Regulators' Demands for Risk-Based CDD are Spur to Best Practice, Says Norkom Technologies

New White Paper Outlines how Regulators' Demands can be met

BOSTON, Massachusetts, February 26 /PRNewswire/ -- The Third EU Directive, being enacted by many EU countries this year, is playing a pivotal role in setting the worldwide standard for customer due diligence.
Complimentary regulation arising in American and Asian markets mirrors its call for a proactive, risk-based approach towards customer acceptance and ongoing monitoring.

"While some organizations have quailed at the complexity of the task, enlightened companies view a risk-based approach with some relish, believing that, if it can be practically achieved, it presents a way to prioritize customer their customer due diligence activities, improve their effectiveness and manage associated operating cost," says Rosemary Turley, Director of Norkom Technologies.

Turley maintains that success lies in allocating an appropriate risk profile at the point of account opening then monitoring and adjusting that risk profile throughout the customer lifecycle.

"If 80% of new customers can be identified as low risk at the outset, justifying a minimal verification process, then the majority of new business can be brought onto book quickly, leaving only a minority to pass through a more rigorous process - making good sense for the business.

"However, that is just one step in the process; automatically adjusting the customer's risk profile as their circumstances or behavior changes is imperative for a robust risk-based approach. Ensuring that the level of
monitoring activity also changes accordingly makes the difference between maximum efficiency and wasted effort," says Turley. "Consistent and accurate changes to risk profiles allow investigative resources to be
targeted where they deliver most value."

Norkom's white paper 'Beyond Knowledge: 21st century customer due diligence' offers the following advice for companies pursuing a risk based approach to customer due diligence:

Customer acceptance

- Define risk using a three-way matrix linking, geographical risk, product or service risk and entity risk. Codifying risk according to the geographies in which the customer trades, the complexity of the services they use and the business in which they are involved allows an accurate initial risk assessment to be made quickly.

- Use automated workflows to speed up the application review process supplemented by direct links to internal and external verification databases and watchlists.

Managing the risk profile

- Use detection alerts to automatically highlight any changes in static information - addresses, telephone numbers, board member changes and so forth - and link directly to external and internal information sources to check the validity of the same.

- Adjust the level of monitoring activity in line with the changing risk profile of your customers to ensure effort is focused towards highest business risks.

For your free copy of Norkom's white paper 'Beyond Knowledge: 21st century customer due diligence' call Rosemary Turley on +3531-873-9600 or email rosemary.turley@norkom.com.

http://www.norkom.com