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Digitalisation and the future of KYC and AML automation

Recently our COO Greg Watson hosted a webinar with an expert panel of industry heavyweights to delve deep into the issues surrounding digitalisation and KYC & AML automation.

Napier AI
June 3, 2021

Recently our COO Greg Watson hosted a webinar with an expert panel of industry heavyweights to delve deep into the issues surrounding digitalisation and KYC & AML automation. We were delighted to have some fantastic feedback, with one guest commenting it was “one of the most progressive webinars this year".

Watch the replay of their discussion

The panel comprised:

  • Andy Maguire - Napier Advisory Board Member; Chair Global Banking at Boston Consulting Group; Former Group COO at HSBC
  • Stuart Muirhead - Managing Director / Global Head of Wholesale Middle Office at HSBC
  • David Buxton - CEO & Founder at Arachnys
  • Sidhartha Dash - Research Director at Chartis Research
  • Greg Watson (moderator) - Chief Operating Officer at Napier

Here’s your summary of the key points:

Digitalisation – a multifaceted concept

It was clear from the webinar that digitalisation is a multifaceted concept.

The basic concept of digitalisation is not new; after all, computers have been widely making things digital since the 90s. Digitalisation is an iterative process of reinjecting new technology into processes.

Today, digitalisation for KYC and AML can encompass many elements including:

  1. Access to real-time data for real-time risk management
  2. Automation of key processes
  3. Intelligent investigative processes
  4. Semantic centralisation of data
  5. Automatic activity logging with full electronic trace
  6. Intelligent workflow
  7. Being open and accessible through APIs

Digitalisation drivers

Cost pressures are one of the biggest drivers behind digitalisation.  Digitalisation provides a means of fulfilling regulatory requirements to be compliant while keeping costs down.

It is also important to demonstrate to regulators you are moving forward and doing the right thing. This is especially true for risk mitigation; point-in-time mitigation is no longer valid for most regulators. Real-time risk management is the next big thing.

Barriers to digitalisation

Many financial institutions are struggling on their journey to digitalisation.

One of the biggest barriers boils down to risk appetite. What are we happy for machines to do? But there are other barriers too:

  • Legacy technical debt
  • Proper interpretation of policy for what is an exception
  • How we translate policy interpretation into consumable and digestible data

Digitalisation must be widely pursued while recognising that it’s not without its limitations. Some things are hard to automate while other things need human input. The key is to use humans for things they are good at (like judgement) and machines for what they’re good at (like pattern recognition).

Get the basics right on your digitalisation journey


Digital scalability is important. From the outset of any project, the focus should be on integration with existing architecture. Connections to the core banking infrastructure need to be in real-time.

Data, analytics, and workflow

The success of digitalisation will depend on getting data, analytics and workflow right. Each of these need to be synchronised and solving the same problem, which can actually present a cultural challenge in its own right. The need to manage technical debt shouldn’t be underestimated or overlooked.


Policy simplification is another really important area to address, since poorly written policies and procedures can make life very complicated, and no amount of digitalisation can fix this. It’s about striking a balance between asking the best small set of customer questions and creating a single policy to get the information you need, while avoiding risk exposure from oversimplification. Afterall, orange jump suits go hand in hand with getting compliance incredibly wrong.

The organisations that are generally doing digitalisation well are the start-ups; but even they are hitting the same problems and making the same mistakes as the older, bigger and more complex institutions. This is a situation which is rather baffling, since it’s entirely avoidable.

The future: seamless digital stitching

Information sharing

We need to be talking about a future of widely and easily sharing information internally and with other banks. This means the digital journey should be accessible to other banks and clients. The successful institutions will become more open and API orientated.

Rip and replace … or not

Right now, digitalisation is not about entirely replacing legacy tech with a shiny new system. It’s about stitching the new and old together. Now more than ever, we need interoperability to share and ingest data while working within the architecture and simplified policy.

Ultimately, KYC is very important, but it should not be something the customer is aware of, unless suspicious activity is detected. We need to get to the point where financial institutions need only manage criminal behaviour.

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