The Regulatory and Technological Challenges of Perpetual KYC
The Regulatory and Technological Challenges of Perpetual KYC
The Perpetual KYC (pKYC) solutions offer a high degree of convenience, time-saving, and cost-saving for regulated entities. Still, the regulatory and technological challenges of pKYC need thorough consideration before regulated entities implement pKYC solutions.
This infographic discusses the challenges that Regulated Entities must be mindful of while attempting to implement pKYC measures for their business.
The regulatory and technological challenges that act as obstacles to pKYC implementation are discussed as follows:
Data Privacy Concerns:
Regulated Entities intending to implement pKYC must consider the prevailing data privacy regime in UAE. Federal Decree Law No. 45 of 2021 Regarding the Protection of Personal Data contains a framework to ensure that the privacy of individuals in UAE is not compromised. Regulated Entities must ensure that they select and implement a pKYC software that is compliant with data privacy laws in UAE as well as laws prevalent in countries from which customers of the regulated entity belong to.
The challenge here is navigating the variation in data privacy laws across various countries and the concern of the personal information of customers being sold or misused for marketing or other purposes by the vendors of such pKYC platforms. The process of pKYC entails the collection and analysis of a huge volume of data in real-time, which requires fail-safe data privacy protocols.
Regulated Entities must ensure that pKYC software that they select is compliant across all required parameters and conduct due diligence, software testing and validation before shifting to a pKYC software for fulfilling its KYC obligations.
Data Security Concerns:
Data Security concerns arise whenever using any software or tool as there exists the risk of malware, phishing, ransomware attacks, or social engineering attacks designed to obtain sensitive personal information from the customers or acquire login or authentication credentials. Regulated Entities must ensure that hackers and cybercriminals don’t end up stealing customer information and compromising the privileged and private information of customers. Regulated entities must ensure that the pKYC software they select and implement uses adequate encryption and security protocols to protect data from the risk of leakage and misuse.
Integration Challenges:
Another set of challenges that regulated entities face is the integration of pKYC software with existing AML compliance, customer relationship management, or client management software and re-tuning workflows and task allocation or task assignment across various personnel in the regulated entity. Regulated Entities must ensure that the pKYC tool they select can be integrated with existing systems for seamless pKYC implementation.
Regulatory Compliance:
Regulatory compliance is the purpose of opting for pKYC, however, it comes with its own set of compliance challenges for Regulated Entities such as ensuring that pKYC tool selected works as intended and within defined and acceptable parameters.
Conclusion
The prospect of implementing pKYC for ensuring a lesser KYC remediation burden and improve money laundering or terrorism financing risk mitigation is a smart choice however, Regulated Entities must be mindful of regulatory and technological challenges and must take adequate measures to reduce such challenges for easier pKYC implementation.
