Take the Panic Out of Compliance Audit Prep With This Checklist
Audits can happen anytime, which makes them a stressor for compliance teams. Audit prep can feel secondary to other more pressing daily tasks — and then if you’re not audited, it can seem like a wasted effort.
But what if your processes around audit prep were routine, continuous, and automated? By following this five-point checklist, you’ll be more than ready the next time the regulators come knocking.
1. You have different onboarding flows for individuals and entities, based on country
Onboarding is the first stop for getting your audit house in order. There are three categories of screening sensitivities recommended by the OFAC risk matrix, and all of them should be incorporated into your onboarding flows:
- There are specific requirements that you need to put in place for individual people.
- Then there are different sets of mandatories for non-person entities and organizations.
- Finally, because different countries have different rules and regulations, onboarding flows should be customized to meet the requirements of the region and jurisdiction that your client is operating in.
The OFAC risk matrix is the standard that many auditors will have in mind as they assess whether your company has made its best effort to mitigate fraud. Having multiple sensitivities for different groups will help demonstrate that you’re doing your due diligence, and put you in good standing with the regulators conducting your audit.
As a last point of consideration, you can implement different levels of access — and get granular around which features are gated — for different users and groups.
2. Your KYC and AML processes are well-documented
You might be surprised at how rare it is for companies to maintain a comprehensive guide of the steps they take to enforce KYC and AML rules — but from an auditor’s perspective, documenting these processes can be just as important as implementing them.
Provide a thorough outline of the KYC and AML screening processes your company has in place. This overview should explain in detail how you proceed if there’s a hit, and describe what your case management process looks like end-to-end.
The bottom line is that you should be ready to show auditors exactly how you’d respond to risks, in or outside of an investigation. If you have these records up-to-date and on-hand, it makes audit prep a lot easier.
3. You are creating, recording, and reporting audit trails
It’s tempting to think that not having a history of red flags is a positive thing — but regulators will have more confidence in you if they see that you’ve intercepted and investigated hits in the past. If your record appears too clean, it can imply that you’re over-constraining your search and screening criteria.
Regulators and auditors will often be purposely looking for records of false positives to show that you’re erring on the side of caution. If you have nothing to show them, that’s cause for concern: it may mean your system is set up so that users are only flagged as potential risks if they fulfil exact criteria, which isn’t a comprehensive approach.
A great way to ensure you have a robust queue in the first place is to support a gradual verification flow. And keep your false positives queue on file to streamline the audit process.
4. You are conducting scans and re-scans on a regular basis
To show auditors that you take compliance seriously, demonstrate your regular re-scanning. Banks re-scan on a daily basis, but this practice is less common among fintech organizations.
If you can prove that your system conducts a daily scrub, it will put you well ahead of the pack. Thankfully there are intelligent, comprehensive solutions like Cognito that can automate this process.
5. Your system is rigorously tried and tested
Every time you’re audited, regulators are evaluating how often you test your system. Exceed their expectations by testing at a regular cadence and documenting it each time.
One of the reasons regulators conduct audits in the first place is to confirm that proper procedures and flows are being followed. So when you follow them, keeping a record of it can save everyone time. Small steps like these are all it takes to simplify your entire audit preparation process.
Automation can help you stay audit-ready
Audits may seem like extra work in theory, but in practice, addressing these five points will put you well on your way to a painless review. And technology can help, so that staying on top of these processes doesn’t take away from your team’s important work.
Cognito makes audit prep easy, providing automated screening processes for onboarding customers and important daily rescans. It also ensures a gradual and granular verification flow so that you can prove your audit trails and false positives.
When Cognito is part of your KYC and AML processes, regulators and auditors have a clear line of sight into your compliance practices, and they know you’re holding yourselves to the highest industry standards.
Start your next audit off on the right foot: Cognito is available to try for free.