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5 Tenets of an Effective Customer Due Diligence Program

Craig Willis



Government regulators levy hefty fines on financial institutions that fail to comply with anti-money laundering (AML) regulations. Zencos is helping customers avoid hefty penalties, streamline internal processes, and maintain auditable records throughout the enhanced due diligence (EDD) process.

Some of the critical components of these processes include:

1. Use a systematic approach to rating customers for risk

Financial institutions work with customers of diverse backgrounds and behavior. Banks are exposed to risk when customers appear involved in high-risk behaviors. These behaviors include money laundering or involvement with terrorist organizations. Therefore, banks need the ability to quickly build, simulate, and deploy a customer due diligence (CDD) selection model specific to their particular needs and flexible enough to assess a broad range of potential customers.

An ideal CDD allows a business analyst to consolidate data and assess risk in real-time. The risk assessment process eliminates time-consuming communications with programmers or other technical resources. Zencos’ approach allows for real-time assessments and is fully auditable, so you can locate issues and provide information to government regulators efficiently. A key benefit of an AML program.

It’s also essential to employ a solution that allows for model validation and tuning processes to meet growing model governance expectations. This compliance process allows for a consistent internal and external audit of your organization’s EDD models.

2. Establish an accurate, expected customer profile with current data

As time and resources become more expensive, it is more critical than ever to have software that enables efficient management of customer profile data. Often banks find maintaining a customer identification program (CIP) data a daunting task. Ensuring current customer profile data is time-consuming.

The Zencos approach combines an effective user interface with robust data science processes. These work together to find and validate customer profile updates. Moving to a proactive and ongoing monitoring process allows your organization to focus on profiles that truly need remediation and, therefore, saves time and resources. This verification process also helps you test and validate trends, increasing your predictive analytic capabilities — all so you can know your customer.

3. A fully auditable method for conducting EDD reviews and addressing backlogged reviews

Implementing a new customer risk-rating model requires a significant commitment of resources. A financial institution must complete CDD reviews of incoming customers and customers not previously vetted.

To handle a workload of this magnitude, CDD analysts need a process that is efficient enough to be fully auditable, quickly reviewed, and repeated. The program must also be robust enough to provide all the information an institution needs to assess the money laundering risk of every potential customer relationship.

The Zencos Financial Solutions group provides a flexible and fully auditable workflow process. Our approach allows institutions to handle an increased workflow and ensure consistent results. The efficiencies gained as a result alongside powerful analysis tools to maximize the effectiveness of each analyst, improving the productivity of the institution as a whole. If time and resources are your greatest assets, a smart EDD solution can help you get the most out of your effort.

4. An EDD review selection model that a BSA/AML department can understand and defend

To build an EDD selection model, the business analyst has to work with programmers, database administrators, and perhaps statisticians to develop, simulate, validate, deploy, and tune models. You can imagine this takes a considerable amount of time and energy. To be considered a success, the process has to be tested, easily repeated, and audited.

When Zencos’ Financial Solutions team partners with our customers’ EDD business analysts, our approach allows them to be more self-sufficient. This process is because we provide a standard approach to building a selection model and powerful tools that work seamlessly with that approach. As a result, one person can do a job that once required 3 to 5 trained experts.

5. An audited process for managing regulatory demands for data and model validation

The EDD selection model must be tuned regularly. Management must ensure a well-documented process. With each change in laws and reporting requirements, you must adapt.

The Zencos approach allows for a flexible and auditable tuning process. This process provides for consistency in approach and documentation that saves time and enables a smoother audit process. If half the battle of avoiding hefty regulatory fines is mitigating risk, the other half may be properly communicating your practices to regulators during audits. Our solution allows you to collect, organize, and provide AML data that validates that your EDD model is working correctly.

Zencos matches each solution with expert consulting

At Zencos, we build solutions that empower you to quickly and efficiently assess and eliminate risk. Our solutions are flexible enough to tailor to your needs and powerful enough to keep up with ever-increasing compliance demands.

But we never stop at a plug-in solution. Our financial crime experts help you get up to speed, implement solutions and learn how to access and audit information regularly. So you can do your job more efficiently.