Compliance

The Rise of Perpetual KYC: A Modern Approach to Compliance and Risk Management

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Chapter 1

Introduction

In today’s world, businesses face immense pressure to conduct thorough customer due diligence to mitigate financial, reputational, and legal risks. The principle of knowing one's business customers has always been vital, but traditional Know Your Customer (KYC) processes often fall short due to their reliance on periodic, manual reviews. While building trust with business customers and partners is crucial, this approach can leave gaps in monitoring, potentially exposing organisations to risks that remain undetected between assessments.

As regulatory pressure increases, businesses are moving from periodic reviews to ongoing, real-time monitoring of customer activity. This shift has led to the emergence of Perpetual Know Your Customer (pKYC), a modern compliance standard that provides continuous oversight of customer data. This guide will explore what Perpetual KYC is, how it differs from traditional KYC, its benefits, and how businesses can implement this approach to stay ahead in the compliance landscape.

Chapter 1

What is Perpetual KYC (pKYC)?

By implementing AI and ML-backed automation tools into the compliance processes, pKYC puts KYC processes conducted during customer onboarding on autopilot, with reviews made more frequently, with greater accuracy and efficiency. The central concept of Perpetual KYC is continuous monitoring to close the gap in which illegal activities can be committed. Once your customers or third parties have been successfully onboarded, your risk engine continually monitors their profiles for any changes based on trigger events, significantly reducing the likelihood of missed suspicious activities.

As companies continue to lean into their third-party network, a data-driven approach to screening allows for better coverage, real-time data, continuous monitoring and targeted assessment activities.

Scott McCowan
EY Americas Risk Management Leader.
Chapter 1

Drivers of Perpetual KYC

KYC processes have evolved from banking industry jargon into essential pillars of financial and regulatory security. Today, the move towards perpetual KYC has been driven by several key factors that highlight the limitations of traditional KYC models and the need for a more dynamic, flexible approach to compliance.

  1. Technological Advancements

    Legacy systems often lack the flexibility and scalability needed for today’s complex transactions. However, advancements in AI and ML offer new opportunities for compliance by processing large volumes of data, identifying patterns, and generating real-time alerts for suspicious activities. Perpetual KYC leverages these technologies to automate and enhance the accuracy of monitoring, reducing the need for resource-intensive manual processes.

  1. Customer Expectations

    Traditional KYC processes can be disruptive, requiring extensive documentation and manual intervention. Automated onboarding facilitated by AI-enhanced technology streamlines the customer journey, providing a smoother experience by automating data collection and verification while maintaining compliance.

  1. Stale Data

    Many organisations still rely on periodic reviews, which can result in outdated data and inaccurate risk assessments. Perpetual KYC addresses this issue by using real-time data to continuously monitor changes in customer profiles, triggering due diligence screening when certain thresholds are crossed, and ensuring information remains current and accurate.

  1. Cost Efficiency

    Effective KYC requires robust policies, risk-based controls, and hands-on reviews to navigate the increasingly complex compliance landscape. Perpetual KYC enables businesses to automate routine tasks, reducing manual intervention and ensuring consistent compliance checks. This not only lowers operational costs but also frees up compliance teams to focus on more strategic activities, helping the organisation stay agile and responsive to emerging risks.

Chapter 1

The difference between Know Your Customer and Perpetual KYC

While both KYC and pKYC aim to ensure that organisations understand their customers and mitigate risk, there are significant differences in how they achieve these objectives.

Traditional KYC involves performing identity verification and due diligence at fixed intervals, typically during customer onboarding and during periodic reviews thereafter. While effective, it creates gaps where customer risk profiles might change but remain undetected until the next review cycle. This can expose businesses to heightened regulatory risks or financial crimes.

In contrast, pKYC provides continuous oversight, allowing organisations to detect changes in real-time and take immediate action. By removing the manual time-bound constraints of traditional KYC, pKYC ensures that businesses stay ahead of compliance requirements and emerging risks.

KYC Process
Chapter 1

Perpetual KYC benefits

From improved customer experiences to enhanced efficiency and access to rich data, pKYC offers a range of advantages over traditional KYC processes, making it the preferred approach for forward-thinking businesses. Here are some of the key benefits:

  1. Improved customer experience

    Traditional KYC processes can be cumbersome and disruptive for customers, requiring them to repeatedly submit documentation. pKYC automates the customer onboarding and due diligence processes by standardising document collection and verification procedures. Now, continuous real-time monitoring of customer information replaces periodic checks, providing a smoother and more streamlined experience.

  1. Rich data

    Boost data integrity and reliability by effortlessly integrating large-volume data sets. pKYC ensures continuous monitoring and up-to-date information, providing actionable insights based on company risk policy, and empowering compliance teams to make swift and informed decisions.

  1. Enhanced risk management

    Strengthen business resilience with ongoing customer data monitoring. pKYC’s proactive approach detects suspicious activities as they occur, improving fraud detection and prevention, and minimising any financial, reputational, and legal risks before they escalate.

  1. Increased operational efficiency

    pKYC streamlines and standardises the compliance process with automated workflows that facilitate real-time data collection, analysis, and reporting. Compliance teams can easily unlock and act upon intelligent customer data, with significant time savings and freeing up resources to focus on more strategic tasks.

  1. Reduced costs

    Put your onboarding process and periodic reviews on autopilot with AI and ML-driven automated workflows. pKYC ensures more frequent, accurate reviews, reducing the need for labour-intensive reviews and safeguarding your business from regulatory penalties and reputational damage.

In the sustainable future state, transformed organisations use data to drive towards enterprise goals, enhanced productivity, and greater profitability.

Deloitte
Chapter 1

Technology enabled due diligence

Implementing Perpetual KYC involves leveraging advanced technology, re-engineering processes, and selecting the right partner. Creditsafe’s KYC Protect tool simplifies and enhances customer due diligence by combining KYC, AML screening, and continuous monitoring into a unified automated platform. This integration streamlines compliance workflows, allowing teams to make quick, data-driven decisions on potential risks and opportunities. With just a few clicks, businesses can efficiently safeguard themselves against legal, financial, and reputational threats.

Effective management strategy to address compliance risk and accelerate customer onboarding, screening and monitoring.

Jessica Yeo
Global Risk & Receivables Manager at JAS Worldwide

Start your free KYC Protect trial today!