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How the Right Customer Due Diligence Solution Can Elevate the Client Onboarding Process

customer due diligence

How the Right Customer Due Diligence Solution Can Elevate the Client Onboarding Process

In much the same way that employers judiciously vet job applicants to determine who might be most fit to work for their organization, financial institutions must evaluate potential clients thoroughly before allowing them to open accounts, apply for loans, or avail themselves of other important services. These risk assessment and screening measures are broadly referred to as customer due diligence (CDD). CDD is a crucial part of the larger client onboarding process. It is aimed specifically at mitigating fraud and money laundering risks.

However, the traditional CDD processes are time-consuming, fragmented, and bogged down by a large number of steps and customer touchpoints. The result is often great frustration on the part of clients. That’s why many abandon their applications midway through, leading ultimately to the loss of significant revenue for the institution.

As technology grows more sophisticated and customer demands evolve, financial institutions need to simplify, streamline, and accelerate their onboarding processes. Many successful organizations explore digital software solutions focused on customer due diligence, seeking to automate CDD processes where possible. Pursuing technological innovation in the area of CDD has numerous benefits for the institution and its client base alike. Let’s take a look at some of the most important ones:

Manage Customers More Efficiently

An effective CDD solution makes it easy both for customers to upload their essential data and for back-end teams to consolidate that data in a centralized customer profile without going back to the customer for verification multiple times. It can also seamlessly process data from multiple sources, as few financial institutions store their information in a single place. More often, this data is stored across multiple databases in various formats and file types; the best CDD software should be able to connect to these many distinct systems and integrate the data they contain.

Minimizing the time spent gathering data also means more time and opportunities to analyze that data effectively. CDD solutions can automatically screen client data against a broad assortment of risk sources, including sanctions lists, internal blacklists and whitelists, PEP watchlists, and others. Access to complete customer information also affords investigators a comprehensive and holistic view of each entity and the associated risks they may present to the institution.

Assess Customer Risk More Effectively

Financial organizations often deal with millions of customers. Therefore, it’s essential to prioritize customer due diligence activities for clients that present the greatest risk. Digital CDD tools use complex algorithmic scoring mechanisms to expeditiously measure the amount of risk presented by each potential client and identify especially high-risk entities. These processes pave the way for faster, better-informed, and more confident decision-making on the part of investigative teams when it comes to evaluating clients for possible involvement in illegal activities.

With a CDD solution, institutions can ensure that all analytical processes pertaining to risk assessment are documented within the system. The software uses completely transparent and explicable risk scoring models for the benefit of internal auditors and external regulators alike. Having clear and comprehensive documentation of CDD processes expedites the institution’s fulfillment of compliance guidelines. Plus, it allows them to meet their regulatory obligations more easily.

Improve the Overall Customer Experience

International CDD regulations require institutions to verify a customer’s identity against several public databases and watchlists before the institution can provide such services as approving the customer’s loan or allowing them to open a new account. Institutions also need to conduct additional screenings for significant changes to client information, such as address and name changes. The need to comply with regulatory guidelines frequently makes for a slow and convoluted onboarding process. This can lead to higher rates of client attrition, increased operating costs, and potentially hefty penalty fees for information errors and other incidents of non-compliance.

However, the use of intelligent CDD software can address or at least mitigate most onboarding problems. The most pressing customer demands when it comes to financial services include speed, ease of use, and personalized service. Automating identity verification procedures accelerates the overall onboarding process, thereby increasing customer satisfaction in the process. 

Many effective solutions allow customers to upload copies of IDs and other application materials through their computers or mobile devices. If customers need support during onboarding, bank employees can engage with clients on a platform of the client’s choice. This includes text-based messaging, audio chat, or video calls. 

Final Thoughts

The right CDD solutions enable banks and other financial institutions to gather client data more quickly, analyze it more efficiently, and successfully walk the tenuous line between providing a favorable onboarding experience to customers and meeting regulatory obligations. Supported by state-of-the-art digital software, institutions can be confident that they are welcoming the right clients while working diligently toward customer satisfaction—both during the onboarding process and beyond.

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