Posted on 18/05/2020
Remediation is an essential ongoing activity for every banking institution and financial services organization. But despite the introduction of innovative technologies and lightning-fast communication, remediation continues to be a cumbersome process. In this blog post, we highlight key remediation bottlenecks and challenges and discuss digital-age approaches that help solve them.
Remediation: a familiar – but unavoidable hassle?
While onboarding processes have generally improved over the last ten years, client onboardings still fall short when it comes to gathering high-quality, comprehensive customer information. With regulators demanding increasingly rigorous measures to ensure that financial institutions adequately manage risks pertaining to money laundering and terrorist financing, failing to truly “know your customer” can mean fines, lost revenue and worse.
“Remediation comes into play when institutes translate changing regulatory KYC requirements into standards, and then identify gaps between the client data they have and the information they need to accurately evaluate risks, maintain compliance and stay in business,” explains Wouter Haerick, CTO at Harmoney.
Capturing the missing information needed to keep client databases aligned with regulations is a resource-intensive, manual, often paper-based process. Some of the data can be sourced from external databases and registers, but most of the time, financial institutions must directly ask their customers to provide it. That’s where things get difficult, as:
- mailing and processing paper forms is time consuming and error prone;
- it’s difficult to gain a clear overview of the process to create an audit trail;
- customers have terrible user experiences, often juggling long, repetitive forms from multiple institutions at the same time – leading to low response rates and general dissatisfaction.
“At the end of the day, when you don’t collect the information needed to stay compliant, the remediation fails and the institution leaves the door wide open for significant risks,” Wouter continues.
“The key to successful, modern-day remediation lies in cutting out the manual labor, ensuring a comprehensive overview of the process, reducing the time needed to complete workflow tasks and optimizing the customer’s remediation experience. Digital is the only way forward here.”
The challenges of new technologies in traditional industries
The 5 phases of remediation
Every single day, most of us rely on ever-more-advanced IT tools and high-speed internet connections to streamline almost everything we do, from interaction, collaboration and purchasing to banking and even accessing public services.
“With this in mind, it’s puzzling and almost unimaginable that financial institutions continue to rely on ‘snail mail’ for remediation,” says Wouter. “But there are still a number of challenges to overcome when it comes to automating, digitalizing and optimizing this banking process.”
One of the biggest problems with digital remediation is the fact that it’s the new kid on the block. “The financial industry is a traditional domain, which makes it slower to adopt new technologies and ways of working than other industries,” explains Wouter. “Understandable, given that these complicated technologies must accurately manage risk, provide levels of assurance on collected information and support complex workflows and high-stakes transactions.”
Thus, an effective digital remediation tool must be built from the ground up by both IT and finance experts, with security and meticulous regulatory compliance embedded at the core. At the same time, it must incorporate the latest innovations in machine learning and advanced analytics to offer the speed, automation and workflow optimization capabilities necessary to add real value.
Harmoney is a next-generation platform of tools and services that not only addresses the user experience and security challenges of the remediation process, but also automates the task of aligning workflows with regulations, pulling additional data from trustworthy data sources like online registers and following up with the end user.
Behind the scenes, Harmoney’s digital remediation process unfolds in five phases, beginning with the financial institution’s customer data.
Step 1: defining the gaps to be remediated
Our team assesses the regulatory coverage of the current process and identifies what needs to be remediated, defines an outreach strategy and maps out the remediation workflow.
Step 2: migration and configuration
Existing customer data is uploaded into the platform. Our team configures workflows, screenings, customer due diligence checks, and required documents and data by customer type (individual vs. corporate).
Step 3: data enrichment
The platform automatically augments the customer data with information provided by trustworthy external data sources and by reaching out to customers via the channel of their choice. Enrichment is driven by optical character recognition (OCR) and AI technologies to perform, for example, liveness checks.
Step 4: remediation KPIs
Harmoney offers monitoring and reporting dashboards during the remediation process, automated risk grading, a complete audit trail and secure, fully digital interactions between the compliance team, relationship managers and end customers.
Step 5: post-remediation
Smoothly transition from remediation to ongoing customer due diligence and streamline the offboarding of recalcitrant customers.
Efficiency, clarity and simplicity from end to end
In this way, the entire remediation process can be accomplished remotely and entirely online, eliminating large amounts of paperwork and the need for manual processing.
“With digital remediation, your skilled compliance experts – which are often hard to come by – are free to focus on value-adding tasks and risk management initiatives, rather than spending hours going through paper forms and retyping the same information,” Wouter says.
“At the same time, users interact with your institution via a single, centralized platform safeguarded by industry-leading IT security solutions. In just a few clicks, they can submit information and electronically sign forms and declarations without picking up a pen. Simple, streamlined user experiences lead to faster response times, more complete customer information and more effective risk management initiatives.”