By Adam McLaughlin, Director – Global Head of Financial Crime Strategy & AML SME at NICE Actimize
2024 was the year perpetual KYC gained significant traction (pKYC) as advanced technology began transforming traditional Know Your Customer from periodic to perpetual. Data intelligence, AI, consolidation of customer profiles, and dynamic workflows ensure that the end-to-end process is automated and streamlined. These approaches deliver greater efficiency, better customer experience, faster time to revenue, and enhanced compliance. With data and AI embedded into ongoing monitoring, teams are now proactively informed of material and non-material events, making pKYC possible. Most importantly, pKYC starts at onboarding, as gathering the correct data at this stage accelerates effective pKYC with a solid foundation.
pKYC is especially critical for corporate entities because the information and activity of corporates is likely to change frequently, this includes corporate structures and ownership. pKYC addresses these issues by continuously tracking significant changes in ownership, activity, or relevant information and promptly alerting compliance teams. By doing this, firms can maintain accurate and up-to-date information on their customers.
What lies ahead? The industry is in the midst of a technology revolution, with rapid advances in AI. Regulators are increasingly adopting a proactive technology-led stance, recognising the effectiveness and efficiency of AI-powered capabilities like pKYC in combating financial crime. In fact in 2023 US FinCEN emphasised the importance of technology evolution stating they encouraged ‘responsible technology adoption’. This technology-forward trend is supported by the increasing adoption of application programming interface (API) connections and generative AI, which enable fast access to relevant data sources and regulatory databases and assessment of this data. The new technology not only ensures the right data is captured but also summaries the data, identifying key features and risks for the user to make a fast assessment of the customer risk.
pkYC and Adverse Media Screening
Over the last few years, there have been drivers to push forward the long-standing desire of banks to achieve perpetual KYC. Regulators in both the United States and the European Union are focusing on the regulated sector taking a risk-based approach, this includes an expectation that banks achieve a more up-to-date view of the risk of their customers.
According to research and advisory firm Celent, specific regulations along these lines include the EU requirement in the Sixth Anti-Money Laundering Directive to be on the lookout for predicate offenses to money laundering, specifically a list of 22 criminal behaviors, and FinCEN’s eight AML/CFT priorities. Adverse media can be used to regularly check news and public record sources that would assist organisations in identifying these offenses early.”
“Banks are keen to use adverse media screening for continuous monitoring—sometimes called event-driven monitoring—to support perpetual KYC. However, continuous monitoring is difficult to do in a practical way largely because of the additional effort required to work through alerts and false positives on a regular basis,” explains Neil Katkov, Research Director, Celent. “Because of this, banks will typically only apply adverse media screening to high-risk situations to get more insight on high-risk entities or to support an enhanced due diligence process. Having the resources to deal with false positives is a prerequisite for adverse media screening.”
Adverse media screening needs to become more efficient to do this effectively, which means that screening tools need to become more accurate. This requires advanced unstructured data analysis to generate more insightful and more accurate adverse media hits than are found using traditional keyword-based approaches. Artificial intelligence—namely, natural language processing (NLP) and now generative AI—can help with this by understanding the context of how an entity appears in the sources. Despite the promise of these technologies in supporting more accurate screening, at present, few adverse media providers have optimised their adverse media screening tools with NLP or genAI capabilities.
“Top functionality for an adverse media solution supporting perpetual KYC includes the ability to run extensive external unstructured data sets as often as a financial institution wants or needs to; with accurate, true positives and low false positives rates; run on the cloud to take advantage of hyperscalers’ scalability and computing power so the service can be offered at a reasonable cost; and applying NLP—and now LLMs—to increase the accuracy of the screening or detection,” concluded the Celent analyst.
2025 – The Year for Integration
As technology increasingly enables pKYC, 2025 will be the year when organisations begin to invest in achieving true pKYC, modernising their solutions to fully integrate their KYC solutions with transaction monitoring, fraud detection, and screening as well as enriching access to external data sources.
The industry has not yet seen wide scale adoption of generative AI, especially in the KYC space but in 2025 adoption of this technology will accelerate, as will the increase in use cases which generative AI technology is applied. The combination of richer data integration, generative AI and seamless integration between solutions across financial crime and compliance is a powerful combination.
As the use of this technology increases organisations will see compounding benefits resulting from a greater understanding of their customer. These benefits include more accurate risk assessment of customers, improved customer experience and greater revenue opportunities through a more comprehensive customer understanding. True pKYC is now a reality and continued technology advancements is making the returns of a pKYC approach.
