KYC (Know Your Customer) might sound simple, but compliance teams are dealing with a number of significant challenges. If you’re on the front lines and see KYC firsthand every day, you know how messy the process can get.
Teams try to move fast, but there’s always pressure to do more with less and still get every detail right. In this guide, we’ll take you through the biggest KYC challenges and provide proven strategies to overcome them. We’ll also explain how ShadowDragon’s OSINT tools fill in the missing context your team needs to make smarter, more confident decisions.
1. Inaccurate or Incomplete Customer Data
Inaccurate or incomplete customer data is a challenge for many KYC compliance teams. Document intake is one cause, because teams often receive documents in non-standard formats, and even in different languages.
Customers fill out details differently on different forms and channels, and systems store data in different ways. This can lead to costly delays and false positives.
Ensuring complete and accurate customer data starts with clean intake and effective KYC integration. Use structured fields and a central repository to store information, so compliance teams aren’t trying to piece details together from different sources later, such as during KYC remediation.
OSINT adds another layer of assurance. ShadowDragon Horizon™ helps compliance teams verify customer identities by comparing customer-submitted information with real-world data.
It surfaces red flags early, such as when a customer’s position doesn’t match their real-world behavior and digital history. This turns a messy intake process into a cleaner, more straightforward system that gives teams more confidence in their data as they move forward.
2. Detecting Synthetic Identities and Fraudulent Documents
Synthetic identities often combine real and fake data to appear legitimate. They may appear authentic on paper, but they can easily fall through the cracks if your KYC processes aren’t robust.
Some fraud rings run these setups at scale across fintechs like crypto exchanges, testing systems until they find a weak spot. Once they gain access, they move money before anyone notices.
Detecting synthetic identities and fraudulent documents requires a layered approach. Biometrics and liveness checks confirm that the person is real and present in front of the camera, and device intelligence can reveal non-typical login patterns. Behavioral signals can indicate whether an individual is acting like a real customer or a script.
OSINT also plays a role here. ShadowDragon Horizon™ gives a broader view of the individual behind the documents.
A real customer leaves traces of activity across public records and other open sources, such as social media networks. A synthetic identity, on the other hand, leaves gaps or mismatched details. Horizon™ helps to reveal these inconsistencies and gaps.
3. High False Positives in Screening
Screening tools typically return a lot of noise. A name match may have nothing to do with the real customer, for example.
Regulators expect teams to check every alert, so nothing is overlooked, but that leads to lengthy queues and overwhelmed analysts spending hours trying to clear false positives. Compliance teams lose critical time they need to focus on real risks.
Better matching is one way to reduce false positives. Fuzzy logic with contextual scoring reduces the number of weak alerts that stack up in analysts’ queues.
Risk tiering also helps. Low-risk alerts can flow quickly through the queue, while higher-risk alerts get more attention.
OSINT provides much-needed clarity. ShadowDragon Horizon™ helps confirm whether a match ties back to the real customer. Analysts can compare details from public sources with information submitted by the customer. If the alert is real, signs emerge quickly, allowing analysts to investigate further.
4. Accurately Assessing Customer Risk
Human-assigned risk scores are subjective. It’s not uncommon for two analysts to look at the same customer and assign different ratings. Whether the assigned risk score is too high or too low, it can lead to poor decision-making.
Blind spots are also a concern. Traditional KYC checks don’t always show business ties or old disputes. Hidden exposure may go unnoticed, and adverse media coverage may be overlooked. Weak signals slip through.
Dynamic scoring is one approach to overcoming risk assessment challenges. Automated frameworks apply the same logic to every case. Scores continuously adjust as new information comes in, ensuring that risk ratings remain consistent and fair.
OSINT fills in the gaps. Adverse media checks help spot political exposure and links to sanctioned individuals or entities. It can also reveal past criminal ties.
ShadowDragon Horizon™ adds clarity by mapping how an individual or business is reflected across public sources. Horizon™ Monitor continues monitoring public sources for new events or changes in behavior that impact risk scores, giving compliance teams a more complete picture and risk assessments they can trust.
5. Balancing Onboarding Speed with Thorough Due Diligence
Customers want fast onboarding, with simple steps over the phone. They don’t want long forms or repetitive requests.
However, compliance teams need documents and thorough verification checks. It can take time to get complete, convincing evidence that a customer is legitimate. Customers can quickly become frustrated if verification processes are time-consuming and tedious. Yet when teams rush, they often miss important details.
The solution to this challenge starts before onboarding. Collecting data prior to KYC results in fewer back-and-forth communications. Basic information is pre-filled, so compliance teams don’t have to repeatedly ask for the same details.
A tiered workflow also helps. Low-risk clients can go through a simplified KYC process, while riskier customers need a more in-depth review.
OSINT tools give teams a more complete picture of the customer without slowing down the KYC onboarding process. Horizon™ Identity can:
- Connect and resolve identifiers from public sources
- Reveal associated aliases
- Uncover geolocation indicators
- Surface behavioral data
- Generate traceable evidence
ShadowDragon Horizon™ also brings context to a customer’s identity profile with public records data, such as news and legal filings. It also highlights connections to companies. These insights help analysts gain a deeper understanding of the customer, resulting in more efficient and frictionless onboarding that doesn’t compromise due diligence.
6. Keeping up with Evolving Global Regulations
A robust compliance program involves continually monitoring and adapting to regulatory changes, which can be region-specific. For example:
- Financial Action Task Force (FATF) – global standards
- Financial Crimes Enforcement Network (FinCEN) – U.S.
- Financial Conduct Authority (FCA) – UK
- EU Anti-Money Laundering Directives (AMLD) – European Union
- Monetary Authority of Singapore (MAS) – Singapore
- Asia/Pacific Group on Money Laundering (APG) – Asia-Pacific region
- Action Group Against Money Laundering in Central Africa (GABAC) – central African region
- Eurasian Group (EAG) – nine countries (Belarus, China, Kazakhstan, Kyrgyzstan, India, Russia, Tajikistan, Turkmenistan, and Uzbekistan)
The FATF Global Network includes the FATF and nine FATF-Style Regional Bodies (FSRB). Over 200 governments and 20 international observer organizations participate in the Global Network.
For compliance teams serving multiple regions, shifting regulations represent a known risk. What may seem like a small rule change can introduce a blind spot that goes undetected until it’s too late, for example, an audit or enforcement action.
Compliance teams need a continuous, reliable way to track updates. A dedicated regulatory intelligence process helps to ensure the team is aware of recent or upcoming changes and what they need to do to remain compliant.
Centralized policy management can also be beneficial. Updating procedures in a central location helps create a single source of truth for the whole team.
7. Privacy Rules and Data Security Requirements
In addition to Anti-Money Laundering (AML) and KYC regulations, compliance teams must also ensure that they’re handling customer data in accordance with privacy and security rules.
The Global Data Protection Regulation (GDPR) applies to any business that collects or analyzes personal data of EU residents. The California Consumer Privacy Act (CCPA) sets strict rules around data sharing. Other regional authorities establish similar rules.
KYC requires personally identifiable information (PII). This means that there’s no room for error. A single mistake in terms of access or retention of data can rapidly turn into a major and costly issue.
Stronger controls provide a solution. Access data only when needed to perform customer or business verification. Encrypt all data storage. Retain it only as long as necessary, with clear retention policies.
Disclosure and consent are key, too. Be transparent about what data you’re collecting and why. Consent should be easy to understand and review.
Investigations also need a similar structure and controls. Access to sensitive information should be limited to specific, authorized team members. Audit trails make it possible to track who has accessed specific data elements at specific times. These practices protect both your customers and your compliance team, ensuring your KYC program is in line with privacy regulations across jurisdictions.
ShadowDragon collects data only from publicly available sources. It does not circumvent any encryption or privacy settings, nor does it attempt to access private messages.
Data is visible only to the user who performed the search, within a private dashboard or API connection, and then discarded. Each result is attributed to the source where it was found for traceability and transparency.
8. Managing Ongoing Monitoring at Scale
Customer risk profiles can change frequently. For example:
- A new filing may appear.
- There’s a change in business ownership.
- An individual moves into a higher-risk role.
- A customer is mentioned in the news.
Traditional monitoring tools send every minor update as a new alert. This creates alert fatigue, and subtle yet important signals can get lost in the noise.
Automation also reduces alert overwhelm by surfacing changes that could affect customer risk instead of waiting for periodic, manual reviews. Trigger-based alerts also go to the right team members, which makes alert triage run more smoothly and reduces the chance of something falling through the cracks.
Horizon™ Monitor provides the context that most traditional monitoring tools are missing. It continuously monitors online activity to identify changes that relate to the customer or business and closely associated people or entities.
Horizon™ Monitor can surface changes in behavior and can help to identify new risk patterns early on. It also helps teams to understand exactly what has changed, instead of wasting time deciphering irrelevant alerts.
Overcome Common KYC Challenges with ShadowDragon
KYC screening is a moving target. Rules and regulations change, and customer risk profiles shift. Fraud becomes increasingly sophisticated. A lack of time is the biggest challenge compliance teams face. They work hard to meet their targets with the tools available. But weak signals and blind spots get through.
OSINT provides more granularity and context than static documentation and databases.
Horizon™ Identity helps confirm customer identities and flags inconsistencies that may indicate risk. ShadowDragon Horizon™ brings in context from public records, so analysts can see whether a customer’s story holds up. Horizon™ Monitor tracks changes over time, surfacing new events and behavior shifts before they become significant issues.
ShadowDragon’s tools strengthen existing KYC workflows, giving teams the missing detail they need to make smarter decisions and overcome common KYC challenges. They reduce the noise that slows onboarding and drains analysts’ time. They support alignment on KYC efforts as regulations and privacy requirements evolve.
Contact us to book a demo and see how ShadowDragon can deliver the intelligence your business needs at the speed your work demands.
