By: Jodie Ruby, Director of Marketing

 

When it comes to building a comprehensive KYC program, monitoring your business customers’ reputation is an important component. A declining reputation can signal that a particular business customer is engaging in unfair and deceptive practices. Continuing to bank that customer could ultimately result in a fine for your financial institution. Further, reputation issues generally precede other risk factors, making reputation monitoring a key element of a strong KYC program.

 

You may already be conducting negative news searches to monitor for risk events in your business customer portfolio that could warrant termination, but this effort only monitors for incidents that hit the press. These searches miss a powerful source of risk information which is the voice of the public. A sudden rise in consumer complaints is an important indication that a particular business customer could be engaging in illegal practices. These complaints and ratings can be found in the CFPB Consumer Complaints Database, Better Business Bureau and other online sources.

 

A recent article in American Banker highlights the potential issues in relying on one source of data for reputation information in its discussion of the errors in the CFPB Consumer Complaints Database.  Examples of these errors included:

• 1 complaint counted as 35 separate complaints
• A claim that was filed against a bank despite the fact that the original complaint was directed at an unrelated payday lender
• An overall inflation in the overall number of complaints due to duplication errors

 

The CFPB asserts that they have established a solid data verification process for the consumer complaints they receive, and that companies have several methods at their disposal to alert the bureau of any erroneous information. However, former CFPB staffers claim that cuts in staff have hampered the bureau’s ability to handle the surge in complaints that has occurred since complaints board was launched in 2012. Data quality issues have also resulted from the outsourcing of the manual complaint intake function.

 

Despite these claims, the CFPB Consumer Complaints Database should not be dismissed when evaluating business customer’s reputation. Recent enforcement actions against companies such as Global Client Solutions require a very specific review of the database for the consent order to be lifted. However, the claims in the American Banker article also highlight the fact that one source of reputation data is not enough.

 

Reputation Monitoring can be used at customer onboarding as well as on a periodic basis to determine whether a particular business customer deserves further investigation based on a review of various sources of reputation information, including Ripoff Report, Better Business Bureau and the CFPB Consumer Complaints Database. Our solutions provide an aggregated report that pinpoints which business customers should be reviewed further for possible risky behavior, based on these multiple sources. Use our solutions to take the burden off your staff, and quickly scale your KYC processes for more thorough KYC compliance.