KYC or
better Customer Due Diligence and the related work of Transaction Monitoring
are often considered cumbersome and painful. Not to mention that financial
institutions can be fined heavily for not getting it right.
The idea
of a KYC utility - shared amongst FIs - keeps popping up, recently in The
Netherlands and the Nordics (https://www.riskscreen.com/kyc360/news/dutch-banks-team-up-to-fight-dirty-money/)
and not that long
ago in Singapore (we wrote earlier about that here
https://www.i-kyc.com/the-failure-of-the-kyc-utility-project-in-singapore-a-practical-view/).
Despite
the failures and the initiatives that don’t get any further than the drawing
table, many FIs and regulators still think it’s worth a try. Let’s have a look
at the possible reasons and success factors.
A KYC utility makes sense
FIs in the same jurisdiction need
to adhere to the same regulations and even though internal controls, systems,
risk appetite and policies might differ, likely a lot of the work is similar if
not the same. That might mean a duplication of work so cost savings are
possible.
Quality
Money
launderers don’t do all transactions with one bank; what looks perfectly
acceptable to one FI might not be so acceptable if the transaction behaviour is
viewed across all the banks that the client is using. By nature, the knowledge
on a client will improve if banks can see all the clients’ activities across
organisational boundaries.
Speed
Everyone
who has dealt with onboarding of clients will have heard the comment “Why do I
need to provide that documentation? Bank ABC doesn’t require that either.”
Aligning onboarding requirements and shared CDD will increase the speed of
onboarding and increase customer satisfaction.
There
are plenty examples of off-shored centres, external companies and internal
service centres that have proven that processes and policies across
jurisdictions can be serviced in and by one and the same team. There are no
inherent reasons that make a KYC utility impossible to realise.
It can
be done, we’ve seen it working, we’ve managed these service centres. It all
comes down to the (political) will to make the KYC utility a success, the
ability to overcome differences in the participating FIs and the power to
execute in the utility itself.
find the original article and find other stories here
find the original article and find other stories here
