Banks that did not digitize their business customers before the pandemic will be forced to rethink their operating strategies in 2020 when their physical branches close or downsize. The result is a greater reliance on your-business technology, which shares many similarities. With your client’s technology, though, the basic specifications have a few important differences.
While many banks treat know-your-customer standards as compliance checkboxes, the your-business standards are more than just compliance issues – they’re a way to improve risk management and banks’ partnerships with business customers, which has implications for risk. .
According to David Wilford, head of legal and compliance for the private payment ecosystem at Global Primex, documents filed with domestic secretaries include valuable information that KYB providers LexisNexis, 4Stop, Refinitiv, Transunion and others can use to collect information on the collected individuals. Using KYC tech from other sources.
But those documents don’t provide enough information to give banks a complete picture of a business customer.
“Know-your-customer is like checking the box and understanding regulatory requirements,” Wilford says. “Know-your-business is like understanding your customer’s business.” Not only do you get that corporate document, but what are you selling? What is your monthly amount? What kind of customers do you have?”
Businesses that before the pandemic sent an owner or representative to apply for service and go into a branch to answer those kinds of questions now need a digital gift to do the same. That’s according to Heidi Hunter, chief product officer at identity verification and fraud prevention firm Ideology. They spoke After a while, the non-profit financial services publication BAI launch Her company’s know-your-business offering.
“We have this fast pace where consumer expectations are high,” Hunter said. “Those consumers are also business owners.”
According to Hunter, most financial institutions rely on Google searches to identify businesses and beneficial owners. While that can determine a business’s location, whether it’s active and how consumers evaluate the business, Hunter said it’s not a way to determine the fraud risk the business represents or whether it’s been doing business with other financial institutions fairly.
Hunter said some Check protection program fraud As examples of know-your-business failures. She specifically pointed out the issue. New Jersey man Man sentenced to 64 months in prison for defrauding $5 million in PPP Got a loan.
“He needed bank accounts to raise this money,” Hunter said. “There were debts and issues in the banks that gave the accounts where the deposits were made. Of course, this was not a legitimate business, and I’m disappointed because there are good people who need that support.”
According to Leslie Bailey, Vice President of Financial Crimes Compliance at LexisNexis Risk Solutions, the technological implications of KYB and KYC systems are similar. Both typically involve referencing data sets from consumer data providers to—in one case the individual consumer and in the other company owners and executives. The way banks can benefit the most is by combining multiple pieces of consumer and business data to gain a deeper understanding of a business’s identity, she said.
KYB can use the same tools as KYC, and this is especially true when it comes to verifying the ultimate beneficial ownership of a company. But verifying legal business documents, business intent and some aspects of the business often requires specialists to do manual labor and investigations, said Miles Pashini, CEO of FV Bank, a Puerto Rico-based challenger bank. Although KYB and KYC technology are very similar, Pashini said KYB has “not yet progressed” as far as KYC.
“If you’re verifying a US business, you can reasonably automate some tasks, but if you’re doing business on-boarding for non-US businesses, it’s a very disjointed process,” Pashini said.
Banks that use know-your-customer technology to automate their know-your-business process can expect the same benefits that come from automating that process, Hunter said. This goes beyond reducing the time it takes to open an account.
“By having a more automated process … you can streamline your process, provide more assurance because more data factors are being checked, and reduce the time it takes to give people a better onboarding experience,” Hunter said.
