Reducing Due Diligence from Weeks to Minutes

Reducing Due Diligence from Weeks to Minutes

The regulated sector is diverse and institutions must keep pace with developing rules and regulations in order to remain compliant.

As such, creating a smooth onboarding process which is both robust and efficient is no mean feat. The challenge for businesses is to continue to meet evolving requirements without adding friction and delays, which lead to customer frustration and drop-offs.

When onboarding, financial institutions need to know who their prospective customers are before engaging in a business relationship. This is where customer due diligence comes into play.

Below is a list of all the topics we will cover in this article. Go ahead and click on any of these links, and you’ll be taken to that specific section.

What is Due Diligence?

Customer due diligence (CDD) is the process of identifying your customers and checking they are exactly who they say they are, ensuring that they are properly risk-assessed before being onboarded. In practice, this means obtaining a customer’s details and cross referencing them with those of an official document which confirms their identity. 

Customer due diligence (CDD) is at the heart of Anti-Money Laundering (AML) and Know Your Customer (KYC) initiatives, and is designed to help financial institutions verify their customers, confirm they’re not on any prohibited lists and assess their risk factors. 

There are three levels of due diligence: simplified, standard and enhanced.

Simplified Due Diligence (SDD) is used in situations where the risk of money laundering or terrorist funding is low and full CDD is not necessary. 

For example, in accounts which are low-transaction/value, the opportunity is limited to perform illegal activity. Therefore these small value accounts can be exempt from stringent CDD to help reduce onboarding friction for customers and financial institutions.

Customer Due Diligence (CDD) is information obtained on customers to verify their identity and assess the risks associated with that customer.

These are the checks most typically taken out on customers when opening a financial account in some form.

Enhanced Due Diligence (EDD) is additional information collected on higher-risk customers to provide a deeper understanding of activity to mitigate associated risks.

For example, most jurisdictions require politically exposed people (PEPs) to go through the EDD process. Other factors that might trigger EDD are high-transaction/value accounts, accounts that deal with high-risk countries, or accounts that deal with high risk activities.

Due diligence is important, not only to comply with regulation and avoid hefty fines & sanctions, but as smart business strategy – not knowing your customer in today’s financial world is a non-starter.

International standards require that a risk-based approach is applied to customer due diligence. Companies should assess the money laundering/terrorist financing risk each client poses and adjust their due diligence scrutiny accordingly. ‘Where ML/TF risks are higher, banks should always apply enhanced due diligence, although national law or regulation might not prescribe exactly how these higher risks are to be mitigated,’ says the FATF.

Speeding up the Process

Regulated firms undertaking financial activities are required to apply risk-based customer due diligence measures to prevent their businesses from being successfully targeted by money launderers or terrorist financiers. By conducting thorough KYC & AML checks, businesses can dramatically reduce the financial, reputational, regulatory and strategic risks from other entities.

Traditionally, businesses would perform due diligence using manual processes. Manual work requires a human, which means it takes more time, is more prone to errors, and offers zero visibility which keeps almost everyone in the dark. Manual processes can be time-consuming, frustrating and create a poor user experience for customers who may be likely to move to a competitor. 

In the Acuant Annual Identity survey, 64% of respondents would abandon creating a new account online if the process was too time consuming, but companies shouldn’t sacrifice security for speed; 70% of respondents would abandon if the process didn’t feel safe. Businesses looking to employ both speed and security in a robust, efficient onboarding process should implement automated multi-factor authentication.

Automated processes are not only quicker, but they are more accurate and efficient and a user can find out the verdict of their application in seconds. Consumers are increasingly becoming more comfortable with automated solutions and utilising their wider digital footprint as a means to perform an identification check. Consequently, businesses have had no choice but to innovate – and quickly – or risk losing market share and reputation to their more digitally nimble competitors. 

Organisations that fail to adapt risk being overtaken by rivals who are more open to innovation and growing numbers of businesses are realising the necessity of, not just being online, but providing a first-class digital experience.

How We Can Help

Here at Acuant, we’ve developed a complete suite of automated solutions to satisfy all of the above requirements while optimising the KYC and due diligence process.

Our comprehensive family of solutions means there is no need to manage multiple integrations from different providers. This approach helps increase pass rates in countries all over the world, verifying identities using a number of data sources, which in turn increases revenue, increases customer acquisition with real-time onboarding and creates a better customer experience. It can also help future-proof your business with the ability to switch on additional services as your requirements change.

Onboard up to 68% more customers than with traditional identity verification methods, using our single universal API, Sodium. One simple integration; a flexible 360° solution which is scalable and secure.

Book a demo today and see for yourself how powerful our suite of solutions are.



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