Tech Traps: Remember it’s Know Your Client, Not Know Your Criminal

Dermot Corrigan smartKYC CEO 30 March 2020

Tech Traps: Remember it’s Know Your Client, Not Know Your Criminal

Dermot Corrigan is CEO of smartKYC, a firm taking a truly multi-faceted approach to client screening. Here, he explains why wealth managers are missing out by focusing overmuch on “red flags” – when in fact they can make KYC a competitive advantage by ensuring relationship intelligence is fully leveraged throughout the client lifecycle.

With ever-tighter regulation and the need for enhanced due diligence when onboarding both individuals and entities as customers of your firm, it is important to remember what the C in KYC stands for: client, not criminal.

KYC (Know Your Client) screening has become synonymous with checking for “red flags” on a firm’s clients, with enhanced scrutiny and stricter regulation coming into effect since the terrorist attacks of 9/11.

But client knowledge should never be the exclusive preserve of the compliance function, nor should it be an activity designed solely to provide reasons not to do business with someone.

Instead, we advocate a holistic approach, whereby technology-led relationship intelligence is used to good effect at all stages of the client journey. Overarchingly, we believe that KYC is about identifying the opportunities as well as the potential risks a relationship represents, and utilizing everything you can know about a client to increase satisfaction and loyalty, and deepen wallet share.

Broad business benefits
The business benefits of this approach are wide-ranging, however, as it lays a foundation for resolving many of the pain points that currently plague the sector. Faster, frictionless - and more confident - onboarding is just the start.

Having a single view of the client, from an intelligence perspective as well as a process perspective, reduces the (very real) risk of duplicated effort and critical data loss, but more importantly it enables better client engagement and the provision of higher quality advice. It will also help your organization function better, putting an end to siloed technology investments and fostering real alignment between compliance and relationship managers (RMs).

So, what do we mean by “relationship intelligence”, and when might it be deployed? In essence, we mean serving up precise, useable information on clients and prospects. This might be with an eye on risk or opportunity, and could be before, during or after onboarding. There are compelling use cases at each stage.

At the prospecting stage, our technology allows RMs to be alerted to specific lead opportunities as defined by the business. These lead triggers could include a breaking media reference to a specific type of liquidity event, a material change at a corporate registry, such as a new director appointment, or a new share allocation.

A tear sheet is then automatically generated containing need-to-know information on the target, including their background, assets, career history, lifestyle, hobbies, philanthropic and political interests, source of wealth and so on.

Furthermore, it might be found that Target A is a patron of the same charity as happy Client B and the RM therefore has the potential for a warm introduction to Target A. Armed with all of this, the RM has a huge head start on rivals, is better informed and stands a much greater chance of success in signing that potential client up.

What’s more, we ensure that no effort is wasted in wooing unsuitable prospects. At this point, preliminary compliance checks are performed automatically to ensure that there should be no obvious reason for compliance to reject this client at onboarding

At onboarding
This is where full due diligence is completed, but not in the traditional, labor-intensive and time-consuming way. Instead, the process is automated so that all external and internal watchlist sources are screened with a high degree of identity precision and all elements of exposure risk are addressed, including to Politically Exposed Persons or sensitive countries/industries.


Our solution will automatically identify directorships and shareholding (including ultimate beneficial ownership), check legal judgment records and corroborate sources of wealth, so that all the major compliance boxes are ticked.

In addition, we leverage artificial intelligence to ensure adverse media analysis is carried out with greater precision and subtlety than ever before. Not only is risk classified in a fine-grained way (fraud, money-laundering, organized crime, ESG etc.), but nuances are picked out, such as the gravity of an offence (e.g. a parking offence versus bribery), or type of accusation (infidelity versus war crimes).

While this research heavy lifting is done by machine and presented to the compliance user in the desired fashion (e.g. via their Client Lifecycle Management system, the smartKYC user interface or in the form of a dossier), the rules by which the risk assessment is done are customized by the client organization to accord with their risk policies. Decisions are not made on a binary basis, but rather on a risk-based one.

It is easy to see the business benefits of looking for positive developments, like a company’s international expansion, which might represent an opportunity to generate further business from the client.

If the potential client has indeed been taken on successfully, our software can then be set to monitoring mode.

Monitoring can be periodic, whereby a full refresh of the client file is carried out at intervals determined by risk policy. If, for instance, it has been determined at onboarding that a client has a footprint in a high-risk jurisdiction and operates in a high-risk sector, monitoring might be more frequent than would otherwise be the case.

However, the industry is now trending towards a more proactive approach whereby all clients are monitored in real time, so that the business can respond quickly to new developments. If a client is disqualified as a director, has new charges brought against them or is cited as a sanctioned individual, a rapid response may be key to a regulatory defense. Ignorance will, of course, be no defense at all.

Yet again though, this should not be all about risk. It is easy to see the business benefits of looking for positive developments, like a company’s international expansion, which might represent an opportunity to generate further business from the client. At the very least, having a nice reason to pick up the phone, like a marriage or positive press, can do wonders for relationships.

Recasting KYC
In today’s data economy, there are incalculable riches of relationship intelligence available to be harvested. But that, of course, means that this wealth of information can become a trap in itself.

The hard part in any monitoring program is to ensure that the business is not swamped either with false positives or by seeing the same piece of information repeatedly, especially given the repetitious nature of news. A multilingual semantic search platform like ours can filter out that noise and so minimize the risk of seeing the same risk or opportunity multiple times.

Being able to harmonize all your KYC sources and run concurrent searches on all your clients daily can give you a truly holistic view of all their respective potential risks and, most importantly, their needs and requirements.

It is easy to fall into the trap of always thinking about KYC in the negative or believing that sifting all the thousands of potential information sources out there is an unwinnable battle. We believe it’s time for KYC to be recast in a far more positive, proactive light.

This forms part of this publication’s latest research report, Technology Traps Wealth Managers Must Avoid. Download your free copy by completing the form below.

Register for WealthBriefing today

Gain access to regular and exclusive research on the global wealth management sector along with the opportunity to attend industry events such as exclusive invites to Breakfast Briefings and Summits in the major wealth management centres and industry leading awards programmes