In the financial services industry, new regulations as well as stronger enforcement of existing regulations places an imperative on banks and financial institutions to meet constantly changing compliance requirements.
A specific area of interest is Know Your Customer (KYC) guidelines. These identify and verify the identity of clients as well as ensure that company agents, consultants, or distributors are anti-bribery compliant. Banks, insurers and export creditors are increasingly demanding that customers provide detailed anti-corruption due diligence information. This puts an onus on companies and particularly financial institutions to collect, manage and maintain a large amount of sensitive information.
KYC controls may include any of the following:
- Collection and analysis of basic identity information
- Name matching and verification
- Developing a risk profile, or an expectation of a customer’s behavior
- Monitoring of a customer’s transactions against expected behaviour and recorded profile as well as that of the customer’s peers
For these controls to be in place, companies are having to rely on a number of sources of information which are integrated in order to build a consolidated view of the customer. There is an added layer of complexity for global organisations, as KYC have different requirements in different countries.
As a specialist integration company, we’re seeing that ways of dealing with KYC requirements are still evolving, and there are many differing views on best practice. Currently, there is no single data provider that can handle the full range of requirements for institutions. This means that banks need a data governance framework, system and process that can take multiple providers information and tie it in to a system that can make sense of it. You need expert integration at various stages of the process, and this is where we can help. We have experience working with a number of global financial services customers, as well as with suppliers and products which could provide the required information. This image illustrates the type of scenario we can build.
There are a number of possible ways to build a solution – but it has to meet the following requirements:
- It is a standard, repeatable process that is as automated as possible.
- Flexibility will be required to manage the potential for new regulation in the future. Currently there is a need for data governance frameworks that can take information from disparate data providers and integrate them into a single picture.
- It bridges company silos to build an overarching structure.
- Audit trail becomes paramount – if there is no audit trail, it effectively means it did not happen, so you need to have those processes be visible. It changes some aspects of company culture, especially with relation to communicating with the customer as it will drive a need to consistently communicate, and to document all activities and communications.
- A central repository or shared services model seems to be the best way to go. This approach has many benefits, one of them being that the customer doesn’t have to be involved every time a different part of the business needs information, or gains new information. Everything will be stored centrally and accessed from there.
- There will need to be a company KYC expert or department to manage the complex challenges of onboarding and KYC requirements in a multi-jurisdictional environment.
KYC is not optional
Unless complied with, not meeting KYC requirements poses the risk of huge fines, as illustrated by a fine of almost £8m to to a well-known bank in 2014 for its failure to implement sufficient money laundering controls. As such, KYC is now an integral part of banks’ risk-based approach, which is vital for monitoring clients and counterparties. KYC enables institutions to understand risk more effectively, which is a crucial tool in a globalised network.
- We know the KYC application vendor market. We have relationships with most of them and have completed installations with some of them.
- Banks will probably need to integrate any new KYC solution into existing back office systems. We have experience, software and templates for integrating with most financial applications used in banking, which can drastically reduce your risk and cost as well as speed up delivery.
- If you wish to build your own KYC solution, we can draw from our experience to help you consume feeds from data sources such as D&B and others as illustrated and integrate them with your internal systems.
If this is a problem you’re grappling with at the moment, we’d be very happy to discuss your requirements and put together some options for you. Just drop your details into the form on the right and we’ll follow up.