This blog post was featured on Forbes.com.
Collaborating author: Andrew Lim
One of the current trends in financial services is the increased awareness and adoption of robotic process automation (RPA). RPA can be utilized in any process within your financial institution, but if you are looking to get on board, a good starting point is your know your customer (KYC) process. However, there are several factors to consider before deciding to implement RPA. Let’s take a look at what you need to know about RPA in the context of your KYC process.
How RPA Works With The KYC Process
KYC is a key part of an effective anti-money-laundering (AML) framework and mandates that a bank perform customer due diligence to ensure they are not enabling financial crimes to occur. For most financial institutions, the KYC process is a series of routine and repetitive procedures across different customers that are being onboarded. In some larger financial institutions, the tasks are even repeated across different departments that deal with the same customer. These mundane tasks include:
- Screenings of the customer, beneficial owners (the human person who owns and/or controls a legal entity customer) and other related parties (e.g., business associates)
- Performing customer due diligence using a set of publicly available tools or trusted sources
- Inputting data into a KYC system
- Setting up the customer in non-KYC-integrated downstream systems
Other highly manual or repetitive processes with little outside dependencies such as these could be candidates to consider for RPA as well.
How Can RPA Help?
Let’s study in detail the first KYC example above: performing screenings. Screening is the process of searching for news, sanctions or other factors that may indicate a heightened risk of doing business with a particular customer. The KYC analyst may be performing the following steps for every beneficial owner, controlling party and related party for each new customer being onboarded:
- Identify all parties
- Input related parties, one by one, into online screening tool
- Download PDF of search results
- Upload the PDF and screening results into the KYC system
- Review and disposition the screening hits in the KYC system
In this small scenario, RPA has the potential to optimize the repetitive aspects of the screening process, such that the KYC analyst merely has to initiate the RPA process, and in a matter of seconds, the bot will automatically execute the first four steps of the process. The analyst will then be able to start step five with the screening results PDF open and an audit trail available to view as needed. The audit trail will also be key in demonstrating the effectiveness of this process to internal audit and regulators.
The main benefit of RPA in this scenario is that the KYC analyst can direct their efforts toward the performance of analytical functions, thus enhancing the quality of the KYC files. In addition to reducing KYC processing time, RPA can also reduce the chance of human error and improve the quality of work in each file.
How Can RPA Hinder?
Despite the potential benefits of RPA, there are some factors that you should weigh against before deciding to get on board, such as:
- Cost: Costs can vary depending on the volume of KYC files, complexity of your KYC process and the extent to which you implement RPA. There are upfront implementation costs as well as ongoing licensing and maintenance costs. For this reason, smaller or simpler KYC processes may not be financially viable or may have longer payback periods.
- Job Security: Inevitably with RPA comes the question: "Will the bot replace my job?" You must consider if the culture of the financial institution, as well as training, is robust enough to educate KYC analysts on their roles in the post-RPA landscape.
- Effectiveness: An RPA implementation takes diligent planning, scoping and documentation, as well as stakeholder buy-in, to be successful. If, for example, a lack of upfront time and resourcing investments results in the bot being scoped to automate only steps one through three above, leaving the KYC analyst to upload files manually, RPA will not be as effective as what was envisioned.
While RPA has the potential to speed up processes by removing the robotic tasks from the plate of the human analyst, there are financial and operational risks that come with implementing it. If you decide to proceed with RPA, consider the KYC process as a pilot given its manual nature and lack of dependencies on other processes. If implemented successfully, you can take your RPA decision-making process to other routine manual processes across your organization.