Mortgage lenders responded to the recent home-buying surge during a global pandemic by finessing their digital self-service platforms to be an end-to-end process and extended the technology into the back office as a way to expedite the administrative tasks. This was no small feat, especially considering that great care was taken to ensure a risk-based approach in order to comply with global and domestic government KYC (Know Your Customer) and AML (Anti-Money Laundering) requirements which combat money laundering and other financial crimes.
Heightened awareness around laundering money to finance criminal activity and counter-terrorism has garnered the focus of law enforcement agencies globally in recent years. This has forced criminals involved in financial crimes to become more creative with their sources, therefore turning to the mortgage industry as a method of money-laundering. Criminals attempt to be anonymous by utilizing a digital mortgage provider where Customer Due Diligence (CDD) verification may not be required as it would be for an in-person mortgage.
Compliance regulations are slightly different in each country but all are implemented to stop illegal financial transactions. Regulators make an effort to create elementary regulations as best they can so businesses can easily gather and effectively communicate the information required about their customers, prior to actually completing a transaction.
AML requirements for lenders may include positively identifying a customer, monitoring and screening their activity, and reporting any suspicious behaviors. This is where the recent upgrades in fintech are additionally beneficial to the digital mortgage process, the lenders are using technology to confirm that it is legal to do business with their customers, thus complying with government requirements and avoiding potential fines and/or penalties. Automating AML data collection and analysis allows digital lenders to adhere to compliance regulations and easily adapt when there are changes.
The ongoing digitization of the mortgage lending industry is not a simple task, nor is it inexpensive. However, it is cost-effective despite being one of the most expensive costs of doing business, when considering the influx in mortgage loans originated and the ongoing security it provides for the lender. Another protective benefit of risk-based digital data collection is the gathering of information regarding lending practices, business activities, or social criteria that can potentially harm the business. By implementing automated risk-assessments, human error or biased is eliminated.
Written by Kourtney Manley, Business Analyst at OnlineApplication