?

The increasing importance of ongoing monitoring for AML is leading financial institutions to look to perpetual KYC (pKYC), an ongoing approach to KYC due diligence based on the dynamic refresh of customer data in response to key triggering events. In comparison to the more traditional, reactive ways of updating KYC information, pKYC solutions focus on building adaptive KYC processes that can evolve with business needs, regulatory requirements and risk profiles.


Perpetual KYC - The future of due diligence?

In this whitepaper, learn how current regulatory pressures and RegTech innovations have created the potential for perpetual KYC.

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Encompass’ KYC & AML automation platform

Encompass is a market leader in KYC automation and AML compliance software that create end-to-end value for banks and financial institutions.

Bringing together automation, global data sourcing, screening and lifecycle customer profile management, Encompass empowers your team with the tools, information and confidence needed to scale your business effectively and compliantly.

KYC software for banks to empower your AML compliance

We help leading institutions across the world meet their regulatory obligations with flexible automation software that can quickly adapt to changes in risk management and AML compliance. Encompass empowers banks to operate an efficient end-to-end KYC process. Our powerful automation tools reduce time required for KYC activities and minimize human error, giving your team more time to focus on delivering value for your business and its customers.

How does Encompass work?

Encompass automates time-intensive, manual due diligence processes undertaken by KYC teams to streamline onboarding and compliance. Our anti-money laundering software for banks gives compliance teams instant access to a vast array of trustworthy global data sources to offer significant time and cost savings, and reduce regulatory and reputational risks.

Learn more about how Encompass works

Key benefits of our AML compliance software for banks

Encompass addresses the key issues banks and financial institutions face when trying to remain compliant in an increasingly competitive and complicated market.  Below we outline some of the key benefits of our digital KYC solutions:

  • Simplifying KYC process management by creating a single, consistent KYC process.
  • Reducing human error by using intelligent process automation and data integrations to retrieve and analyze high-quality data from trusted global KYC data providers.
  • Increasing team efficiency by reducing time spent on KYC by up to 98%, streamlining previously manual processes for document collection, data analysis and management and ongoing KYC refresh. 
  • Minimizing the risk of non-compliance by using automated processes to reduce the risk of human error or missed steps.
  • Improving the onboarding experience to bring new clients in quickly without compromising on compliance.

Banking use cases

Combining cutting-edge software, deep industry expertise and years of experience, we analyze existing KYC and AML compliance processes to find opportunities for improved efficiency, service and risk management. Our customers include respected corporate, business and challenger banks across the sector.

Find out how Encompass is working with some of the world’s most innovative challenger banks to help them stay on the cutting edge of financial innovation.

Find out more

Explore our AML software case studies

Encompass provides AML software for banks and leading financial institutions across the globe. Watch our video below, in which representatives from Santander discuss working with Encompass and how our digital solutions have transformed the bank’s customer onboarding process.


To learn more about the impact we’ve created for businesses with our KYC automation platform, check out our AML software case study library.

Explore our AML software case studies

Speak to our AML and KYC experts

Our AML software specialists and KYC experts work with top innovators, institutions and data partners to analyze processes, find opportunities and implement the right technology to help organizations find a competitive advantage and bolster their compliance capabilities.

If you’d like more information about any of the topics discussed on this page, including anti-money laundering requirements or software implementation, get in touch with the Encompass team.

Request a complimentary consultation with Encompass

If you’d like to book an in-depth session with Encompass to discuss how our anti-money laundering software can help you stay compliant and competitive, you can request a free consultation tailored to your specific business needs. Just fill out the form below.