Embedding KYC Compliance into an Exceptional Onboarding Experience

When it comes to complying with complex and labor-intensive KYC and AML requirements, financial institutions (FIs) are stuck between a rock and a hard place.

On one side, compliance lapses have cost U.S. FIs billions in fines and penalties. On the other, the seemingly endless series of intrusive questions new applicants are forced to answer creates a bad first impression. Within the broader context of a clunky and disjointed digital experience, it’s no wonder abandonment rates for new account opening and customer onboarding are so high.

In 2024, regulatory enforcement actions for AML breaches totaled $4.6 billion. Meanwhile, customer expectations continue to grow. Research shows that customer abandonment rates can exceed 50% if digital account opening takes more than 3-5 minutes. 

Speeding up the time it takes to open an account online is a great place to start. But, before you can begin improving your customer onboarding experience, let’s look at KYC/AML compliance more closely.

What is KYC/AML?

While related, there are some key differences betweenKYC and AML compliance requirements. KYC refers specifically to the steps institutions must take to verify their customers' identities; AML refers to a broader set of requirements designed to prevent financial crimes like money laundering and terrorism financing. FIs use AML and KYC compliance to help maintain the security and integrity of their organizations and the financial system as a whole.

In short, KYC processes allow firms to take a risk-based approach to AML compliance that focuses on understanding who their customers are and what level of money laundering risk they present. While FIs may structure their KYC process differently, core components of the KYC process involve collecting proof of customer identity and address.

When a customer’s profile represents a particularly high risk of money laundering, institutions may be required to gather additional information in a process known as “enhanced due diligence” (EDD). Depending on the situation, these steps may include:

• Collecting additional proof of identification and documentation

• Verifying the source of the individual’s funds

• Scrutinizing the purpose of transactions or the nature of business relationships more closely

• Implementing ongoing monitoring procedures

Challenges in managing KYC compliance

Although KYC compliance seems fairly straightforward, it can be very cumbersome. The problem arises when the FI must perform a series of steps ranging from collecting customer information, physically verifying proof of identification, performing credit checks, screening against government lists like the Office of Foreign Assets Control (OFAC), and obtaining a wet signature. The vast majority of institutions perform most or all of these steps manually.

This is a time-consuming and inefficient approach rife with the potential for human error. At best, this makes for a poor customer experience, and at worst, it can lead to the misreporting of essential data to the government. If not done properly, KYC compliance lapses can have a significant impact on an institution’s bottom line. 

These challenges are amplified for smaller institutions like community banks and credit unions. They don’t benefit from robust technology budgets, large staff, and other resources to improve the front-end experience and back-office efficiencies. These organizations are in particular need of solutions that are easy to implement and maintain while meeting critical data security standards and regulatory requirements.

Supporting a seamless, compliant onboarding solution

Fortunately, advanced digital solutions now offer FIs of all sizes the ability to reduce their compliance burden, improve the experience for their customers, and simplify the process of collecting required KYC information.

Through digital solutions, customer-specific information-gathering means that applicants only need to fill out fields relevant to them based on their unique risk profile. It eliminates the need for the bank to request irrelevant, excessive personal information, significantly reducing the time and amount of data gathered during onboarding. It also provides customers and employees with a smooth, frictionless, and highly intuitive account opening process.

Another critical compliance step in the KYC process is customer identity verification. It’s impossible to know your customer without seeing verifiable proof of their identity. Fortunately, modern Identity Verification solutions offer secure, legally admissible, federally compliant (IAL2) verification embedded right within the Docusign eSignature process. Additionally, with Risk-Based Verification, you can fortify your compliance workflows without compromising customer experience. With this powerful, integrated functionality, the customer no longer needs to visit the branch to show physical identification. Instead, they can verify their identity,  upload government-issued ID documents, and complete biometric (liveness) checks right from their mobile device or computer.

By integrating the identity proofing process upstream into the signing process, financial institutions can expedite processes such as new account opening, policy sales, or client onboarding with a touchless experience. For scenarios where notarization is preferred, Docusign Notary further offers your notaries public the tools they need to conduct remote online notarization transactions.

Lastly, digital audit trails—a key component of advanced end-to-end electronic signature and agreement platforms like Docusign—introduce enhanced confidence and security to the account opening or maintenance process. Key customer identity information is readily accessible through one centralized platform to support future security and audit checks. 

Marrying KYC compliance with a better customer experience

Today, a growing number of financial institutions are offering their customers a more efficient and intuitive account opening experience. By embedding KYC compliance support seamlessly into the onboarding workflow, digital account opening happens in less time, at a lower cost, and with less manual effort from both the applicant and banking staff. 

A fully digital process also means a reduced risk of regulatory fines and findings, and a higher degree of data security and protection as compared with traditional, in-person account opening. In a 2025 survey of 1,400+ global organizations looking into identity verification trends, commissioned by Docusign and Entrust, it was identified that the benefits of investing in digital identity verification tools don’t just result in monetary benefits, but also less tangible ones: 

• The average organization saved over $8M in total by preventing identity fraud using an identity verification solution

• 63% of organizations that invested significantly more in IDV than their industry peers believe the steps they took to prevent identity fraud had a positive impact on their brand

• 70% of organizations surveyed believe investing heavily in technology solutions is the best way to mitigate risks of identity fraud 

Moreover, these institutions are proving that a frictionless, efficient, and pleasant customer experience can be achieved alongside better compliance. Remember that KYC is not simply another compliance box to check, but an opportunity to build a competitive, differentiated customer experience that will exceed your market’s expectations.

Learn how Docusign can help you begin your digital onboarding journey while supporting your KYC compliance requirements.