In today’s globalised economy, businesses and products face similar challenges when it comes to compliance regulations. The challenge for many organisations is in staying compliant as these rules change and evolve over time.
Anti-money laundering (AML) and compliance officers must first understand new regulations and then apply them to their products. To provide clarity, we’ve come up with 4 tips to help businesses stay compliant across their products’ lifespan.
Tip #1: Create a Compliance Plan
Regulations define the scope of every product that can operate within the economy. Compliance plans set out guidelines and best practices for a business’s employees regarding adherence to particular laws and regulations. Overall, a compliance plan exists to protect a business.
The first thing a compliance officer should do is become familiar with the necessary local regulations that a business needs to follow. Regulations provide businesses with a strong foundation, covering all aspects of risk that a business or product might encounter, thereby setting boundaries that shouldn’t be crossed.
Next, a compliance plan can be drafted based on these understandings. Whether the business is in the financial sector, fintech, crypto, or any other, there are rules and regulations to follow. The main aims of these regulations are to eliminate illegal practices like money laundering and data breaches.
Tip #2: Find the Right Solutions
In every business, success depends on choosing smart goals, implementing plans efficiently, and choosing the right tools at the right time to support reaching ambitious targets.
When a business provides a financial service, the most important tool to opt for is onboarding as KYC, or customer verification, is central to compliance no matter where you operate your business. Since no tool can provide all elements of your digital onboarding experience, you must find tools that can work in tandem to provide a seamless onboarding solution. Research is key here as not all tools can be integrated and some solutions are smoother than others.
For instance, in the fintech industry your document management system needs to be able to connect with your identity verification and risk scoring tools. Your choice in all three tools is limited to tools that can be integrated which limits your options.
Something to keep in mind when looking into Know Your Customer (KYC) solutions is automation and the level of automation that your business is comfortable with. Taking the example of fraud detection, is your business looking for a tool that can automate everything or do you prefer to work with a team of specialised fraud analysts who can lower false decline rates more than automation could? This decision will inform the fraud detection solution you choose.
Every solution choice should also be considered in a long-term context to ensure you’ll be able to scale over time. If the aim of the business is to grow exponentially and branch into different industries quickly, it’s in your best interest to choose a tool that will grow with you, rather than needing to replace it a few months down the line.
Tip #3: Is Your AML Tooling Compliant?
You’ve created your compliance plan and researched digital onboarding tooling for your business — great! The next step is assessing whether or not the solution is compliant with regulations.
Most solutions, especially in the financial sector, take regulatory compliance in larger markets into account, but if you operate outside the US and EU, compliance might be trickier to prove. If you are in a highly-regulated space, compliance with new regulations is not a given immediately after new regulations come into force. For instance, when GDPR was implemented in 2018, ambiguity around the regulations meant that tooling solutions were initially slow to introduce compliance.
Early testing is important in this instance and strictly following customer onboarding flows to highlight potential non-compliance is needed. Honing in on each step of the digital onboarding process can open your eyes to shortcomings and benefits. An important aspect to test is the margin of upgrade. This is to see how easy it would be to update the tool if new regulations were introduced into your sector. Your solution should be easy to update, instead of needing to find a new solution if new regulations occur.
Market research is also crucial as a product’s reputation can help you understand its strengths and weaknesses. Asking for current customer recommendations can give you a real-time snapshot of the business.
If you were to prioritise the steps in making sure your digital onboarding process is compliant, the most important element would be to first fulfil your business requirements, then look at the ability to modify and finally, automate.
Tip #4: Be Proactive With New Onboarding Steps
Margins of improvement are a reality in any existing system and tools. The need to upgrade tools emerges when the tool fails to meet current requirements or is not mitigating a new problem that the product faces. Upgrading a tool can be a proactive exercise through periodic testing of existing systems.
As a compliance officer, you’re the first of the 5 pillars of your AML programme. You assess existing processes and onboarding systems and are responsible for the business’s compliance programme. Since the onboarding process is not a single process but a collection of several, introducing a new step can impact all its constituent parts. AML managers must assess which parts of the process a new step might disrupt and mitigate this.
By introducing new steps you should understand the impact of the change and the chain reaction it can have on every part of the onboarding process. Before introducing something new you should also ensure that it will be better than any existing steps and that the change can benefit the onboarding process as a whole.Since the onboarding process can be mostly automated, the existing tools’ limitations should be tested so that it can be easily embedded with existing solutions without much stress.
In summary, compliance is a constant challenge for businesses from financial services providers to ecommerce stores. They have to be much more vigilant and keep up-to-date with regulatory changes so that they might mitigate the chance of a penalty. Following our four tips can help you keep your product compliance but it is always good practice to review your digital onboarding process regularly to ensure everything is up to scratch.