The process of "knowing your customer" - one of the requirements in AML laws and regulations - continues to cause a lot of companies problems in different ways. While authorities tighten their grip on preventing money laundering, businesses are struggling to ensure legal compliance while providing great customer experience.
Compliance demands have changed the game
Updates and add-ons in AML-regulations in recent years have changed the playing field for all businesses which falls under compliance requirements. And affected business are increasing in numbers too, since new sectors and branches have been added in the mentioned AML updates, meaning it now applies to everything from real estate brokers and car sales to auditors, accountants and insurance companies. Failure to comply usually result in fees, normally from 500 euro and up to 10% of company revenue. However, in the event of serious, repeated or systematic violations of the Money Laundering Act, authorities may order a financial institution to cease the business operations completely.
Compliance requirements are causing an increase in information needing to be gathered from customers (and potential customers) which in turn is resulting in more manual labour and assessment. By extension there is quite a hefty increase in costs for companies trying to stay compliant, especially for those trying extra hard to avoid aforementioned penalties from authorities. On top of that, research shows that the more compliance a company is forced to ensure, the worse their customer journeys and onboarding flows are perceived. Churn increase, customer experience decrease and missing out on customer loyalty are a few examples of the effect this might have on your business.
"Breakdown: average business costs of AML (The true cost of AML compliance Europe – 2017)"
Onboarding done the wrong way will drive the clients away
Far too often we find onboarding-flows that include filling out dozens of documents, identifying yourself multiple times and awaiting manual assessment for weeks before being approved or declined as a new customer. This process is time-consuming, complex, costly, prone to duplication and redundancy; the result is delays in onboarding a new client or losing a potential one. Consequently, the experience can be a "make it or break it" for the potential or ongoing relationship with customers.
Summing this up, businesses spend an awful lot of money, due to inadequate response to regulatory obligations, however this still backlashes into poor customer experience and service. More costs and less revenue, probably not the way you would want to go.
"By reducing manual labour and assessment you can significantly increase business value"
Is automation and digitization the way to go?
Beyond mentioned side effects of businesses trying to stay compliant, approximately 35-40% of customer information in Swedish companies' registers is estimated to be incorrect and outdated. In addition, roughly 20-25% of relevant data in registers are changed annually, meaning this is starting to become a vicious circle for businesses from a lot of perspectives. Data quality is therefore important to ensure, both at the start of a business relationship, as well as continuously in the long term.
By reducing manual labour and assessment you can significantly increase business value. In doing so, digitization and automation are key ingredients, creating customer journeys and onboarding-flows that reduce churn while increasing customer experience and conversion rates. Below we will show an example of a flow created for one of our clients, combining full compliance and a smooth customer experience.
"Example of Roaring API's creating a compliant and smooth customer onboarding flow."