Reported by WorkFusion and Compliance Week

(Summary featured below. To read full report, go to: https://www.workfusion.com/wp-content/uploads/2023/03/Financial-Services-Roadmap-Know-Your-Customer-E-Book_WorkFusion-Compliance-Week.pdf)

KYC is no longer a static compliance checkpoint but a scalable risk-intelligence function embedded across the customer lifecycle. As highlighted in WorkFusion’s The Financial Services Roadmap: Know Your Customer, expanding sanctions regimes, opaque ownership structures, and surging alert volumes have fundamentally outgrown traditional, checklist-driven KYC models.

The paper underscores that sanctions risk extends far beyond name matching. Effective KYC must surface indirect exposure through ownership, control, geography, trade activity, and evasion behaviors. Concepts like the 50% rule illustrate the gap between legal theory and operational reality—manual processes simply cannot identify layered or indirect ownership risk at scale without automation.

It also reframes false positives as a governance issue rather than a cost nuisance. Excessive alert noise strains resources and increases the chance of missing real risk, while regulators expect institutions to improve precision without suppressing detection. This shifts KYC toward continuous monitoring, where changes in ownership, media, behavior, and external risk signals are tracked dynamically rather than through periodic refresh cycles.

Persistent blind spots remain in trade finance, checks, and other paper-heavy products, where manual data handling limits visibility. The paper points to OCR, AI-driven extraction, and expanded screening as essential tools to bring these channels into scope, while emphasizing that regulators expect transparency—AI models must be explainable, governed, and aligned to institutional risk appetite.

The broader message is clear: modern KYC increasingly encompasses supply-chain and third-party exposure, client-provided data accountability, and even communication metadata as a risk signal. Firms that adapt will treat KYC as an integrated intelligence layer across sanctions, AML, fraud, and trade risk. Those that do not risk falling behind regulatory expectations that now favor proactive, technology-enabled risk management over static compliance formality.