Regulators Driving Remote Account Opening – What Banks Need to Know


By Stanley Yu, Director, Hong Kong, Fenergo

COVID-19 has radically transformed the financial services industry across APAC. With forced branch closures and social distancing requirements, financial institutions have had to swiftly implement digital technologies to allow remote account opening or risk losing customers. Regulators such as the Hong Kong Monetary Authority (HKMA) have been actively encouraging this, outlining how technology can enhance the process of onboarding and enable financial institutions to mange risk more effectively and efficiently. 

But for financial institutions who’ve been hesitant to adopt new technologies, switching from manual processes to digital onboarding can take some getting used to. There are several processes that need to be designed and deployed in order to create a seamless, frictionless and straight through process for remote account opening and digital Know Your Customer (KYC) compliance. 

Setting the foundations: Multi-Channel & Front Office Integration
The ability for customers to open bank accounts and access financial services remotely is a crucial aspect of modern-day banking, COVID-19 aside. But of course, banks must onboard customers in compliance with Anti-Money Laundering (AML) / KYC and Counter Terrorism Financing (CTF) compliance obligations, so the onboarding solution must be centred around compliance.

In order for this to work seamlessly, banks will need to first integrate their banking channels and front office systems (CRM/bank portal/third party portal) to deliver a fully automated flow of customer information. This way, regardless of the channel – whether customers open their account online, via mobile, through customer care or at a physical branch – their experience is fully digital and truly seamless.

Digital Compliance 

One of the most frustrating issues for customers when opening accounts is the delays due to the volume of data and documents required for identification purposes. In a remote environment, implementing an automated process not only reduces the number of resources required, but it improves customer experience. 

To implement a risk-based approach to AML/KYC and CTF compliance, it is essential that the financial institution has all the necessary information about a customer, and implement tools and processes to ensure this happens smoothly. A regulatory rules engine is required to identify all in-scope rules that pertain to the customer and the data and documents required to evidence the compliance process, while automated risk assessments allow financial institutions to have a 360-degree view of their customers and be able to measure exactly how much risk they present to the financial institution. 

For business customers, it is essential that financial institutions understand beneficial ownership – entity relationship structures (including directors, shareholders, guarantors and beneficiaries etc) – and can measure their individual and collective risk to the bank. Tools exist which allow banks to graphically visualize all relationships, linkages, hierarchies and ownership structures of their business customer and measure each of these components as part of the overall risk assessment process. 

A significant component of remote account opening involves the correct customer identification and verification. Therefore, it is vital that a remote account opening solution should have integrated ID&V technologies that will enable digital uploading of identifying documentation and a ‘live test’ verification process. 

Digital Data & Documents 

Every customer journey is built on data – whether the client is being onboarded, opening a new account or undergoing a KYC refresh. These processes involve leveraging a significant amount of data from a vast number of industry data providers (AML, industry, entity data providers and KYC utilities) and internal bank systems, as well as processing and routing of this data to the right internal systems. 

Because there is no single data universe for all a financial institution’s client or counterparty data needs, banks must implement data management strategies to overcome this:

  • Centralized data management: Rather than keeping data siloed across different departments, by centralising customer data and documentation, all parts of the organisation can access the same data. With a true, real-time view, customers will never have to provide the same information twice, and precious resources won’t be wasted rekeying duplicated information
  • API-First Data Integration: By integrating with a host of industry data and screening providers, regulatory utilities and internal data stores (both upstream and downstream), banks can automatically gather and verify client information and data. Ideally, as part of the data and document verification process, the solution should integrate seamlessly with company registers to automate the consumption of customer KYC information, significantly accelerating the onboarding process
  • Intelligent Document Processing: To streamline the process even further, financial institutions should deploy OCR (Optical Character Recognition) and NLP (Natural Language Processing) capabilities to extract meaningful information from documents (text or image-based documents) that can be auto-classified and added to the customer risk profile to create a more enhanced 360-degree view of the customer

Onboarding the future 

Throughout this process, the customer application and journey should be tightly orchestrated with sophisticated workflow management to ensure that all approvals are obtained (compliance, credit, legal), before delivering the customer to final account opening and onboarding stage. What looks like a simple and seamless process to customers hangs on the sophistication and power of the underlying technologies to bring everything to bear in a fast, efficient, and effective way. 

Although the COVID-19 pandemic has accelerated the need for digital onboarding, customers have been wanting a more streamlined onboarding solution for years. Banks who implement this technology now will not only be future proofed from evolving compliance requirements, but will benefit from faster client onboarding and time to revenue and higher customer satisfaction. And with regulators such as the HKMA actively promoting the adoption of remote onboarding as a best practice during the pandemic, there has never been a better time for banks to do away with manual processes and digitise customer onboarding.