Operating within a highly regulated environment, financial institutions have had to be innovators just to keep pace with the ever expanding Know Your Customer (KYC) legislative requirements.
One of the main problem areas that Financial Institutions face is that current KYC procedures and solutions were originally developed in a pre-digital age and not only are they resource heavy and costly, they are just not efficient as they might be if designed in today’s digital era.
For Financial Institutions (FIs), it is a delicate balancing act to ensure efficiency, reduce costs and use their resources effectively whilst at the same time complying with an ever burgeoning KYC compliance commitment. In order to do this they are looking for more innovative ways to manage their KYC obligations, such as digitizing client information, and automating the KYC processes to become operationally efficient. This is driving solutions which will see more compliance work automated, whether using internal bank processes or third-party solutions such as Thomson Reuters Org ID KYC Managed Service and Client On-boarding solutions.
What’s needed is simplicity of assessment and application, often FIs spend vast amounts of time and effort to create a control environment that looks good on paper in that it complies with regulations, only to find that in practice it falls short of managing the real risks.
Banks coming together to tackle KYC
Steve Pulley, Managing Director, Risk Managed Services, Thomson Reuters, discusses how banks are currently managing their KYC challenges and outlines some innovative approaches to adoption.
For organizations that are serious about managing their KYC processes effectively — the acquisitions of Clarient, a global KYC managed services organization and Avox, a supplier of legal entity data on financial entities globally, reinforces Thomson Reuters position assisting financial institutions to meet their KYC and regulatory needs.
FIs quest for efficiency driving digitization
FI’s are investing heavily in FinTech/RegTech firms to make sure they have a seat at the table. In 2010 the investment in FinTech companies was just $1.7billion, in 2015 this had grown to over $22billion. In 2016, investment was up 65% year- on- year and is expected to increase again this year.
Getting to know you
One of the main goals of FIs is to get a centralized view of their client; think of the model that retail has employed for years – they know everything about you from usage to buying patterns and personal preferences. This is all about a more personalised service. You expect your bank to know everything about you, but do they?
In reality because of the siloed way in which FIs gather their information with one department requesting tax information, other business information, account information and so forth and at differing times of the relationship (some KYC related some not), the information is disparate and duplicated with no complete picture of the client. The task of gathering the information is often onerous and duplicative for the client.
The 2016 Thomson Reuters KYC and Client Onboarding survey revealed that 27% of corporates take over 3 months to be on-boarded by their bank, with 9% of those survey saying it takes over 4 months.
Client onboarding times
Meeting client’s expectations
It’s a struggle for FIs to keep pace in the age of digitalization where clients expect both speed and a personalized experience. If FIs fail to cater to these expectations by not adopting the right technology now, they risk a scenario in which they are playing catch-up.
Cost of KYC
The future of KYC is information powered by technology and there is now a plethora of data available such as Thomson Reuters Permanent Identifier, Perm ID – that provides profile entity reports, but many organizations struggle to take advantage of this.
You can even rate your organization’s performance against your peers by using sophisticated KYC and Client Onboarding diagnostic tools.
Innovative KYC Solutions which address FIs’ concerns are more widely available than ever. They allow processes to be streamlined and give FIs confidence to act on trusted information whilst mitigating risks and keeping business disruption to a minimum.
Thomson Reuters Org ID KYC Managed Service is a global solution developed for banks, investment managers and corporates to simplify and streamline customer counterparty due diligence and the ongoing maintenance of KYC records — through collecting, classifying and verifying a client’s identity — in line with ever-changing regulatory demands.