How Fintech Is Making “Know Your Customer” Compliance Even Easier

Banks have a slew of regulations to comply with when making new small business loans, including Know Your Customer rules, Customer Identification Programs, the Bank Secrecy Act and other anti-money laundering rules - to name only a few. Traditional lenders have well-established systems for complying with this alphabet soup of regulations when loan applications happen in person. Particularly for community banks, the trust and comfort that comes with seeing the loan applicant across the desk feels like a key part of the process.

The idea of moving the loan origination process online may seem like a risk to a bank that's used to its in-person verification processes. But here's an encouraging news flash: fintech now makes it possible to move their entire verification process online-while actually reducing risk.


Bringing your loan application online can take all the steps and questions that loan officers typically do in person and runs through all those checks automatically, every time. For example, Mirador first checks the applicant's information through a credit bureau like Experian, looking for any fraud alerts associated with the borrower's identity. The system will also check the borrower's identity against the Office of Foreign Assets Control's list and other databases. These checks happen automatically, instantly, and invisibly to the borrower. Any flags will automatically trigger an alert on the borrower's application.


Next, the online application system will verify that the applicant is who they say they are, in order to comply with Know Your Customer and other regulations. The system can prompt applicants to upload a driver's license or other identifying document, and also ask out-of-wallet questions to confirm the applicant's identity.


Here are four specific benefits of an online Customer Identification Program:


  1. Customized to your requirements. Online verification systems can be customized to suit any individual bank's needs. It'll be your current Customer Identification Program, exactly as it's always been done-just moved online. All the same checks, with less staff time expended. This streamlines the process, reducing the cost of loan origination-and the process is quicker and easier from the customer's perspective, too.


  1. Constantly updating. Because the entire verification system is online, it can be updated any time regulations change or new databases become available. No need to worry about keeping up-to-date with rules changes-an online system can be updated quickly and painlessly any time regulators hand down new requirements or modifies existing rules.


  1. The same process, every time. Because the verification system is automated, it happens the same way, every single time. That virtually eliminates the possibility of human error in database checks or any other steps in the process. Loan officers can rest easy knowing that this paperwork has been taken care of through a reliable process that's painless on both sides of the transaction.


  1. Enhanced, real-time verifications. Online loan applications can check additional data-sources for up-to-the-minute verifications, giving lenders a more complete borrower profile. Online reviews, shipping trend data, social media buzz, Google Analytics activity - all of these metrics provide salient evidence of a business' health (or lack thereof). It's not practical to add extra verifications like these to manual loan application process, which is already too time-consuming and slow. (Our recent post Could Great Yelp Reviews Soon Make Up for a Poor Credit Score? shares more information.)


Moving loan applications online actually reduces risk by automating the entire process, making it reliable and perfectly repeatable-the same checks, the checks you've always done, but performed the exact same way, every time. An automated process can easily be updated to keep up with changing regulations, and it's quicker and easier for both loan officer and borrower.