Typically, knowing your client (KYC) processes are fraught with many problems:
- Lengthy onboarding processes
- High onboarding costs (time and money)
- Human errors
- False positives
The Knowing your client (KYC) journey starts when a new client approaches your practice and continues throughout your continuous engagements with the client. It’s about verifying key details and keeping a lookout for potentially suspicious activity so that it can be raised early on. Undoubtedly, many law firms find process-oriented AML and KYC screening challenging because of the various steps involved. The main purpose of KYC is to prevent misuse of the businesses’ services through identity theft, money laundering, terrorism funding, and fraudulent financial transactions.
KYC can be done both online and offline:
Offline: The customer fills in the details in a physical document, signs the document and submits it along with copies of the required paperwork.
Online: The customer uploads the required documents and types in the details required in an online form. The documents are verified by manual reviewers who will correspond with the customer to finish the process.
We know that typical offline KYC processes are often dependent on people performing manual tasks, which can result in mistakes due to the repetitive work involved. With this dependency on manual work, law firms may encounter more obstacles as they grow with onboarding an increasing number of clients efficiently and ensuring regulatory compliance at the same time.
Many businesses in various industries still retain inefficient onboarding processes that require the data to be collected through manual means like paper documents and forms. A survey has shown that 40% of employees waste at least an hour daily on administrative tasks which could be easily eliminated. These administrative tasks include organising filing books, manual data entry, information checks, rectifying errors and more. With increasing workloads today, every second lawyers can save helps. The manual nature of KYC also means that valuable human resources spend longer than necessary on KYC for clients instead of focusing on tasks requiring their skills and experience.
Studies have found that automated KYC workflows can reduce onboarding costs by 70%. By automating end-to-end processes, you can minimise the risk of data-entry mistakes and time spent on rectifications. This reduction in manual KYC processes also significantly reduces data breaches and keeps your customers’ data secure and compliant with industry standards. By reducing the time taken to perform KYC checks, law practice management software serves to give lawyers more time for other pressing tasks.
In addition to minimising the probability of data entry mistakes, legal technology, such as legal cloud software, also serves to reduce user-made mistakes. A cloud-native legal software like Tessaract enables an entire file to be recovered in the case of hardware malfunctions or human errors, like when an employee accidentally deletes a vital file.
Legal professionals are often required to complete certain high-value transactions or to access specialised legal skill sets that could assist in the laundering of the proceeds from criminal activities and funding terrorist-related activities. This means that the burden is increasingly on lawyers, who may be vulnerable to the risk of inadvertently facilitating money laundering, to detect and address potential red flags.
Conventional KYC processes can be time-consuming. Law firms would start carrying out checks by requesting documents from clients that confirm their personal information, such as their legal name, an accurate address and proof of identity. These documents are requested in earlier engagements with the client, but it may take some time for clients to gather their documentation to prove the validity of their personal information. The time costs to both your staff and clients add up.
With access to the right legal technology, you can kickstart client onboarding with a streamlined and industry-compliant AML/CT process. By guiding users through the AML/CT workflows, law firms can upload documents, generate custom digital forms to record correspondences and put in place warnings and reminders to ensure compliance with current AML regulations. Workflow automation of KYC provides clients with fuss-free engagements by reducing the continuous back-and-forths when new information is required.
Some practice management software like Tessaract integrates various modules like digital workflows, digital signing, and legal document management systems. Ideally, systems and processes need to be in place that enables you to verify the identity of clients, alongside the true nature and purpose of the business relationships they engage in. Make it easier to uphold regulatory requirements for AML by bringing your compliance checks and onboarding into a single secure platform like Tessaract.
Conducting these due diligence checks enables you to take a risk-based approach and avoids exposing your firm to any potentially damaging circumstances.
Automate Your KYC processes with Tessaract
Automating KYC processes can reduce costs, boost efficiency, free up human resources and help your business ensure regulatory compliance.
Interested in exploring automated solutions for your KYC processes? Take a look at how Tesseract's solutions can help you streamline your KYC workflow, or get in touch to discover how Tessaract can help you digitally transform your business and meet your business needs.