At what point does rethinking your approach to in-life monitoring become unavoidable?
For the London branch of Commerzbank AG, it should have been notified by the FCA, on three separate occasions, of the weaknesses in its operation. Instead, these warnings were ignored and, in the middle of 2020, it was hit with an eye-watering £37.8m fine.
It’s an extreme case, but one that is a symptom of a wider industry shift. Driven by domestic and international regulatory changes, banks now have to build a much greater resilience to economic crime and drastically improve their management of that risk. The British government’s Economic Crime Plan 2019-22 is now in full swing; inaction, or delayed response, is no longer a viable option.
Now, sporadic in-life checks are no longer fit for purpose. And, as competition in the sector intensifies, up-to-date information on SME customers is more than just compliance-related hygiene – it’s an opportunity for growth, too.
Where are we now?
- £37.8m. The fine administered to Commerzbank AG by the FCA.
- 2019-2022. The timings of the government’s flagship economic crime plan.
- 3-5 years. The average time between customer monitoring checks by financial service providers.
As the new decade gathers pace, government regulation continues to evolve – and with it, so are expectations around adequate safeguarding against financial crime. Sweeping new initiatives from the FCA, combined with a natural reshaping beginning to occur post-Brexit, mean that banks need more than just a static snapshot of the businesses they choose to work with.
These snapshots are carried out, at best, as annual checks. Industry estimates actually suggest this timeframe is more like every 3-5 years. But we know that SMEs, and the landscape within which they exist, evolve rapidly; 3-5 years could be an entire lifetime.
So what happens when things change – and how do you ensure the records and data you have is accurate all the time?
Automate customer lifecycle management to stay on top of regulatory compliance
As we covered in our guide to reimagining the onboarding process, consumer expectations are changing. Almost three quarters of adults in the UK (72%) are set to be mobile-first bankers by 2023. The digital space isn’t just a new frontier for finance anymore; instead, it’s a life-or-death battleground.
But for banks, failing to meet these new digital expectations presents a number of different challenges.
The first is that, without an automated lifecycle management approach, KYB and KYC processes become increasingly expensive. The overwhelming volume of new customers (the number of businesses formed annually has almost doubled in a decade) means that it’s impossible to deploy relationship managers for every one.
It also means that human error when monitoring such a vast number of customers becomes inevitable (and remediating these errors incurs further cost). These errors form part of the second challenge: staying on top of regulatory compliance. The solution to both, fortunately, is a simple one.
Using an API-first approach, real-time data can be fed into your risk or compliance engine to help you automate decision-making around existing customer accounts. With manual processes stripped away, internal teams become more efficient, focusing on the information that matters most exactly when they need to.
From there, lifecycle management becomes a dynamic part of your offering, rather than a static one. And, as regulations continue to evolve, your ability to remain compliant stays one step ahead.
Simplified in-life monitoring to identify changes in your customer base (and spot opportunities for growth)
If automation can unlock real-time, relevant data on your customers, it can also unlock vital insights that would have previously taken considerable man hours to uncover and verify. Now, technology exists to enable internal teams to deploy tools that flag when things change – and this reaps rewards not just from a compliance perspective, but from an upsell perspective too.
We know how quickly the SME sector moves, and it’s vital that the development of financial products matches these new needs. To do so at pace has often proven difficult without compromising on risk, but this dynamic has changed considerably.
Now, technology exists that enables you to be automatically informed of company changes. This new information is ready-made to feed into your sales and marketing funnels as you look to identify prospective new business, or whether existing clients are ready for a new product, service or more support.
What changes can I track to aid my in-life monitoring process?
- Company status. Stay on top of all the businesses forming, growing, dissolving or ceasing to trade. Remove organisations that are no longer in operation from your CRM, and update the risk profile of those who may be encountering difficulties.
- Officer appointments. New appointments occur on a daily basis and have a considerable impact on the viability of a business or its risk profile. Surface individuals that may need sanction checks or PEPs, or identify new business opportunities following organisational changes.
- Company financials. Proactively or automatically evaluate the risk of a customer or prospect as their new reports are filed. The easiest way to get a clear view of a business and its bottom line.
- Employee count. A solid indicator of a company’s progress, and one that helps pinpoint organisations that may need new lines of credit, insurance or an enhanced product offering.
- Almost anything else. Address changes, shareholders and persons of significant control, Gazette Notices – almost every piece of public information required can be sourced within seconds.
Re-engage prospects at the right time
Your internal teams are now completely connected to the businesses they are working with. Once compliance and risk appetites have been satisfied, and potential upsell opportunities identified, the final piece of the puzzle is timing.
It’s key to note that traditionally, getting re-engagement timings right was almost impossible. Compliance consultancy firm Protiviti estimates that, of the time spent conducting periodic customer reviews, 80% was spent on collecting the data rather than analysing it. The ability to then roll out timely campaigns or carefully considered direct outreach is impacted significantly
- 80%. The percentage of the periodic review process spent on data collection when done manually.
- 80%. The estimated increase in efficiency experienced by Santander after implementing technology into their monitoring process.
The core benefit of this is felt most keenly by your relationship managers. Powered by RegTech solutions, they can focus on core activities instead of being burdened by manually searching websites, conducting credit checks and direct contact at inopportune moments.
As with the onboarding process, a real-time approach to in-life monitoring dramatically changes the scale of opportunity your organisation can unlock.