Understanding regulatory compliance at the program level

As a licensed, regulated entity, Alviere takes Customer Identification Programs (CIP) and Know Your Customer Policies (KYC) very seriously. We have to. By understanding the ins and outs of CIP and KYC requirements, there are avenues to make the process more seamless for users — while still retaining the highest degree of diligence.

Offering financial products can seem daunting without complete knowledge of what’s required for compliance. It’s worth considering compliance at the program level to avoid unnecessary restrictiveness and to ease end-user friction. Determining the financial service, and the customer segment most likely to engage begins all conversations and plans.

Financial products can extend the core business into new revenue, new customers, and help retain existing customers. Managing regulatory compliance should be part of the decision with complete knowledge of the requirements by program.

Step 1: Align business objectives

Customer growth? Lower churn? More revenue per customer? Reduce CAC? Those are all goals that can be impacted by adding financial products. But those objectives are often supported via various means —there’s no singular path to achieve these high-level goals. Understanding how financial products will contribute to those goals requires objectivity, data, and no small measure of realism.  Build the business case for the intended audience. Modeling early results through the out years will yield a comprehensive view, and allow for healthy discussion.

Step 2: Design the first phase

Ocean boiling is tempting here, as new products bring significant promise. But resist the urge to overstate or over-complicate the business model. Ask: "What is the most meaningful value we can deliver to our customers in the shortest amount of time?" There’s a concept in software development that applies here: WSJF. Weighted shortest job first narrows the focus on the desired end result without carrying an excessive burden. Unlike improv training, the answer isn’t “yes, and…” It’s staying focused on the core value and benefit to customers, and the determining most expeditious path to delivery.

Step 3: Determine the appropriate level of KYC for the program

One of the many levers available to Alviere clients is to determine what’s required for each type of financial product or service they are considering offering. Our experts work with clients to find the best fit with the least friction, ensuring compliance with existing regulations. (A great resource for program elements is our Launch & Implementation Guide.)

Our Chief Compliance & Risk Officer, Jorgen Norgaard, discusses finding the balance between compliance and user friction. (1:31)

Here’s an overview of KYC requirements by financial product or service type:

International remittances

The simplest of transactions, sending money to someone in another country, is defined as a “pass-through” transaction, requiring only limited KYC. The sender will provide their, and the recipient’s, full name and address. Behind the scenes, the Alviere HIVE platform, assisted by AI fraud detection, runs sanctions checks to ensure both the sender and receiver are not sanctioned individuals. 

Closed-loop prepaid cards

These cards allow the use of funds only for a specific merchant, such as a retailer or retail chain, a college campus, or a subway system. The Starbucks card is an example of a closed-loop card, where funds can only be used to purchase Starbucks goods. These funds cannot exceed $2,000 on any day.  Requiring limited KYC, these cards only require Alviere to conduct sanctions screening on the name of the users.

General-purpose prepaid cards

These cards carry the ability to reload funds and can be used anywhere. These are typically debit cards, but cannot exceed the funded amount. From a regulator’s point of view, issuing a general-purpose prepaid card creates a formal banking relationship and is equivalent to opening an account for purposes of the CIP rule. This requires name, date of birth, address, and an identification number (either a U.S. taxpayer identification number, or number and country of issuance of any other government-issued document). Alviere verifies the information through non documentary and documentary means to confirm the identity of the consumer.

Open-loop prepaid access cards 

These are often considered gift cards or promotional cards. For example, sign up for a service, and we’ll give you a $100 prepaid Mastercard. These cards can be used only domestically, cannot be used for P2P (peer-to-peer) payments, and when they do not exceed $1,000 on any day, they are not subject to Bank Secrecy Act (BSA) regulatory requirements. As a best practice, Alviere screens the cardholder's names against OFAC’s sanctions list.

Step 4: Implement the initial financial product

Determine the flow of funds and required integrations with existing systems. For example, remittances, because they do not hold funds, can be part of a retail service counter or virtual app experience. Debit cards can be offered to rewards program members as an additional way to pay while accelerating loyalty points earning. 

This initial phase can be part of a larger initiative, or be the end result to drive the business objective. Often these decisions are the result of user feedback after the initial rollout. Continuously optimizing the functionality and efficacy yields new potential (and sometimes unforeseen) options that can also contribute to enterprise goals.

Align program objectives + required compliance with the right provider

Examining the business goals, aligning with customer expectations, and maintaining program-appropriate KYC, strikes the right balance between growth and risk reduction. The Alviere approach to tiered CIP / KYC allows for the most flexibility while maintaining superior regulatory compliance. Launching a financial product can seem daunting, but is approachable when the embedded finance provider is licensed and regulated, with an expert compliance team. 

With guidance from Alviere, this will be an investment in future, sustainable growth. At Alviere, we don’t do off-the-shelf. We’re thorough in our approach to configuring solutions because we know that the upfront work will pay dividends for long-term success and compliance certainty.

Written by Alviere