GS interviews Treasury Prime's Jeff Nowicki

In this Q&A, Jeff Nowicki, chief banking officer at Treasury Prime, discusses the challenges community banks and payments companies face when balancing seamless customer onboarding and stringent AML/KYC compliance—including evolving regulations, outdated technologies and operational inefficiencies—and explains why FIs must now adopt smarter, tech-driven approaches.

What are the biggest challenges community banks face when trying to balance customer onboarding and compliance with AML/KYC regulations, and how can they overcome these obstacles?

A major challenge for community banks is navigating the ambiguity of AML/KYC regulations. While banks are required to "know their customer," there is no clear roadmap, just aging suggestions for how to implement these measures, leaving individual banks to interpret the ever changing landscape of vendors and processes to meet the regulations. This results in varying compliance and onboarding practices, making it difficult for institutions to maintain consistency. 

Many banks also struggle to embrace more efficient and tech-forward practices. For example, a traditional hard signature for consent is no longer necessary; a simple button click can serve the same purpose.

Banks should also assess whether the information they are collecting is truly necessary and if there are more modern methods for achieving compliance. Digital verification methods, such as selfies or videos, offer effective alternatives to outdated practices, like physical client signature cards. 

Ultimately, the key to success lies in being strategic about which compliance steps are essential. Banks must ensure that any changes to their processes are made for the right reasons, as cutting corners can lead to vulnerabilities in fraud prevention and regulatory oversight.

By adopting more flexible and tech-driven approaches, community banks can streamline their onboarding process while staying compliant with AML/KYC regulations.

Outdated AML compliance technology is a significant pain point for many institutions. What are the key features they should look for when upgrading their systems to ensure both efficiency and regulatory compliance?

When upgrading AML compliance technology, institutions should focus on solutions tailored to their specific needs rather than sticking with outdated systems. Since banking services can vary widely, AML tracking and transaction monitoring should be adaptable to the type of clients the institution serves.

The team behind the technology also plays a critical role in system upgrades. A knowledgeable staff that understands the nuances of the system and can provide ongoing support is essential for meeting the bank's unique compliance requirements. This ensures an AML solution that is both efficient and aligned with current regulatory demands and business needs.

For companies in the merchant acquiring sphere, what best practices should they adopt to effectively manage KYC requirements while onboarding high-risk merchants?

Onboarding high-risk merchants involves implementing a robust and adaptable compliance program. This includes conducting thorough due diligence to verify the legitimacy of the business and its beneficial owners, understanding the nature and purpose of the merchant's activities, and continuously monitoring transactions for suspicious behavior.

Utilizing advanced technologies, such as machine learning and AI, can enhance the detection of fraudulent activities and streamline the compliance process. Collaborating with trusted partners and leveraging specialized vendors can also provide valuable expertise and resources to strengthen the KYC framework.

How can advancements like artificial intelligence and machine learning be leveraged to streamline AML/KYC processes, and what should financial institutions keep in mind when implementing these technologies?

Advancements in AI and ML have the potential to significantly streamline AML/KYC processes by automating data analysis and improving transaction processing and monitoring. Financial institutions should ensure that these technologies are implemented with robust data privacy measures and compliance with regulatory standards.

Training staff on how to effectively utilize these tools is also part of a successful implementation.

What role does collaboration play in AML/KYC compliance? How can community banks and payments companies work with regulators and third-party solution providers to improve compliance and reduce fraud risks?

Effective AML/KYC compliance relies on collaboration, especially in sharing data across systems. If onboarding data remains siloed and isn't used throughout the client's relationship with the bank, opportunities to detect fraud and enhance compliance are missed.

By integrating data from various sources and vendors, community banks and payments companies can better track client transactions and spot potential risks.

Collaborating with regulators and third-party providers helps ensure compliance while also improving the efficiency of the onboarding process. Using data across platforms allows institutions to adjust client transaction limits, refine fraud detection, and make smarter compliance decisions.

At the end of the day, it's not about collecting more data, but how you use the data that you have.

Whether you want to upgrade your POS offerings, find a payment gateway partner, bone up on fintech regs or PCI requirements, find an upcoming trade show, read about faster payments, or discover the latest innovations in merchant acquiring, The Green Sheet is the resource for you. Since 1983, we've helped empower and connect payments professionals, starting with the merchant level salespeople who bring tailored payment acceptance and digital commerce tools, along with a host of other business services to merchants across the globe. The Green Sheet Inc. is also a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals.

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