Understanding KYC for FINTRAC requirements: Compliance Without Compromise

Every interaction requires a certain level of trust between a customer and a business; an assurance that “you are who you say you are”. Businesses who are regulated by FINTRAC (Financial Transactions and Reports Analysis Centre of Canada) must follow a process called KYC (Know Your Customer) to adequate verify the identity of all prospective and active customers, and help safeguard against identity theft, financial fraud, money laundering, terrorist financing, and account takeovers. 

In this blog post, we'll discuss KYC as part of FINTRAC requirements. We’ll explore how digital trust solutions can enhance compliance while prioritizing customer experience, and we’ll provide a checklist to help your organization move forward in today’s digital-first world.

What is required to satisfy KYC compliance?

KYC guidelines were drafted in 1970 when the United States passed the Bank of Secrecy Act (BSA). Over the years, KYC practices have been standardized and globalized and international bodies like the Financial Action Task Force (FATF) have set the gold standard for KYC regulations worldwide¹.

There are several key components required for compliance:

1. Customer Identification: Obtain and verify an individual’s identity using one of five different methods² including the government-issued photo identification method, the credit file method, the dual-process method, the affiliate or member method, or the reliance method.
2. Record Keeping and Ongoing Monitoring: Keep detailed records of all transactions to detect suspicious activities and update customer information and identification documents as required.
3. Risk Assessment and Mitigation: Implement a risk-based approach to identify, assess, and mitigate the risk of money laundering and terrorist financing. Develop and maintain policies, procedures, and controls to manage and mitigate identified risks.
4. Reporting and Compliance: Report all suspicious transactions to FINTRAC. Establish and maintain a comprehensive compliance program that includes policies, procedures, and training.
5. Enhanced Due Diligence (EDD): Apply enhanced due diligence measures for higher-risk customers and transactions, such as those involving politically exposed persons (PEPs) or high-risk jurisdictions.
   
   

How KYC Impacts a Customer’s Experience

As a heavily-regulated process, KYC isn’t very customer-friendly. In fact, financial institutions in North and Latin America rank KYC as their #1 onboarding challenge³. Consider these unsurprising statistics: 

• 40% of time spent during the onboarding process is consumed by KYC⁴
• 77% of consumers report that onboarding can make or break a brand relationship⁵
• 89% of users have had a bad KYC experience; 13% changed their financial institution as a result⁶

Traditional methods of KYC compliance often result in lengthy and frustrating customer experiences, high operational costs and customer churn.

Balancing KYC Compliance with Customer Experience: A Checklist

Businesses are searching for a better way to satisfy FINTRAC-required KYC compliance while keeping their customer experience top-of-mind – and they’re starting to look at digital trust technology to do so.

Digital trust technology streamlines and simplifies the process of identity verification (one element of KYC compliance), leading to faster onboarding, optimized operating costs, enhanced customer satisfaction scores and improved client conversion. 

This checklist can help you implement a customer-centric, automated experience:

• Simplify Information Collection: Make the process of gathering customer information as straightforward and user-friendly as possible. Use digital tools that are easy to fill out and allow customers to verify their identity safely and securely online.
• Leverage Verification Technology: Implement advanced ID verification technology to automate the process. This not only speeds things up but also reduces the chances of human error and ensures a smoother customer experience.
• Communicate Clearly and Transparently: Keep customers informed at every step. Explain why certain information is required and how it will be used. Clear communication helps build trust and alleviates concerns.
• Provide Multiple Channels for Support: Offer various support channels such as chat, email, and phone support to help customers with any questions or issues they might encounter during the KYC process.
• Implement Continuous Improvement Practices: Regularly gather feedback from customers about their KYC experience and use this feedback to make continuous improvements.

Oliu Supports Compliance Without Compromising Experience

Adhering to KYC regulations without compromising customer experience is crucial. Oliu’s digital trust platform orchestrates automated, layered ID verification with a single API integration, enhancing KYC processes and supporting FINTRAC-required KYC compliance without heavy development costs or operational resources.

52% of financial services providers increased their use of ID verification technology in 2023⁷. If you’re ready to join the movement towards automation, download our whitepaper “How Digital Trust is Reshaping the Emerging Technology Landscape” to learn more. This valuable resource offers detailed insights and expert advice to help you navigate the complexities of KYC in today's digital landscape without sacrificing your customer experience.

If you’re ready to automate your ID verification processes today, contact us.

Our most recent report “How Digital Trust Is Reshaping the Emerging Technology Landscape” provides an in-depth look at how enterprises big and small can gain a competitive edge by prioritizing customer trust and data security, and embracing digital trust.