RapidAML Team
2024-06-18
KYC compliance is a critical AML requirement in the UAE. However, data collection and verification during the KYC procedure affect customer experience. The contest between customer experience and KYC compliance is real. Regulated entities in the UAE need to act through it for their AML compliance.
In this article, we will explore the fight and balance between customer experience and KYC compliance. We will discover the challenges while maintaining this balance and strategies to overcome them. But before that, we will learn about the KYC compliance requirements in the UAE.
KYC is a mandatory procedure under AML requirements. It helps you prevent and mitigate the risks of money laundering, terrorism financing, and other illicit activities. That is why KYC compliance must be an essential component of any entity’s AML/CFT framework.
KYC compliance requires you to know your customers better. By knowing them, you can learn about the risks they pose to your business. This includes knowing your customers before boarding them and during the business relationship.
The primary laws governing KYC compliance in the UAE are:
These laws apply to the following entities:
The KYC compliance process involves collecting data on customers, verifying it, monitoring customers on an ongoing basis, and recording the results. The KYC step-by-step procedure is as follows:
Step 1: Customer Identification
The first step involves collecting data on customers like:
Step 2: Customer Verification
In the second step, you must verify all the information collected in the first step. For verification, you must collect documents like passports, national ID cards, driver’s licenses, utility bills, and bank account details.
Step 3: Customer Risk Assessment
This step involves assessing more details on customers like:
All these data points help you build the risk profile of every customer. Now, you know whether the customer is high, medium, or low risk. Based on this, you can plan your decisions and future actions on how to deal with them.
Step 4: Ongoing Monitoring
Knowing your customers doesn’t stop with a one-time exercise. As time passes, customers change, their businesses undergo amendments, and market situations vary. These changes can lead to changes in customers’ risk profiles. Therefore, constant monitoring of customers and their transactions is essential. You can update their risk profiles to stay up-to-date and accurate.
Step 5: Record-Keeping
Whatever information, technique, and results you get in Steps 1–4, save them. UAE’s AML laws require you to maintain a record of these data points for at least five years. These prove to be helpful at the time of audits, investigations, and submission to authorities.
The right KYC software can easily manage all these processes. It facilitates an accurate, hassle-free, and complete process. These solutions improve customer experience, which is necessary. Let’s understand why customer experience is significant for any entity.
Customer experience is critical in any entity. If you ensure a good, positive customer experience, they will enjoy working with you, and they will not bounce off to any other vendor and will stay loyal to your offerings. Ultimately, it benefits you in terms of customer retention and operational efficiency. Thus, customer experience is significant for the growth and development of any entity in the following ways:
It Improves Customer Retention
When you provide a good experience to customers, they stay with you and your products and services. They do not have any motivation to bounce off to another service provider. Their satisfaction levels with your offerings are high, leading to customer retention and loyalty. Also, loyal customers help you attract new customers with word-of-mouth publicity.
It Improves Your Market Reputation
When your customers’ interaction with you is excellent, they provide indirect promotion. They will talk about their satisfaction with your brand to other potential customers. Thus, you attract new customers at no extra cost. Moreover, they give reviews and testimonials on different online platforms, improving your reputation in the market.
It Contributes to Growth
When the customers are happy, they stay loyal to you, giving you more revenue over the lifetime. Moreover, they are more receptive to cross-selling and up-selling opportunities. Thus, happy customers contribute in many different ways to increase your revenues. And this results from the good customer experience that you offer.
It Gives You an Edge Over Competitors
Happy customers lead to customer retention, brand reputation, and higher revenues, which are the perfect ingredients to gain a competitive advantage over others.
It Contributes to Your Product/Service Development Process
While ensuring an excellent experience for your customers, you try to understand them. Thus, you interact and engage with them more at different touch points. So, you know them, their preferences, likes and dislikes, and needs better. All these insights help you develop and innovate in products and services. Thus, it is a kind of customer behaviour understanding exercise that helps customers stay ahead of others.
Thus, customer experience is essential for your business and customers. However, managing both KYC compliance and customer experience is challenging. Let’s explore these challenges.
We understand how KYC compliance is necessary for every regulated entity under AML laws. This means that DNFBPs and VASPs also need to follow KYC compliance requirements in the UAE. However, the problem occurs when you balance customer experience and KYC compliance. You will face several challenges while balancing the two, like:
Time-Consuming KYC Process
KYC compliance involves several steps. You need to collect documents, verify them, and conduct more research for confirmations. All these steps consume a lot of time. The customers get frustrated with such long steps because they consider them unnecessary.
Also, when you manage manual KYC compliance, you are prone to errors. The process is slow and tiresome, and you might miss some details. It can lead to delays in customer onboarding and bad customer experience. Thus, while you try to comply with KYC requirements, you compromise on the customer experience.
Data Security is a Concern
A key ingredient of customer experience is data security. Customers are unhappy if you don’t keep your customers’ data safe and secure.
So, you must ensure data security and confidentiality during the KYC compliance process. You expect customers to share many personal data points for the KYC process. However, you must ensure that the data stays confidential and private. Make it accessible to only a few trustworthy personnel in your organisation.
Any loopholes in your data security policies will break customer trust and affect customer experience. So, install secure systems for customer data collection, verification, and storage. This will ensure a fine balance between customer experience and KYC compliance.
A Risk-Based Approach can be Inconvenient
You will be taking a risk-based approach to KYC and due diligence. A risk-based approach means more stringent measures for high-risk customers, while low-risk customers must follow standard KYC procedures.
Stringent and complex KYC procedures involve many details. This can prove inconvenient for high-risk customers, leading to poor customer experience. Also, you need more resources and time to manage the customised KYC procedures.
On the other hand, using standard KYC procedures for all customers is not justifiable for the KYC exercise. Moreover, it will affect your KYC compliance because you might onboard high-risk customers or reject the low-risk ones, impacting customer experience.
Changing KYC Requirements for AML Compliance
Regulations keep changing over time. Similarly, KYC requirements also change. Moreover, getting details on customers with a presence in different jurisdictions is challenging. This makes compliance with KYC requirements challenging.
Moreover, while KYC requirements change, you need more or different customer details. Thus, KYC becomes a never-ending process, irking your customers more. You have to keep a balance, ensuring a good customer experience and aligning with evolving regulations.
Inefficient Personnel or Technology
KYC compliance requires you to have the best KYC solution to complete the process. It enables KYC automation, thereby saving time and delivering accurate results. Thus, you must deploy multi-faceted KYC software with all the necessary features to ensure a hassle-free process.
Similarly, capable personnel must handle this process. They must know what details to collect, what documents to refer to, and how to deal with customers. Thus, a combination of the right employees and customised, multi-featured KYC software ensures KYC compliance.
The following conditions spoil the overall customer experience:
In such cases, you will neither complete your KYC compliance nor be able to give good experience to customers. So, you must have robust strategies to deal with all these challenges.
An imbalance between customer experience and KYC compliance affects your operational efficiency. Either your customers are unhappy or your KYC process is inaccurate and incomplete, or both. Many entities engage in corner-cutting, which means they sacrifice some KYC compliance rules to ensure a better customer experience. But this practice will increase the risk for your business.
So, you must apply the following proven strategies to overcome these challenges:
Use Advanced KYC Solutions
KYC compliance is a lengthy, cumbersome, and tiresome process. It affects the quality of KYC results and spoils the customer experience.
You need a robust KYC solution that uses AI, machine learning, and biometric technologies. These technologies ensure document verification and identity confirmation. Also, it lets you store the data of several customers, which will be useful later. You can update them as required and analyse them to understand customer behaviour.
Besides streamlining the KYC process, it also enhances customer experience. They do not have to undergo manual processes that are time-consuming and cumbersome. Hence, they are more receptive to KYC queries on their identities and transactional details. Thus, you can achieve a good balance of both – good customer experience and efficient KYC compliance.
Adopt a Risk-Based Approach for KYC Compliance
Don’t use standard KYC compliance procedures for all customers. Categorise them using their risk profiles. Take a risk-based approach to collecting only necessary details from them.
You will need only a few identity details and documents for low-risk customers. Thus, they do not get irked with the cumbersome KYC compliance process. And are happy. Thus, you can ensure a good customer experience and achieve KYC compliance.
But for high-risk customers, you need to collect and verify more details. You need to be more careful in this case. Since you will be applying enhanced due diligence for high-risk customers, you must communicate the need and significance to them. Communicate your expectations. Thus, you can improve customer experience and manage successful KYC compliance.
KYC Support and Guidance
You know KYC is not a procedure that customers like. So, why not try to make it pleasant for them? A pleasant KYC compliance experience will earn you good points from customers.
How do you make it pleasant?
By showing your presence, you can maintain a fine balance between customer experience and KYC compliance.
Communicate Requirements Pre-KYC, During KYC, and Post-KYC
KYC compliance is a mandatory procedure you need to follow. So, why not prepare your customers for it?
Communicate to your customers about the steps of your KYC compliance. Inform them what they need to do to ensure you have all the required details. Give them clear instructions on each step, expectations from them, and results. You can use user-friendly interfaces on your KYC solutions for clear and transparent communication.
Audit Your KYC Compliance to Improve Customer Experience
If customers are unhappy with your current KYC compliance procedures, you can improve them. So, one strategy to balance customer experience and KYC compliance is audit.
Examine the thoroughness, quality, and success of your KYC compliance. If you detect any loopholes, correct them. Improve upon the procedures by making them:
You can audit it yourself. You can also ask your customers for feedback. Check if KYC aligns with UAE’s regulatory expectations. Examine if the KYC automation improves customer experience. If not, make corrections and enrich customer experience during KYC compliance.
Create and Apply Data Security Policies
You know how data security is a concern for every individual. It is for your customers as well. So, you must pay complete attention to it during KYC compliance.
Develop effective data protection policies in your entity. These policies help you keep customer data private and confidential. Also, communicate these policies to your customers so that they trust you with their data.
These are the strategies you must use to ensure a fantastic customer experience while managing stringent KYC compliance.
You will apply these proven strategies, but you need employees to make it happen at the ground level, and not just employees but skilled, well-trained, and committed employees. This is possible if you conduct sufficient staff training on efficient KYC compliance procedures.
Staff training enables you to enhance customer experience while managing KYC compliance. It is important because:
1.Knowledge of KYC Laws and Procedures
The staff must know the KYC regulations to follow while conducting KYC procedures. This ensures alignment with the laws. With knowledge of the procedure, steps to follow, and requirements, they know the ‘what’, ‘when’, and ‘how’ of KYC compliance. Thus, you can carry out a smooth KYC process without hassles.
Such smooth handling doesn’t frustrate the customers. They happily provide the data and cooperate in verification procedures. Thus, customer interactions are smooth, leading to a rich customer experience.
2.Ability to Handle Complaints and Demanding Customers
You must train the staff on complaint handling and clarification of confusion. In this, they will learn customer service skills. You must learn to understand and resolve customer concerns empathetically.
It allows you to handle sensitive situations, such as customers’ frustrations or unwillingness to provide KYC details. You can show care to them, build rapport with them, and express empathy. All these help you enhance customer satisfaction, improving their trust in you.
3.Acumen to Handle KYC Solutions
Technological proficiency is essential to enable the smooth running of the solution. Your staff must know these tools and their features. They must know the AI, biometric, and machine learning technologies used in this KYC software.
They must also be able to handle technology and technical issues during KYC compliance. With this know-how of employees, you can ensure a seamless KYC process, accurate results, and a smooth customer experience.
4.Communication Skills
Your staff have to have good communication skills to handle KYC compliance. You need these skills:
Thus, communicating with customers at every step of the KYC process makes the experience fruitful.
5.Customer-Centric Attitude
A customer-centric approach by vendors is necessary for a fantastic customer experience. When you focus on customers, you can understand their needs and expectations. Thus, you can take a customer-centric approach to KYC compliance.
Thus, a customer-centric approach to KYC compliance helps you build customer trust.
You must conduct regular staff training to avoid any imbalance between customer experience and KYC compliance. Use role-plays, simulations, and case studies in your training programs. You must also track these training programs and staff performance to make changes for better quality.
Conclusion
Thus, balancing customer experience and KYC compliance is necessary. The latter is a legal obligation, while the former improves your business revenues, reputation, and customer retention. You cannot compromise one for the other. So, create a good balance between the two using KYC automation. Moreover, train your employees to handle both simultaneously.
Purva is a Certified Anti-Money Laundering Specialist (CAMS) and a Lawyer with 5+ years of experience.
She has substantial knowledge of Anti-Money Laundering Laws, Rules, Regulations, and AML Compliance Processes. Purva has been instrumental in drafting RegTech processes, corporate policymaking, and fulfilling various legal research and drafting requirements arising from AML laws and regulatory technology.
