KYC Process in Wealth Management: Digitalization Benefits

Financial Services

February 15, 2024


In today’s complex financial world, wealth management has gained significant importance as high-net-worth individuals and institutions increasingly rely on wealth managers to preserve, grow, and manage their assets. One of the fundamental processes in responsible wealth management is KYC or know your customer. In this blog, we examine the latest trends in KYC in financial services and explore Hexaware’s strategies, aimed at ensuring the safety and success of our wealth management clients.

What is KYC?

KYC is a critical process that involves verifying the identity and background of clients. It is an integral part of customer due diligence (CDD) and anti-money laundering (AML) procedures in the financial industry. In wealth management, KYC plays a vital role in ensuring that wealth managers have a thorough understanding of their clients and can provide personalized financial services while adhering to regulatory requirements.

Importance of KYC in Wealth Management

In wealth management, the KYC process is crucial for compliance with government regulations and maintaining secure client relationships. It plays a pivotal role in verifying and establishing trust, contributing to transparent legal operations and fraud prevention. By implementing stringent KYC practices, wealth management firms not only protect themselves from potential damage caused by illegal activities but also safeguard their clients from malicious actors seeking to exploit the services for criminal purposes.

KYC Trends in Wealth Management

  1. Leveraging AI and ML Capabilities: Artificial intelligence (AI) and machine learning (ML) are revolutionizing KYC processes by analyzing large volumes of transactional data and user behavior to detect patterns associated with fraudulent activity. This capability enables proactive measures against potential security threats, thereby enhancing the overall effectiveness of KYC processes in the financial sector.
  2. Digital Transformation: The digital age has revolutionized wealth management KYC practices, by embracing technology for customer identity verification. This encompasses streamlined digital onboarding processes, sophisticated biometric authentication mechanisms, and the implementation of e-signatures. The focus is on enhancing convenience, security, and regulatory compliance in identity verification.
  3. Utilizing Cloud Technology: Firms are partnering with cloud providers to facilitate the creation of advanced AML tools that integrate real-time monitoring and predictive analytics into the compliance framework. This can result in reduced operational costs and a substantial improvement in the effectiveness of AML and KYC operations.
  4. Generative AI and API Integration in KYC Processes: There has been a gradual adoption of generative AI for report generation and adverse media analysis. Large language models (LLMs) like ChatGPT-4 offer new capabilities but their implementation needs to be meticulous. Organizations can opt for established LLM APIs, choose from a range of models, or develop their own proprietary LLMs. Moreover, utilizing APIs to connect with third-party data services enhances identity verification and risk assessment processes.

Key Challenges

  1. Comprehensive Data Screening: Efficient screening of structured data (such as databases and watch-lists) and unstructured data (such as news articles) is essential to ensure no critical information is overlooked, particularly concerning financial crimes and reputational damage.
  2. Continuous KYC Monitoring: KYC processes should extend beyond initial onboarding, encompassing continuous monitoring throughout the client lifecycle. Perpetual KYC allows for real-time screening and updates, ensuring ongoing compliance.
  3. Federated Search for Due Diligence: To conduct thorough due diligence, wealth managers must utilize federated search capabilities to efficiently retrieve relevant information from various sources.
  4. Multilingual and Cultural Nuances: Given the global nature of wealth management clients, it is crucial to prioritize multi-language support and cultural competency in KYC processes. This ensures effective communication and understanding across diverse backgrounds.
  5. Traditional KYC Processes: Traditionally, KYC processes have been manual, which makes it time-consuming, error-prone, and resource-intensive. It also often leads to data inconsistencies, processing delays, high costs, and security vulnerabilities.

KYC Process in Wealth Management

KYC, a significant part of the client onboarding process, typically involves the following steps:

  1. Customer Identification: The first step is to collect basic information from the client, including their name, date of birth, address, and contact details. This information is used to create a customer profile.
  2. Risk Assessment: Wealth managers assess the client’s risk tolerance and financial goals through interviews and questionnaires. This step helps in designing an appropriate investment strategy.
  3. Source of Funds Verification: To ensure that the client has obtained their wealth legally, wealth managers verify the source of funds through bank statements, tax returns, and other financial documents.
  4. Identity Verification: KYC involves verifying the client’s identity by requesting government-issued documents such as passports, driver’s licenses, or national ID cards.
  5. Continuous Surveillance: KYC is not a single event. Wealth managers consistently oversee their clients’ accounts and transactions, remaining vigilant for abnormal or potentially suspicious activities.

Regulatory Aspects of KYC in Wealth Management

Wealth managers must adhere to various regulations and guidelines when conducting KYC. A 2022 report by Fenergo, a provider of client lifecycle management and KYC solutions, noted that global enforcement actions for non-compliance with regulations fell by 22% in 2022, totaling $4.2 billion compared to 2021.

Nevertheless, these compliances entail a cost to the wealth management firms. Fenergo’s 2023 report on KYC trends states that while the average number of people carrying out KYC tasks has decreased worldwide (down 14% from 2022), the average cost of carrying out a single KYC review has increased by 17% since 2022 to $2,598.

According to a 2023 research by Chartis, a provider of research and analysis on the global market for risk technology, the US remains a dominant force in shaping sanctions and regulatory measures, helping to push sanctions deeper into the global supply chain.

Some of the key regulatory aspects include:

  1. Anti-Money Laundering (AML) Regulations: AML laws require wealth managers to report suspicious transactions and maintain records of client transactions. Failure to comply can result in severe penalties.
  2. Customer Due Diligence (CDD): CDD regulations mandate that wealth managers conduct thorough due diligence on their clients to assess their risk profile and verify their identities.
  3. Enhanced Due Diligence (EDD): The FATF (Financial Action Task Force) recommends that wealth managers customize their due diligence efforts based on the level of risk associated with each business relationship.
  4. Privacy and Data Protection: Wealth managers must also comply with data protection laws to safeguard their clients’ personal and financial information.

Hexaware’s Offerings for KYC in Wealth Management

Hexaware provides a suite of services for wealth management firms to streamline their KYC processes and comply with global Financial Crime Compliance (FCC) regulations by leveraging existing proprietary assets and entering partnerships with leading fintech providers.

KYC Centre of Excellence

One of Hexaware’s key offerings is its KYC center of excellence, staffed by experienced professionals well-versed in global KYC and AML regulations. Through proprietary training tools and methodologies designed to cultivate practical KYC skills, this team delivers scalable services within a short timeframe.

Frameworks and Best Practices

We provide a comprehensive repository of best practices in KYC, industry benchmarking, operational excellence, and a quality assurance framework. This repository assists in optimizing KYC processes, meeting industry standards, and maintaining operational excellence with robust quality assurance.

Partner Ecosystem

Through established strategic partnerships with leading fintech companies, we provide transformative KYC and AML solutions. Our goal is to enhance and modernize clients’ KYC programs through innovative and collaborative initiatives.

Program Accelerators

We invest strategically in both proprietary and partner solutions to enhance client value. By developing cutting-edge technologies and collaborating with industry leaders, we provide clients with immediate efficiency and innovative solutions.

KYC Outreach Solution

Our KYC outreach solution enables financial firms to manage end-to-end client outreach processes for KYC in a controlled and automated environment. It significantly reduces the time taken to establish and resolve outreach activities through pre-configured distribution templates, business workflows, and integrated digital customer portals.

The solution leverages the Xceptor platform to provide data automation, easy data ingestion, data transformation, and process digitalization.

Training Simulator

Our proprietary KYC training simulation tool offers a sandbox environment for financial firms to implement a “hire, train, and deploy” model effectively. It enables hands-on practice for trainees, enhancing their understanding and proficiency in KYC operations. Additionally, support from subject matter experts (SMEs) ensures that ongoing training initiatives are tailored to industry best practices, maximizing efficacy and operational readiness.

Benefits to Clients:

  • 30–40% reduction in total cost of ownership.
  • 40–50% reduction in manual efforts: Automation streamlines tasks such as correspondence, request tracking, response reviews, and follow-ups.
  • 20–30% efficiencies in outreach program: Eliminate the need to manually track communication, leading to increased efficiency, improved transparency, and better quality.
  • Cognitive document processing solution: Our solution automates the extraction of data from documents, conducts rule-based assessments, and updates the integrated KYC platform automatically.
  • Empowering better client experience: Leveraging digital portals ensures standardized processes and enhances control, resulting in superior client experience.
  • Strong governance and tightened controls: Timely completion of KYC processes is ensured, while risks are mitigated through automated governance and enhanced control over communication and response management.

To learn how Hexaware can empower your enterprise with futuristic solutions that facilitate rapid digital transformation at scale, visit our website or email us at

About the Author

Jamir Savla

Jamir Savla

Vice-president & Global Head — Wealth Management Consulting

Jamir is an experienced professional with over 18 years in wealth management technology, specializing in digital solutions. He leverages his deep understanding of digital innovation, automation, and problem-solving to deliver strategies that help businesses reduce costs and enhance efficiency. His expertise cuts through the complexities of technology and operations, offering practical solutions and innovative approaches to streamline processes. Through his thought leadership, Jamir has established himself as a trusted resource in the wealth management technology space. 

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