The continued pressure to increase efficiencies within KYC and reduce the cost of compliance has resulted in ‘KYC automation’ becoming a hot topic for the industry. Clients often ask us what their priorities should be, who can help them with the process and what the best practices are for implementation. Here are the 7 key principles I normally share:

1. Think transformation, not automation
   Use the opportunity to transform and improve the way you do things today, rather than just automating existing processes. Explore the opportunities for simplification in order to maximise the benefits of automation. Measure the current KYC processes against a set of KPIs and demonstrate the benefits as you progress through your transformation programme.
2. Understand your requirements first
   You need to ensure you know what you’re trying to automate before you start. This sounds obvious but it is not always the case. In the first instance, this requires clearly documented and well-structured policies, processes, and procedures. You will also need to understand the data and documents that you collect and associated metadata. You should then set a clear scope and set of objectives for your programme so that everyone understands what you’re trying to achieve.
3. Start small and deliver quick wins
   Be ambitious with your automation programme but make sure you don’t overreach too early. Try to break this programme of work into smaller phases. Focus on specific areas of automation and build a roadmap that provides a clear structure and plan of attack. Try to achieve some quick wins and show the benefit of automation in order to show results and gain buy-in from the organisation.
4. Use a cross-functional team
   At a minimum, you need representatives from across operations, compliance and technology (likely front-office too). Engage with the users on the ground who will be impacted to fully understand the requirements.
5. Don’t underestimate the data challenge
   Automating any KYC process will inevitably require a huge focus on data. Incorporating new data or taxonomies into an existing data model and existing systems can be the trickiest part of this puzzle, so make sure you focus on the data aspect from day one.
6. Agree third party approach
   Some organisations look to automate processes using only in-house resources, while others seek out 3rd party vendors to solve their automation challenge. The balance is always somewhere in between. Identify areas where a 3rd party can deliver automation in a more cost effective or higher quality way, but be targeted and specific about what you want to achieve. 3rd parties can be used particularly effectively where this is a discreet process that can be segmented and there is a simple way to interface with that solution e.g., via API. Ensure you identify early where you believe 3rd parties will be required to support and which parts you will tackle in-house.
7. Test, and test again
   This is clear with any technology-based initiative, but it is especially important when processes are being automated. Make sure that every scenario including edge cases are considered and tested. If they are not picked up during testing, it could potentially be a long time before anyone realises something is wrong. Engaging a wide user group for testing is critical.

Fundamentally, delivering successful KYC automation into your organisation requires a combination of strong senior sponsorship, excellent programme management, a delivery team with the right skills and experience, and full collaboration within the organisation and any third parties.

Like all technology-led change, continual improvement is critical. It is important that organisations deliver regular incremental automation enhancements. While automation is an important step in the journey to increasing efficiencies and reducing costs in KYC, it is only one piece of the puzzle. Getting this right however will build the foundations for longer term transformation.

This blog was first published on Finextra.