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Best practices for KYC/AML

2022-08-19
4 min read

The KYC Onboarding Process: Building AML-compliant Customer Onboarding

Onboarding is often the first impression customers get about a company. Therefore, it’s critical to build this process properly, as it sets the tone for the customer experience.

Today, we’ll delve into how onboarding can be simultaneously smooth, quick, and in line with Anti-Money Laundering (AML) compliance requirements.

The highlights

  1. What is the KYC onboarding process?
  2. Who needs KYC during onboarding?
  3. KYC/AML requirements for customer onboarding
  4. How to improve customer onboarding (KYC) process flow
  5. Customer onboarding flow peculiarities

What is the KYC onboarding process?

AML-compliant customer onboarding (sometimes referred to as the “Know Your Customer (KYC) onboarding process”) is a set of legal procedures businesses must conduct before working with a new customer.

These procedures include collecting and verifying certain data about customers.

The minimum data businesses need in order to identify their customers includes:

  • name;
  • date of birth;
  • address.

This process is required for compliance with Anti-Money Laundering (AML) regulations. The personal data required for collection may vary by country, so always check the AML regulations and guidelines of your jurisdiction.

To verify customer data, businesses need to obtain authentic and valid documentary evidence from the customer. This can be an ID card (or any other valid identity document) and a utility bill (or some other proof of address document like a tax bill, voter roll, or bank statement).

Who needs KYC during onboarding?

Any AML-obligated industry has to apply KYC procedures during customer onboarding, though non-obliged businesses can also benefit from it.

Regulated businesses include financial institutions and designated non-financial businesses and professions such as:

  • banks;
  • casinos;
  • virtual asset service providers;
  • real estate agents;
  • high-value dealers, etc.

Non-regulated businesses, such as carsharing services and marketplaces, are also encouraged to apply KYC procedures to prevent fraud and avoid financial and reputational losses.

KYC/AML regulations for onboarding by country

Customer onboarding is easy with Sumsub. Request a demo today.

KYC/AML requirements for customer onboarding

Customer onboarding requirements usually depend on the regulations of a given jurisdiction. In many countries, it’s enough to remotely verify documents and perform a liveness check. But in Germany, for instance, businesses have to onboard customers through a video identification process, which includes a range of mandatory steps such as an interview.

However, there are some ubiquitous customer due diligence procedures, including:

  1. Customer identification—acquiring the customer’s personal data.
  2. Customer verification—ensuring that this data is true by verifying it against documents or other reliable sources independent of the customer.
  3. Selfie check or face authentication—determining whether the true document holder is present during the onboarding process.
  4. Address verification—determining whether the customer comes from the claimed region.
  5. Beneficial ownership check—identifying the beneficial owner, where relevant, and verifying their identity.
  6. Understanding the purpose of the business relationship—assessing, and, where appropriate, obtaining information on the purpose and intended nature of the business relationship or transactions.

Regulators determine the required information, documents, and verification methods for passing KYC. But companies can have their own specific requirements for the customer onboarding process.

Companies need to adjust their KYC workflows to specific customer groups. This means building processes that:

  • ensure AML compliance;
  • can be tailored to the relevant industry and the business’s specifics);
  • simplify the customer experience by making onboarding easy, thereby increasing conversion rates);
  • keep costs low.

To make the onboarding process easier, companies can delegate their KYC duties to a verification provider. 

How Sumsub’s solution works

How to improve customer onboarding (KYC) process flow

Automating the verification process can make a big difference. In Sumsub’s experience, automation reduces costs by 40%, speeds up verification to one minute, and frees up company resources, with employees spending 70% less time on compliance tasks.

With right KYC provider, businesses can also benefit from:

Assisted image capture—reduces drop-offs during the ID scanning process by automatically capturing required document fields. 

Fast fail—users get hints and real-time feedback if they make a mistake and can retry every step of the verification process.

Opportunity to continue verification on mobile—users can proceed or complete verification on other devices.

Reusable KYC—business partners can exchange KYC data to eliminate repeat verification for mutual users.

Сustomer onboarding flow peculiarities

Not all customers can be onboarded the same way. That’s why it’s essential for companies to customize their onboarding process. Doing this manually is cumbersome, which is why digital solutions are a great help.

Sumsub’s digital solution enables the following:

Verification levels—the number of steps users take to pass verification. Dividing verification into levels is meant to reduce drop-offs during onboarding. For instance, when a user signs up for the first time, they can pass a limited  level that quickly identifies them without a complex verification procedure.​ This makes onboarding easier, and users are more motivated to go through the full verification process once they’ve been acquainted with the service.

Verification flows—the interface the user sees during verification. It can be localized into foreign languages, keeping conversion high for users around the world. Also, it can be adjusted to the brand of the company (colors, style, etc.) and can contain instructions for passing verification.

A standard verification level consists of the following steps:

  • providing personal information;
  • uploading an identity document;
  • passing a liveness check.

In addition, businesses can use settings to specify supported countries and documents.  For example, a company may choose not to accept a certain document (e.g., a Residence Permit) in one country, while accepting it elsewhere.

Conclusion

  • AML-regulated businesses must conduct proper KYC checks, including customer verification, before working with a new customer.
  • Not all types of customers can be onboarded in one way, which is why it’s essential for companies to customize their onboarding process.
  • Though AML/KYC requirements can be cumbersome, automating the verification procedure significantly speeds up the process and saves resources.

Get in touch with Sumsub today to comply with AML regulations and simplify the KYC process for all of your customers.

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