DEREK SMITH: Compliance pitfalls to avoid

REMOTE-first digital communication is expected to continue growing at an astounding rate year. In addition, due to the pandemic, society is increasingly reliant on connected infrastructure and digital services for the day-to-day functioning of its daily operations, which means that using digital services to interact has now become the norm. As a result of this shift, the question arises - Are compliance professionals making Know Your Customer (KYC) compliance more challenging than it needs to be? Also, have compliance professionals adjusted their regulatory monitoring frequencies? Understanding that achieving compliance is not easy, and when teams need to manage multiple work streams while remaining productive, compliance is a delicate balancing act.

This article explores three pitfalls this writer encourages other compliance professionals to be acutely mindful of.

Pitfall #1: Complying as a “tick-box exercise”

Compliance with KYC/ AML procedures is frequently viewed as merely a “tick-box exercise” and completed to what is perceived as the prescriptive demands of applicable laws. Compliance, however, must represent more than a mere ticking of boxes in improving security, reducing risk, and protecting assets and reputations.

There must be a shift from meeting regulatory requirements to understanding and identifying who your customer is. This approach helps compliance be viewed as a partner that adds value and helps reduce risk while simultaneously ensuring the organisation is compliant with rules and regulations.

Pitfall #2: Incomplete and insufficient information

The presence of gaps in internal data can pose a significant threat to compliance efforts and insight into customer behaviour, leaving you more at risk of financial crime. Further, incomplete and missing data allows criminals to exploit any weakness in KYC and AML processes to perpetrate fraudulent activities. Consequently, incomplete data used to identify and verify beneficial ownership could result in a shareholder being overlooked or a risk assessment being incorrect because of neglecting red flags.

Pitfall #3: Underestimation of digital communication transformation

Digital transformation is not a task for IT teams alone—organisations that make it a priority will reap the benefits. Change management is at the heart of digital transformation. However, it requires a strong leadership commitment to be successful. This leadership must include the voice of the compliance professional who will ensure steps taken by an organisation are within the landscape of the law. Observation can provide insight into an organisation’s leadership consideration.


In short, invest in people, technology, and reliable data to prevent these mistakes. This will increase your chances of catching criminals and protecting your brand. Don’t risk losing customers, fines, and reputation.


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