I have concluded that perpetual KYC is more of a marketing stunt than a real thing.

The concept has been around for some years and even has its own abbreviation, "pKYC."

I'm not sure who coined it, but I'm pretty sure it originates from technology providers trying to sell more Public Data.

The idea is great. You onboard your Counterparty once (obviously), and from here on, the counterparty data is kept up to date through automatic and regular updates rather than only at specific intervals. No more periodic reviews, no more outreach to the counterparty, no more waiting for replies.

Unfortunately, it's often not true when someone tells you that something hard can be done easily.

The main problem with pKYC is the significant dependency on public data. I have previously written about the problems with public data in my article "KYC and Public Data: 5 Costly Misconceptions Funds Should Avoid".

‍This means that all the challenges with public data will apply directly to the concept of pKYC.

Therefore, I don't believe you can avoid the periodic review, and I don't think you can avoid some outreach. So the truth is somewhere between reaching out to the counterparty asking if anything changes (reconfirmation of data) and ensuring all data is updated based on what's available in Public Registers.

Public data can enhance your trigger-based Due Diligence (DD). For example, a change in board members is registered in a public database. This change is identified in your KYC platform, and it is significant enough that you want to initiate outreach to

1) confirm from your counterparty that this change is correct and

2) potentially obtain additional data and documents you can't get from the public register (like a passport).

The strength of the periodic review is that the KYC analyst (with support from her KYC platform) can reevaluate the overall risk based on all the (renewed) data points on the counterparty.

If you want to get to pKYC you need the counterparty to participate on your platform.

Imagine if we were all on the same platform and KYC Responders would open up for relevant data to those KYC collectors that request it. If the KYC responder then, at some point in time, changes a data point, the platform notifies the KYC collector that the data has changed and automatically sends the updated data.

That's real pKYC.

Unfortunately, it will take some time before we get there. But at Avallone, we get up in the morning to make it happen.

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WANT MORE? SOME RELATED KYC ARTICLES

KYC Is Outdated. It’s Time for Know-Your-Counterparty (KYCp)

Understanding the Differences Between Customer Due Diligence (CDD) and Know Your Customer (KYC)

What Law Firms Do Different: The Case-Based KYC Model