Retrospective ID investigations needed for 5AMLD

By Barley Laing, UK Managing Director at Melissa

February 4, 2020

Financial services companies based in the EU now have yet another regulation to adhere to: the fifth Anti-Money Laundering Directive (5AMLD) that became law in early January. But how many have taken steps beyond ensuring their new customer onboarding process is set up for compliance with these new regulations? Equally as important, existing customer records within their databases must be compliant too.

What is 5AMLD?

Designed to strengthen transparency rules to prevent large-scale concealment of funds, 5AMLD is one of many new international and local laws that have been implemented in recent years to tighten know your customer (KYC) and anti-money laundering (AML) regulations. And while they are important to financial services organisations, adherence to these new directives can be complex, time-consuming, and costly.

In the rush to prepare for new KYC and AML regulations, it can be easy to prioritise implementation around the onboarding of new customers over existing customer data. But neglecting your existing customer data can put you in serious jeopardy of not meeting the new legal requirements. This is particularly an issue because, in many cases, previous onboarding procedures are insufficient for contemporary regulations.

Retrospective ID investigation

The solution is to undertake a retrospective ID investigation to ensure that historic customer data is compliant as the KYC and AML laws become more rigorous.

There are two ways to deal with a retrospective ID investigation. The first is to actively engage with existing customers – not only to ensure compliance but to gain further insight and updates that can be used for future targeting. In this respect, new laws, such as 5AMLD, provide an opportunity for re-engagement with customers. However, it’s worth bearing in mind that directly approaching customers with a retrospective ID investigation can not only be costly for the merchant, the additional administrative communication can prove irritating for customers.

Fortunately, this is not the only option to consider. Financial services organisations can instead employ existing technology to undertake a ‘live re-onboarding’ process that operates behind the scenes. It is possible to deliver this without customer engagement and to ensure compliance with the more stringent AML and KYC regulations. The first step is to source a comprehensive electronic or online ID verification tool containing billions of identity elements worldwide that can check and verify customer data globally. It must have the ability to verify a person’s name, address, phone, email and date of birth against trusted reference data, such as credit agency and electoral roll, efficiently and in real-time. Also, access to global politically exposed person (PEP) lists is essential, in addition to the various global watchlists and sanctions checks for AML.

Determining authenticity

To make ‘live re-onboarding’ work, banks need the technology to scan copies of customer ID documents, such as driver’s licences, passports and utility bills; these are items likely already stored for customer due diligence. Then by using the appropriate optical character recognition (OCR) and machine-readable zone (MRZ) technology, it’s possible in real-time to determine whether the ID document is real and valid – eliminating the potential for human error. Furthermore, the photo ID embedded in these scanned documents supports biometric ID verification, such as facial recognition, which helps those in financial services to securely speed up engagement with customers. 

As the number of AML and KYC regulations, like 5AMLD, proliferate around the world, retrospective ID investigations cannot be avoided. Speed, efficiency, and cost are the key reasons banks should leverage existing technology to launch a ‘live re-onboarding’ process behind the scenes.



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