Building a strong Know your customer (KYC) and anti-money laundering (AML) compliance is crucial for all financial sector companies to prevent fraud, money laundering and illegal transactions. Ignoring it can cost millions both in lost revenue and the company’s reputation. So, any business that works on a global scale, regardless of its size or niche spends a great amount of time and energy on building compliance.

While most companies have some kind of strategy figured out, very few know how to properly implement it for sustaining operational efficiency and profitability. The majority of these firms continue making the same costly errors that damage their business again and again.
Keep on reading this article to learn the top 5 most common mistakes that companies make when building compliance and how to avoid them.

1. Not monitoring the evolving regulatory framework

Rain or shine, businesses are obliged to comply with constantly changing industry standards, national laws, local and international regulations. Remember a good rule of thumb: when a company gets paid, makes financial transactions or deals with personally identifiable financial data, there always will be a certain corresponding regulation. Every year these regulations become tighter and compliance rules get more lengthy and wordy. Due diligence on new customers, management of AML measures, monitoring of suspicious activity and so on and so forth — very often companies don’t quite understand or even know what they need to be compliant with. Yet, ignoring or not having very attentive monitoring of the regulatory landscape leads to critical errors in the internal processes, along with big fines, legal penalties and other regulatory repercussions.

So, it’s crucial for the compliance team to be aware of every tiny change in legislation to be able to adapt to it right away and take immediate actions whenever compliance issues arise.

2. Not keeping up with technology

Another common mistake that companies make when building compliance is using outdated technologies that were designed in-house, or contracted from some third-party service provider but never updated due to costs, technical constraints, or both. Many companies seriously believe that because the techs they use currently — always performed correctly in the past, and there has never been any problem with breaches, data loss or detecting frauds — they do not need to make any improvements ever. However, this is a very dangerous assumption. In fact, the development of fraud detection technology is well recognised by all sorts of scammers. As a result, the quality of fake documents has been significantly improved lately. And of course, it will continue further thus making it more difficult to detect fakes and forgeries in the future. Therefore, keeping up with technology is a key factor in the process of building an effective compliance program.

3. Lacking internal communication

Nothing ruins business faster than a lack of communication. When the company’s departments have collaboration and coordination between them on a high level, they deal with arising concerns way before minuscule problems become calamities.

In the terms of KYC compliance, internal communication helps all parts of the team understand the value that compliance provides. When everyone stays updated on the latest compliance needs, the company is better protected from unpleasant surprises of audits’ visits and damages provoked by bad actors.

Besides, compliance officers don’t need to spend their time doing tasks outside of their scope. Remember, a compliance mistake affects the whole company, so everyone in the team should be capable of preventing one.

4. Relying on manual processes

Relying on manual labour, such as collecting data or overwriting old documents can potentially introduce errors into the process. When compliance officers create a document manually, they risk to include outdated and no longer valid information or old and unrelated regulations.

Also, It takes a lot of time and focus; costs more resources and requires more personal. All together it complicates the task, decreases the department’s efficiency and brings frustration for both business and customers.

The story isn’t the same for the companies that have been sharp enough to automate their compliance processes. Automation ensures that the compliance department avoids human mistakes and helps the business stay fully compliant with all the regulative updates.

manual processes

5. Doing it in-house

Strictly speaking, in-house compliance is generally inefficient, and often compliance officers have a sad reputation of “business inhibitors”. Rare companies have the time, decent budget and profound knowledge of regulations to build strong compliance. This makes it extremely hard to provide superior protection for the business. In fact, this shouldn’t even be a company’s priority. It is way more productive to contract a third-party service provider, specialising in compliance management, while the company itself keeps focusing on the product’s quality and clients satisfaction.

As you already know, everything related to frauds, risks and compliance must be constantly monitored, improved and optimised. The analytics, competence and flexibility levels of third-party specialists usually are very high because it is their bread and butter. Outsourcing enables companies to improve operational performance, reduce operational risks and increase efficiency through better consolidating and centralising functions.

Summing up

It’s always best to solve a problem before it even occurs, yet the majority of the companies do just the opposite. Waiting until your business faces a regulatory audit instead of taking the time to analyse and improve your compliance policies and procedures is totally unproductive. By avoiding common mistakes described in this article, your company will avoid the lawsuits, penalties and operational delays that can easily happen.

Be realistic about the risks you could be taking with your business.

BASIS ID is a great example of choosing the right outsourced KYC and AML compliance provider.

We are a listed company group in NASDAQ First North Sweden (ZIGN:SE0012930105) and follow every regulatory obligation meaning strong reporting, corporate governance, licensing, and compliance with international laws such as GDPR, data localization laws, and FATF.

At the same time, we are agile development and consulting boutique. We work very closely with our clients, being hands-on onboarding & verification engineers, compliance & risk generalists, and finally, friends, who rely on trust, relationship satisfaction growth, and general intelligence.

Usually, we provide our software, our own intellectual property developed and supported in-house, in addition to consulting and development teams for special integrations or customization according to your plan. We sell solutions to your challenge, not features.

We’re completely driven by our customers. We focus on what matters to them: cost, speed, convenience, and coverage. To prove that, we are happy to introduce you to our partners and clients as well as provide documentation fit to your vendor selection process.

Our partners are SingPass, Dow Jones, Refinitiv, Experian and PwC – leading trendsetters in sanctions, media adverse screening, due diligence and regulations tracking.

We have the adequate skills and expertise to cater to all your needs.
Feel free to reach us for any queries and additional information.


Read our guide “how to choose KYC service provider for your business and what to consider before making the final decision”


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