The perpetual know-your-client (KYC) model is gaining traction as financial institutions shift to regular identity verification of clients through automation.

“Perpetual KYC” is a term used to “indicate the industry objective of moving away from conducting painful and ineffective periodic review processes,” either annually or semi-annually, according to a report by Edo de Vries Robbe, vice president of strategy and strategic alliances at data-monitoring company Arachnys. “Few banks, however, have made much progress with reducing this burden,” the report states.

It’s standard for a company with upward of 10,000 customers to check the identities of high-risk applicants annually, in accordance with KYC regulations. But medium-risk applicants are usually checked every three years, and low-risk individuals every five years, Ian Henderson, CEO of global business register Kyckr, told Bank Innovation.

Financial institutions and regulators, however, are concerned about the time period between the checks, Henderson said, spurring the banks toward automated alternatives. Founded in 2007, Australia-based Kycker provides KYC services to financial institutions, including Citibank, HSBC and PayPal, and has a market cap of $19.9 million.

“A lot can change in five years; a lot can change in three years,” Henderson said, noting it is difficult for any one bank to know every customer’s situation.

This is where perpetual KYC comes into play, Henderson said, adding “the nature of the business has changed.” As such, Kyckr this month launched Company Watch, a new software that advances the speed and capability of financial institutions to monitor the security of their clients on a regular basis.

Utilizing a global catalog of up to 200 company registries, Company Watch will notify a bank of content changes on a customer’s account, according to the bank’s preferences. Since the software bypasses unnecessary customer contact by automatically detecting changes to shareholding, capital structure and company directors, users report a time savings of up to 80% for the KYC process, according to a Kyckr statement.

Many banks are already instituting perpetual KYC technologies, also known as “hyper KYC,” that look at 300 or more features of a customer, said Jason Somrak, chief of product and strategy of AML Next Gen Analytics at Oracle, a computer technology corporation.

Citibank, for one, extended its use of Kycker’s software to Citi Commercial Bank this April, and has been using the technology within the bank’s Institutional Clients Group and Trade and Transaction Services since 2016, according to a Kycker release. The bank uses Kycker’s API to access primary source data and documents for customer verification in 15 different countries.

Financial institutions are looking at both behavioral and nonbehavioral profile information, Somrak told BI. “It really allows them to take in these many different signals and gives them a constant monitoring on the process and it’ll kick it out for review,” he said.

Data heavily influences how KYC checks are performed. Banks monitor three pillars of data to coordinate a fully-functional KYC system: self-reported customer data, external data and transaction data, Robbe said. And a lack of quality customer data can lead to inaccuracies in a client’s risk profile.

“Customer data is frequently stored in a variety of databases across the bank, which means there is not one single source of truth for the data,” Robbe said. “Moreover, most customers fail to update their customer data when changes occur in a person’s or company’s circumstances, resulting in a lot of the data stored by the banks being out of date.”