A new report from Consult Hyperion, commissioned by Mitek, reveals that the average UK bank is currently wasting £5 million each year due to manual and inefficient know your customer (KYC) processes.
What’s more, with the introduction of AMLD4 (European Anti-Money Laundering Directive) and later on the introduction of AMLD5, the required frequency and scope of these KYC checks is set to inflate operational costs, and the annual waste is expected to rise to £10 million in three years.
The report, titled ‘AMLD4/AMLD5 KYCC: Know Your Compliance Costs‘, examines the existing cost of manual and inefficient KYC checks for banks, the impact of new AMLD4 and AMLD5 directives, and the potential of electronic identity (eID) verification. AMLD5 suggests using government-backed eID schemes, such as GOV.UK Verify, to improve KYC processes. However, the report concludes that most eID schemes will not be ready for some time and recommends advanced mobile technology to bridge the gap.
“The message to all financial institutions is clear: The cost of KYC checks is much too high, placing too much reliance on inefficient and error-prone manual processes,” said Steve Pannifer, author of the report and COO at Consult Hyperion. “Getting it wrong is both costly and damaging. New rules will result in much higher fines when serious failures in compliance occur. Financial institutions cannot afford to wait for eID to be widely available. Advanced mobile technology provides a straightforward mechanism now to reduce both cost and risk as well as remove friction from the user experience, increasing top line revenue.”
The Consult Hyperion report concludes that AMLD4 and AMLD5, due to take effect in twelve months, will increase these costs substantially as the frequency of KYC checks increase and more transaction types fall within its scope. These checks also have a major effect on conversion rates, particularly on those applicants with a limited credit history.
Written by DFGR Research Team.
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