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INSIGHT: Undecided cases make up the lion’s share of compliance expenses in customer onboarding; new research says the longer they remain undecided, the more they cost

By Dan Byrne for AMLi

THE BULK OF onboarding compliance costs for the average organisation comes from just a tenth of specific cases that need more attention, new research has shown.  

In a world of expanding requirements around customer due diligence, ‘amber clients’ has been taken to mean those potential customers who don’t qualify for either a ‘yes’ or a ‘no’ upfront.  

They are not given the green light or red light because they need further due diligence, and until that is complete, they remain in ‘amber’ territory.  

“Our research shows that 90% of an organisation’s compliance costs sits in just 10% of Amber cases,” said Anton Zdziebczok, Chief Product Officer at risk management and onboarding consultancy firm NorthRow.  

“For those that were measuring Amber cases, we found that the majority of the compliance resource and compliance costs were taken in manually verifying this smaller percentage.” 

But that was just for those measuring cases. It also transpired that the many of the firms NorthRow had spoken to did not fall into this category at all.  

Over 280 compliance professionals were polled at one of the firm’s recent webinars, and almost two thirds of them didn’t measure nor understand the number of Ambers currently waiting in their onboarding cycles.  

“Based on our research, this isn’t surprising,” the firm said. “However, it demonstrates the scale of the Amber management problem.” 

“There is a huge opportunity within the compliance function to improve operations and reduce client due diligence manual workload simply by identifying ambiguous cases.” 

According to NorthRow, the risks that came with poor “amber management” were numerous and ranged from poor customer experience, a poor culture of compliance among staff, and a higher amount of manual work.  

But chief among these risks was the potential loss of revenue, because according to the firm, a large proportion of amber cases would usually end up being brought into an organisation as full clients anyway.  

But for as long as these clients were waiting in amber territory, they wouldn’t be providing any revenue to the organisation, the firm said.  

Similarly, there was a greater risk that the status of an amber client would change the longer they were waiting, the firm added, meaning institutions would have to reboot their onboarding efforts to incorporate up-to-date information.  

NorthRow has developed functionality to specifically measure and report on an institutions’ amber management progress, which it says will enable firms to “unlock detailed insight so you can efficiently manage those cases that are not immediately assigned.” 

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